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LAW   LI 


^       I 


LOS  ANGEL 


A  TREATISE 


Law  of  Mortgages 


Real  Property: 


BY 


DARIUS  H.  PINGREY, 

OP  THE  Illinois  Bar. 

Author  of  a  Treatise  on  Chattel  Mortgages;  etc 


IN  TWO  VOLUMES. 


Volume  I. 


PHILADELPHIA: 
T.  &  J.  W,  JOHNSON  &  CO., 

1893. 


Entered  according  to  Act  of  Congress,  in  the  year  1S93,  by 

DARIUS  H.  PINGREY, 

In  the  Office  of  the  Librarian  of  Congress,  at  Washington,  D.  C. 

T 
IS93 


PREFACE. 


The  design  of  this  work  is  to  present  the  law  of  real  estate 
mortgages  as  it  is,  supported  by  the  leading  and  the  latest 
decisions  of  the  courts  ;  therefore,  the  author  has  refrained 
from  unnecessarily  obtruding  his  own  theory.  The  bench 
and  the  bar  want  the  law  as  it  is,  and  use  text-books  as  the 
pole-star  to  guide  them  to  the  source — the  reports.  Every 
treatise  derives  its  authority  from  the  cases  cited.  However, 
it  is  not  granted,  as  assumed  by  some  of  the  leading  American 
and  Englisli  authors,  that  the  cases  make  the  law  in  the  same 
sense  as  the  statute  does. 

The  law  is  the  general  rule  on  which  the  case  is  decided  ; 
or,  as  Thomasius  says,  the  decisions  are  the  principia  cognos- 
cendi,  but  not  the  principia  essendi  of  the  law. 

While  the  author  acknowledges  that  precedents  carry  more 
weight  than  argument,  yet  he  has  not  neglected  to  discuss  the 
fundamental  principles  that  form  the  basis  of  the  law  of  real 
estate  mortgages. 

The  decisions  of  the  new  courts  have  been  given  due  promi- 
nence. The  fifteen  thousand  cases  cited  have  been  carefully 
studied  without  regard  to  the  syllabi,  and  the  author  has 
attempted  to  present  the  principles  as  deduced  by  the  courts. 

The  author  believes-  that  the  system  of  classification  and 
grouping  of  subjects  will  make  the  law  readily  accessible  to 
the  practitioner.  This  new  plan  of  treatment,  new  labor,  and 
new  materials  were  found  essential  to  meet  the  growing- 
demands  of  the  age. 

Trusting  that  this  work  will  be  found  of  value,  it  is  sub- 
mitted to  the  examination  of  a  liberal  and  enlightened  pro- 
fession. 

Darius  H.  Pingrey. 

Bloomington,  III.,  March  15th,  1893. 


^r^.^.a'ya 


TABLE  OF  CONTENTS. 

PAET  I. 

THE   NATURE   AND   REQUISITES   OF   THE   CONTRACT. 
CHAPTER   I. 

DEFINITION    AND    DEVELOPMENT. 

SECTIONS 

1.  History  and  Development, 1-8 

2.  The  American  Doctrine, 9 

3.  The  States  Adopting  the  Common-Law  Rule, 10-27 

4.  The  States  Adopting  the  Equitable  Rule,          28-54 

5.  The  States  Adopting  a  Modification  of  the  Common-Law  Rule,    .  55-59 

6.  The  State  Whose  Mortgage  is  a  Species  of  a  Pledge,      60 

CHAPTER  II. 

CONDITIONAL    SALES,    ASSIGNMENTS,    AND     CHATTEL     MORTGAGES 

DISTINGUISHED. 

1.  Whether  a  Conditional  Sale  or  Mortgage, 61-66 

2.  Construction  and  Illustration, 67-68 

3.  Assignment  and  Deed  of  Trust  in  the  Nature  of  a  Mortgage,  .    .    .  69-75 

4.  A  Chattel  Mortgage  Distinguished, 76-78 

CHAPTER  III. 

ABSOLUTE    SALE    DISTINGUISHED. 

1.  Absolute  Conveyance  with  Defeasance, 79-85 

2.  Deed  Intended  as  Security, 86-89 

3.  Agreement  to  Reconvej%        90-96 

4.  Sale  with  Right  to  Repurchase, 97-99 

5.  Purchasing  at  Judicial  Sale, 100-101 

6.  The  Rights  of  Parties  Under  Deeds  of  Trust, 102-103 

7.  Rights  of  Subsequent  Purchasers  for  Value  and  without  Notice,   .  104-105 

8.  Assignments  of  Contracts  to  Purchaser, 106 

V 


VI  TABLE   OF   CONTENTS. 


CHAPTER  IV. 

EVIDENCE   TO   ESTABLISH   THE  CHARACTER  OF  THE  CONVEYANCE. 

SECTIONS 

1.  To  Establish  a  Conditional  Sale 107-109 

2.  To  Prove  an  Absolute  Deed  a  Mortgage, 110-125 

CHAPTER  V. 

BASIS  FOR  THE  INTRODUCTION  OF  PAROL  EVIDENCE. 

1.  Classification  of  the  Legal  Rules, 126-129 

2.  Statutory  Provisions  and  Decisions, 130-137 

3.  Equity  Arising  from  the  Real  Character  of  the  Transaction,  .    .    .  138-170 

4.  Doctrine  of  Fraud^  Accident,  Mistake,  or  Some  Vice  in  the  Con- 

sideration,      171-175 

5.  A  Trust  Created  between  the  Parties, 176-180 

CHAPTER  VI. 

REQUISITES   AND    VALIDITY. 

1.  Classification  of  Mortgages, 181-188 

2.  The  Date  of  the  Mortgage, 189-190 

3.  Description  of  the  Parties, 191-194 

4.  Description  and  Identification  of  the  Parties, 195-200 

5.  Clause  of  Defeasance  and  Recitals, 201-207 

6.  Execution, 208-220 

7.  Delivery  of  the  Instrument, 221-226 

CHAPTER  VII. 

CORRECTION    AND    REFORMATION. 

1.  Filling  Blanks  After  Execution, 227-257 

2.  Attestation 258-264 

3.  Reforming  the  Mortgage, 265-270 

CHAPTER  VIII. 

EQUITABLE  MORTGAGES. 

1.  General  Statement, 271 

2.  By  the  Deposit  of  Title  Deeds, 272-277 

3.  Infonnal  Mortgages, 278-''8S 

4.  Agreements  to  Make  Conveyance  of  Land,  when  Intended  as  Se- 

curity for  a  Debt, 289-297 

5.  Assignments  of  Contracts  of  Purchase  as  Security, 298-304 

6.  By  Act  of  the  Legislature, 305-306 


TABLE    OF    CONTENTS.  Vll 

CHAPTER  IX. 
vendor's  lien. 

SECTIONS 

1.  Nature  and  Effect, 307-316 

2.  Reservation  of  Vendor's  Lien, 317-327 

3.  Priorities, 328-335 

4.  Enforcement  of  the  Lien, 336-347 

CHAPTER  X. 

THE   PARTIES    TO    THE    MORTGAGE. 

1.  Classification  and  Competency  of  Gi-antors, 348-375 

2.  Classification  and  Competency  of  Grantees, 376-382 

CHAPTER  XL 

MORTGAGABLE    INTERESTS. 

1.  Present  Interests  or  Interests  In  Esse, 383-394 

2.  Fixtures  Subject  to  a  Mortgage  Lien, 395—109 

3.  Fixtures  in  Manufactories  and  Mills, 410-417 

4.  Rolling  Stock  of  Railways, 418— tl9 

5.  Accessions  to  Mortgaged  Realty,      420^22 

6.  Enforcement  of  Lien, 423-426 

CHAPTER  XII. 

AFTER-ACQUIRED    PROPERTY. 

1.  Potential  Interests, 427^28 

2.  Unplanted  and  Growing  Crops, 429-452 

3.  In  Equity, 453-455 

4.  Railroad  Property, 456-462 

CHAPTER  XIII. 

THE    DEBT    SECURED. 

1.  Identification  and  Description  of  the  Debt, •    .   .  463-482 

2.  Future  Ad-»-ances, 483-495 

3.  Indemnified  Mortgagee  for  Future  Advances, 496-505 

4.  Mortgages  for  Support,    ....  ..■••.........  506-517 

CHAPTER  XIV. 

THE    CONSIDERATION. 

1.  A  Valid  Consideration, 518-535 

2.  Want  of  Consideration, , 53f>-543 

3.  Illegal  Consideration, 544-549 


VUl  TABLE    OF    CONTENTS. 

PAET  II. 

RELATIVE  RIGHTS  OF  THE  PARTIES  TO  INSURANCE. 
CHAPTER  XV. 

INSURABLE    INTERESTS. 

SECTIONS 

1.  The  Mortgagor's  Right  to  Insure  for  His  Own  Indemnity,  ....  550-551 

2.  The  Mortgagor's  Right  to  Insure  for  the  Mortgagee's  Indemnity,  .  552-557 

3.  Misrepresentation  and  Conceahnent  of  Mortgagor, 558-5(51 

4.  The  Right  of  the  Mortgagee  to  Insure  for  His  Own  Indemnity,    .  562-5G4 

5.  Enforcement  of  Contract  in  Case  of  Loss, 5(35-578 

6.  Ahenatiou  of  Mortgaged  Property, 579-588 

PAET   III. 

REGISTRATION  OF  THE  INSTRUMENT. 
CHAPTER  XVI. 

REGISTRATION. 

1.  Statutory  Provisions, 589-641 

2.  Registration  of  Separate  Defeasance, 642-647 

3.  Title  Deeds 648 

4.  Equitable  Mortgages  are  within  the  Rule, 649-653 

5.  Assignment  of  Mortgages, 654-662 

CHAPTER   XVII. 

THE    LIEN. 

1.  The  Parties, 663-674 

2.  Lien  of  Purchase-Money  Mortgage, 675-685 

3.  Mechanics'  Lien, 68()-695 

4.  After-Acquired  Title, 696-70(5 

5.  Covenants  of  IVIortgagor, 707-708 

6.  Extinguishment  of  the  Lien, 709-716 

CHAPTER  XVIII. 

CONSTRUCTION    OP    REGISTRATION    LAWS. 

1.  The  Record, • 717-734 

2.  Constructive  Notice, 735-749 

3.  Actual  Notice, 750-759 

4.  Implied  Notice, 760-768 


TABLE   OF    CONTENTS.  IX 

PAET  IT. 

CONTRACTS  IN  VIOLATION  OF  LAW. 
CHAPTER  XIX. 

USURIOUS    MORTGAGES. 

SECTIONS 

1.  Nature  and  Effect, 769-781 

2.  Defense, 782-787 

3.  Interest  upon  Interest, 788-794 

4.  Conflict  of  Laws, •    •    • 795-799 

CHAPTER   XX. 

FRAUDULENT    MORTGAGES. 

1.  Fraud  Generally, 800-805 

2.  Diu-ess  as  an  Element  of  Fraud, 806-808 

3.  Preferences, 809-812 

4.  Who  May  Set  Up  Fraud, 813-819 

5.  Sunday  Laws, 820-822 

PAET  Y. 

RIGHTS  OF  PARTIES  BEFORE  DEFAULT. 
CHAPTER   XXI. 

THE   RIGHTS    OF    THE   MORTGAGOR. 

1.  Construction  of  Mortgagor's  Covenants, 823-825 

2.  Relative  Rights  as  to  the  Mortgagee, 826-841 

3.  Remedies  Against  Mortgagee, 842-845 

4.  Relative  Rights  as  t,o  Third  Persons, 846-853 

5.  Improvements, 854-857 

6.  The  Right  of  Eminent  Domain, 858-862 

7.  Remedies  Against  Mortgagor  for  AVaste, 863-879 

8.  Rights  to  Emblements, 880-885 

CHAPTER  XXII. 

THE   RIGHTS   OF    THE    MORTGAGEE. 

1.  The  Mortgagee's  Interest, 886-896 

2.  Relative  Rights  as  to  INIortgagor,  .   .   - 897-909 

3.  Remedies  Against  the  Mortgagor, 910-914 

4.  Relative  Rights  as  to  Junior  Mortgagee, 915-923 

5.  Relative  Rights  as  to  Purchasers  and  Creditors  of  Mortgagor,    .   .  924-931 

6.  Relative  Rights  as  to  Lessee  of  INIortgagor, 932-948 


X  TABLE    OF    CONTENTS. 

CHAPTER  XXIIL 

ASSIGNMENT    OF    MORTGAGE   AND    DEBT. 

SECTIONS 

1.  Rule  at  Common  Law, 949-955 

2.  Who  May  Make  an  Assignment, 956-96G 

3.  Priorities, 967-9G9 

4.  What  Constitutes  an  Assignment, 970-977 

5.  Rule  in  Equity, 978-984 

6.  Validity  in  Equity  and  at  Law, 985-997 

7.  Negotiable  and  Non-Negotiable  Instruments, 998-1006 

CHAPTER   XXIV. 

TRANSFER    OF    THE    MORTGAGED    PROPERTY. 

1.  Purchase  without  Assuming  Payment  of  Mortgage, 1007-1012 

2.  Assumption  of  Payment  by  Vendee, 1013-1018 

3.  Transfer  of  the  Debt, 1019-1026 

4.  Right  of  Mortgagee  to  Bring  Action  Against  Vendee, 1027-1040 

5.  Right  of  Mortgagor  or  Grantor  to  Enforce  the  Contract,  ....  1041-1044 

6.  Defense  of  Purchaser, 1045-1052 

CHAPTER   XXV. 

MERGER. 

1.  At  Law  and  in  Equity, 1053-1054 

2.  When  It  Takes  Effect, 1055-1074 

3.  Discharge  and  Release  of  Mortgage, 1075-1083 

CHAPTER   XXVI. 

SUBROGATION. 

1.  Rights  of  Purchaser  and  of  Party  Paying  the  Debt, 1084-1096 

2.  Rights  of  Mortgagee, 1097-1099 

3.  Rights  of  Junior  Mortgagee, 1100-1106 

4.  Rights  of  Sureties  and  Guarantors, 1107-1119 

CHAPTER   XXVII. 

PAYMENT    OP    THE    DEBT. 

1.  Constructive  Payment, 1120-1139 

2.  Actual  Payment, 1140-1154 

3.  Rights  of  Administrators  and  Executors, 1155-1161 

4.  Foreclosure  is  a  Payment  Pro  Tanto, 1162-1168 


TABLE    OF   CONTENTS.  XI 

SECTIONS 

5.  Change  in  the  Form  of  the  Debt, 1169-1187 

6.  Presumption  of  Payment, 1188-1191 

7.  Evidence  of  Payment, 1195-1198 

8.  Application  of  Payments, 1199-1211 

9.  Eeissue  and  Eevivor  of  Mortgage, 1212-1218 

CHAPTER   XXVIII. 

DISCHARGE    AND    RELEASE. 

1.  Requisites  of  a  Discharge, 1219-1232 

2.  Entry  of  Satisfaction  on  the  Record, 1233-1234 

3.  Action  to  Enforce  Release, 1235-1240 

4.  Cancellation  of  Release, 1241-1251 

5.  Statutory  Provisions  for  Release  of  Mortgages, 1252-1302 

6.  Action  to  Recover  Penalty, 1303-1312 


PAET  YI. 

RIGHTS  OF  PARTIES  AFTER  DEFAULT. 
CHAPTER  XXIX. 

FORECLOSURE  OF  POWER-OF-SALE  MORTGAGES  AND  TRUST  DEEDS. 

1.  Foreclosure  With  No  Redemption 1313-1318 

2.  Who  May  Exercise  the  Power  of  Sale, 1319-1335 

3.  Suspension  of  the  Power, 1336-1344 

4.  Notice  in  General, 1345-1348 

5.  Construction  of  Notice, 1349-1358 

6.  Recitals  in  the  Notice, •. 1359-1368 

7.  Method  of  Sale, • 1369-1372 

8.  Validity, 1373-1378 

9.  Payment,       1379-1382 

10.  Who  May  Purchase, 1383-1394 

11.  The  Affidavit, 1395-1401 

12.  The  Deed, 1402-1423 

13.  Enjoining  the  Exercise  of  the  Power, 1424-1436 

14.  Setting  Aside  the  Sale, 1437-1454 

15.  Costs  and  Expenses, 1455-1461 

16.  The  Surplus, 1462-1470 

17.  Redemption, 1471-1474 

CHAPTER   XXX. 

POWER-OF-SALE     MORTGAGES     AND      TRUST      DEEDS STATUTORY 

PROVISIONS. 

1.  Statute  of  England, 1475-1477 

2.  Statutes  of  the  Several  States, .  1478-1527 


Xll  TABLE    OF    CONTENTS. 

CHAPTER  XXXL 

THE    RIGHT    TO    FORECLOSE. 

SECTIONS 

1.  Right  to  Foreclose, 1528-1537 

2.  Election  of  Mortgagee  to  Declare  the  Whole  Debt  Due,  ....  1538-1545 

3.  Election  of  Remedies  by  Mortgagee, 1546-1552 

4.  Actions  at  Law, 1553-1563 

5.  Eflect  of  the  Statute  of  Limitations, 1564-1575 

CHAPTER   XXXII. 

FORECLOSURE    BY   TAKING    POSSESSION. 

1.  Statutory  Provisions, •  1576-15^1 

2.  Construction  of  Statutory  Provisions, 1592-1611 

3.  Waiver  of  Foreclosure, 1612-16^3 

CHAPTER  XXXIII. 

FORECLOSURE    BY   WRIT    OF    ENTRY. 

1.  Statutory  Provisions, 1624-1627 

2.  Who  May  Bring  the  Action, 1628-1637 

3.  Against  Whom  Brought, 1638-1642 

4.  What  Defense  May  Be  Made, 1643-1657 

5.  The  Conditional  Judgment, 1658-1664 

CHAPTER   XXXIV. 

PARTIES    TO    AN    EQUITABLE    FORECLOSURE. 

1.  By  Whom  Brought, 1665-1692 

2.  Against  Whom  Brought, 1693-1722 

3.  Defect  of  Parties,      1723-1726 

4.  Intervention  and  Substitution  of  New  Parties, 1727-1735 

CHAPTER   XXXV. 

FORECLOSURE    IN    EQUITY. 

1.  Jurisdiction, 1736-1745 

2.  Defenses,     1746-1772 

3.  Pleadings— The  Bill,    ...••• 1773-1780 

4.  Pleadings — Plea,  Answer,  and  Cross-Bill, 1781-1782 

5.  Pleading  and  Practice, 1783-1790 


TABLE    OF    CONTENTS.  Xlll 

CHAPTER   XXXVI. 

THE    APPOINTMENT    OF    A    RECEIVER. 

SECTIONS 

1.  Grounds  for  Appointment, 1791-1799 

2.  Equitable  Rule, 1800-1801 

3.  Rights  of  Junior  Mortgagee, 1802-1808 

4.  Status  of  the  Receiver, 1809-1816 

CHAPTER   XXXVII. 

STRICT    FORECLOSURE. 

1.  When  Applied, •    ...  1817-1820 

2.  States  Using  this  Method, 1821-18-12 

3.  Pleading  and  Practice, • 1843-1850 

4.  Setting  Aside  Foreclosure, • 1851-1855 

CHAPTER   XXXVIII. 

THE    DECREE. 

1.  Jurisdiction  of  Court  of  Equity,  .    .    .    .  • 1856-1860 

2.  Form  of  the  Decree, 1861-1866 

3.  Validity, 1867-1871 

4.  Who  are  Bound  by  the  Decree, 1872-1881 

5.  The  Amount  Due, 1882-1893 

6.  Costs, 1894-1904 

CHAPTER   XXXIX. 

THE    SALE. 

1.  Notice  and  Terms  of  Sale, 1905-1915 

2.  Sales  in  Parcels  or  En  Masse, 1916-1919 

3.  Marshalling  and  Method  of  Sale, 1920-1935 

4.  Validity, 1936-1946 

5.  Confirmation  of  Sale, 1947-1951 

6.  Rights  and  Liability  of  Purchaser,  .    .    .  • 1952-1970 

7.  The  Deed, 1971-1981 

8.  Setting  Aside, 1982-1998 

CHAPTER  XL. 

APPLICATION    OF    PROCEEDS. 

1.  Disposition  of  the  Proceeds, 1999-2002 

2.  Distribution  of  Surplus 2003-2019 

3.  ]VIarshalIing  Distribution  of  Proceeds, 2020-2026 


XIV  TABLE    OF    CONTENTS. 

CHAPTER  XLI. 

THE    DEFICIENCY. 

SECTIONS 

1.  Judgment  for  Deficiency, 2027-2029 

2.  PersonalJudgment, 2030-2035 

3.  Enforcement  of  Personal  Judgment, 2036-2054 

CHAPTER   XLII. 

STATUTORY    FORECLOSURE    AND    REDEMPTION. 
1.  Statutory  Provisions  and  Decisions, ....  2055-2103 

CHAPTER  XLHI. 

ACCOUNTING. 

1.  Mortgagee's  Debits, 2104-2116 

2.  Mortgagee's  Credits, 2117-2129 

3.  Periods  of  Bests, 2130-2136 

CHAPTER  XLIV. 

REDEMPTION. 

1.  Nature  of  the  Remedy, 2137-2139 

2.  Right  to  Redeem, 2140-2150 

3.  Who  May  Redeem, 2151-2174 

4.  Terms  of  Redemption, 2175-2201 

5.  Contribution  to  Redeem, 2202-2208 

6.  Pleading  and  Practice, 2209-2227 

CHAPTER  XLV. 

REDEMPTION   BARRED. 

1.  Definition  and  Nature  of  the  Statute  of  Limitations 2228-2236 

2.  Running  of  the  Statute, 2237-2245 

3.  New  Promise  or  Acknowledgment, 2246-2251 


PART  I. 

THE  ISTATUEE  A:N'D  EEQUISITES  OF  THE 
CONTRACT. 


CHAPTER  I. 

definition  and  development. 

Article  1. 

History  and  Development. 

§  1.  The  Origin  of  Mortgages.  I  6.  A  Mortgage  at  Common  Law. 

§  2.  Vivum  Vadium.  |  7.  Mortgages  as  Viewed  in  Courts 
I  3.  Mortuum  Vadium,  of  Equity. 

^  4.  Welsh  Mortgages.  §  8.  The  Adoption  of  the  Principles 
I  5.  The  EngUsh  Law  of  Mortgages.  of  Redemption. 

§  1.  The  Origin  of  Mortgages. — Mortgages  were  frequent 
in  ancient  times  in  Egypt,  as  indeed,  they  are  at  this  day.  In 
one  paper  is  found  an  official  copy  of  a  mortgage  for  pubHca- 
tion  or  registration,  dated  in  the  thirteenth  year  of  Trajan,  A. 
D.  110,  from  a  bank  called  the  Broad  Bank  of  Sarapion,  which 
belonged  to  some  Syrians  and  an  Egyptian. 

It  declares  that  they  have  entered  on  a  continuous  mortgage 
of  land — ^that  is,  not  merely  for  a  short  loan  before  harvest — 
of  which  one  and  a  half  acre  belongs  to  Dioktetos  and  eight 
acres  to  Tutares.  This  reaffirms  an  old  mortgage  which  had 
not  been  witnessed,  and  declares  the  whole  debt  to  be  equal  to 
about  sixty  quarters  of  grain,  worth,  perhaps,  one  hundred  or 
one  hundred  and  fifty  pounds.  It  was  stipulated  in  grain 
because  probably  it  would  be  paid  in  kind,  so  much  to  be 
deducted  each  year  for  the  grain  handed  in  and  so  much 
added  to  the  remaining  principal  for  interest. 

1 


2  NATURE    AND    REQUISITES    OF   THE    CONTRACT. 

Pledges  of  land  were  made  by  the  Anglo-Saxons  in  England, 
but  the  nature  of  the  transfer  and  the  rights  of  the  parties  are 
unknown.^  It  is  well  established  that  liens  upon  the  property 
of  another  prevailed  at  all  times  among  all  civilized  nations. 
The  jurisprudence  of  all  civilized  nations,  both  ancient  and 
modern,  contains  a  system  of  liens  whereby  the  creditor  can 
take  a  lien  upon  his  debtor's  property.^  However,  some  au- 
thorities claim  that  mortgages  of  land  originated  with  the 
Jews,^  which  assertion  has  long  since  been  overthrown. 

An  ancient  recorded  Egyptian  marriage  settlement  says: 
"  In  case  I  should  despise  thee,  in  case  I  should  take  another 
wife  than  thee,  I  will  give  thee  twenty  argenteus,  in  shekels 
one  hundred,  twenty  argenteus  in  all.  The  entire  of  the  prop- 
erty which  is  mine  and  which  I  shall  possess,  is  security  of  all 
the  above  words  until  I  shall  accomplish  them  according  to 
their  tenor."  * 

It  was  held  usury  for  Christians  to  lend  money  at  interest. 
So  if  lands  were  enfeoffed  to  a  creditor  and  the  rents  and  profits 
received  by  him  and  not  used  in  reducing  the  principal  of  the 
debt,  it  was  punishable  by  forfeiture  of  his  lands  and  chattels, 
if  he  died  possessed  of  the  pledge.  This,  says  Glanville,  is  the 
origin  of  the  term  mortuum  vadium,  and  not  the  ineaning  sub- 
sequently attached  to  the  definition  by  Littleton.^ 

In  a  state  of  nature,  agreements  of  this  kind  must  have  been 
entirely  useless,  for  in  that  state  a  creditor  might  have  seized 
on  any  part  of  his  debtor's  goods  and  chattels  without  ceremony 
or  contract.® 

It  would  seem  that  the  primitive  idea  of  giving  mortgages 
ought  to  be  referred  more  to  the  introduction  of  order  and 
civilization  among  mankind  than  to  the  invention  of  any  par- 

*  Essays  on  An^lo-Saxon  Land  Law,  p.  106.    Essays  in  Anglo-Saxon  Law, 
Appendix,  Case  No.  18,  p.  342. 

^  Hamilton's  Hedaya,  Book  XLVIII,  Pawns. 
'  Powell  on  Mortgages,  1. 

*  Records  of  the  Past,  Vol.  X,  pp.  75-78 ;  Comp.  Just.  Inst.  1.  IV,  tit.  6, 
Beet.  29. 

*  Glan\nlle,  Lib.  10,  c.  6. 
«PuflF.  Lib.  5,0.10,  sect.  16. 


DEFINITION    AND    DEVELOPMENT.  O 

ticular  people.  Hence,  it  is  evident  that  different  nations  sub- 
jected this  system  of  lending  money  to  different  regulations, 
and  in  England  the  Court  of  Chancery  has  given  rise  to  the 
inseparable  incidents  of  redemption  and  foreclosure.  "  But 
the  general  principle  must  have  been  common  to  all  mankind, 
as  a  necessary  effect  of  the  establishment  of  society.  The.  prac- 
tice, then,  of  lending  and  borrowing  at  interest  must  have  ex- 
isted from  the  earliest  antiquity ;  but  its  present  prevalence, 
which  is  almost  universal,  may  be  attributed  to  the  extension 
of  commerce ;  for  commerce  could  not  be  carried  on  without 
credit,  and  credit  could  not  be  obtained  without  compensation."  ^ 

The  two  distinct  forms  of  mortgages  which  have  been  desig- 
nated by  the  terms  vivum  vadium  and  mortuum  vadium  appear 
to  have  been  adopted  from  the  customary  law  of  Normandy.^ 

During  the  feudal  tenures  in  England,  it  seems  that  there 
were  no  mortgages.^  The  feudatory  with  the  concurrence  of 
his  lord  might  have  aliened,  and  consequently  have  mortgaged 
the  feud.* 

"  The  tenant  could  not  transfer  his  feud  without  his  lord's 
consent,  nor  the  lord  his  seigniory  without  his  tenant's  consent, 
although  the  tenants,  men  of  the  crown,  it  would  seem,  might 
grant  subinfeudation  (i.  e.,  to  hold  themselves)  without  license. 
It  was  further  held,  the  tenant  could  not  subject  his  lands  to 
his  debts  by  execution  of  law,  for,  if  he  could,  he  might  have 
effected  that  circuitously  which  he  could  not  by  direct  means 
have  accomplished.  Nor,  if  the  lands  came  to  him  by  descent, 
could  he  aliene  them  without  the  consent  of  the  next  collateral 
heir."^ 

So  when  a  pledgee  of  land,  in  feudal  times,  took  possession, 
he  did  not  take  full  feudal  seisin,  but  only  a  qua^i  seisin,*^  a 

^  Mr.  Coventry  in  Powell  on  Mortgages,  p.  106. 

^  Vinnius,  Ingt.  Lib.  3,  tit.  15. 

'Treatise  on  Eq.  Lib.  3,  c.  1,  sect.  1. 

*Feud.  Lib.  2,  tit.  5,  sect.  5. 

*  Coote  on  ]\Iortgages,  5.  There  is  a  case  reported  of  a  feudal  lord  mort- 
gaging his  provinces.  1  Hume's  Hist,  of  England,  270 ;  4  Hume's  Hist,  of 
England,  30. 

«4  Bract.  (Rolls  Ed.)  74,  sect.  4. 


4  NATURE   AND    REQUISITES   OF    THE    CONTRACT. 

seisin  de  vadio,  which  was  a  pledgee's  seisin ;  or  a  seisin  dis- 
tinct from  the  general  seisin,  not  exclusive  of  that  of  the 
pledgor,  but  consistent  with  and  dependent  upon  it.^ 

The  freehold  was  deemed  to  remain  in  the  pledgor,  and  the 
pledgee  was  said  to  be  seized  through  the  owner  of  the  fee ;  ^ 
the  pledgee  was  seized  not  in  his  own  name  but  in  the  name 
of  another.^ 

§  2.  VivuM  Vadium. —  Vivum  vadium  denoted  a  pledge  of  land 
when  the  creditor  took  possession  of  the  land  lender  the  con- 
veyance to  hold  and  enjoy  until  he  paid  himself  out  of  the 
rents  and  profits,  without  any  limit  to  the  time  for  redemption. 
Upon  payment  of  the  debt  the  debtor  received  back  his  lands, 
and  could  recover  them  by  suit  if  not  voluntarily  given  to  him 
by  the  creditor.  In  this  case  the  land  survives  the  debt.  It 
consisted  of  a  feoffment  to  the  creditor  and  his  heirs,  until  out 
of  the  rents  and  profits  he  had  himself  satisfied  his  debt.* 

The  Norman  judges  recognized  gages  or  pledges  of  land, 
either  with  or  without  transfer  of  possession.  If  the  pledgee 
took  possession,  the  transaction  was  a  pawn ;  if  not,  it  was  a 
hypothecation.^ 

Where  one  seized  as  a  pledgee  died  in  possession  and  his 
heir,  being  excluded,  brought  a  writ  of  mort  d^ancestor  to  get 
possession,  he  was  provided  not  with  the  ordinary  writ  of  mort 
d'ancestor,  counting  upon  seisin  generally,  but  with  a  special 
writ,  alleging  in  his  ancestor  a  seisin  de  vadio.^ 

In  Glanville's  time,  a  form  of  contract  was  used  by  which 
one  might  pledge  his  property  on  the  terms  that,  upon  default, 
the  pledgee's  interest  should  become  absolute.^  If  the  pledge 
was  pignus,  and  the  pledgee  was  in  possession  on  the  day  of 

1  Glanv.  Lib.  XIII,  cc.  2,  26-30 ;  4  Bract.  (Rolls  Ed.)  23&-240. 
''Glanv.  Lib.  XIII,  c.  11.    "  Qualemcunque  seisinam,  scilicet  per  ipsum 
tenentem  vel  per  aliquem  antecessorem  ejus,  veluti  in  vadio." 
^4  Bract.  (Rolls  Ed.)  550.    "  De  vadio  .  .  .  et  sic  in  nomine  alieno." 
*  Coote  on  Mortgages,  4  ;  4  Kent's  Com.  137. 
H  Bract.  (Rolls  Ed.)  74,  236. 
6  Glanv.  Lib.  XIII,  cc.  26-30. 
^Glanv.  Lib.  X,c.6. 


DEFINITION    AND    DEVELOPMENT.  O 

default,  his  freehold  began  at  once  in  possession ;  if  not,  he 
had  to  resort  to  a  real  action  to  get  possession/ 

§  3.  MoRTUUM  Vadium. — Mortuum  vadium  was  an  absolute 
fee,  with  the  condition  annexed  making  void  the  feoffment  on 
paj^ment  of  a  given  sum,  which  the  common  law  allowed,  if 
reserved  to  the  feoffer  or  his  heirs.  The  feoffee  took  the  whole 
estate,  subject  to  be  defeated,  but  which,  on  the  non-fulfillment 
of  a  certain  engagement,  became  his  own  by  an  indefeasible 
title.  If  the  debtor  did  not  discharge  the  debt,  according  to 
contract,  theii  the  land  was  lost  to  him,  and  became  dead  to 
him  forever.^ 

§  4.  Welsh  Mortgage. — The  Welsh  mortgage  has  now  en- 
tirely gone  out  of  use.  These  mortgages  resemble  the  vivum 
vadium  of  Coke,  or  the  mortuum  vadium  of  Glanville.  In  them 
the  rents  and  profits  were  substituted  for  the  interest,  and  the 
land  was  to  be  held  until  the  mortgagor  refunded  the  princi- 
pal ;  yet,  if  the  value  of  the  rents  and  profits  was  excessive, 
equity  would,  notwithstanding  any  agreement  to  the  contrary, 
decree  an  account.^ 

The  Welsh  mortgage,  without  any  mitigation  of  its  severity 
in  equity,  was  analogous  to  the  contract  termed  antichresis  in 
the  Roman  law.*  Such  mortgages  were  analogous  to  the 
mortgage  of  lands  in  the  time  of  Glanville.  This  mortgage 
was  harsh  and  unconscionable,  but  a  lawful  contract.  Glan- 
ville calls  it  lawful  but  unjust :  injusta  et  honesta.^ 

The  French  code  '^  adopted  the  Roman  antichresis,  with  this 
mitigation,  that  the  rents  and  profits  shall  be  applied  to  keep 
down  the  interest,  and  the  surplus,  if  any,  to  liquidate  the 
principal  debt.     So,  under  the  civil  code  ^  of   Louisiana,  taken 

'  1  Bract.  (Rolls  Ed.)  160.    This  system  seems  to  be  derived  from  the  civil 
law.— 1  Bract.  (Rolls  Ed.)  146,  236,  8. 
2  Co.  Litt.  205,  a ;  2  Black.  Com.  157. 
^  Fulthrope  v.  Foster,  1  Vern.  476. 
*Dig.  20,  tit.  1,  law  1,  sect.  11. 
*Glanv.  Lib.  10,  c.  6,  sect.  8. 
8  Code  avil,  No.  2085. 
» Civil  Code,  art.  3143-3148. 


6  NATURE   AND    REQUISITES    OF   THE   CONTRACT. 

from  the  Code  Napoleon,  there  are  two  kinds  of  pledges — the 
pawn  on  movables,  and  the  antichresis  given  on  real  estate. 
Under  the  antichresis  the  creditor  acquires  the  right  to  take 
the  rents  and  profits  of  the  land,  to  apply  annually  to  the  in- 
terest, and  the  surplus  to  the  principal  of  the  debt,  and  is  obli- 
gated to  keep  the  estate  in  repair  and  to  pay  the  taxes.  If  the 
debtor  makes  default  in  payment  of  the  debt  the  creditor  may 
prosecute  the  debtor  and  obtain  a  decree  for  selling  the  land 
pledged. 

In  a  Welsh  mortgage  there  is  a  perpetual  power  of  redemp- 
tion, and  the  mortgagee  cannot  compel  a  redemption  or  fore- 
closure.^ An  assignment  of  the  rents  of  the  mortgaged  premises, 
until  full  payment  of  the  mortgaged  debt,  to  the  mortgagee  by 
the  mortgagor,  is  in  the  nature  of  a  Welsh  mortgage.^  And  a 
mortgage  with  a  clause  to  the  effect  that  the  mortgagee  shall 
take  possession  and  apply  the  rents  to  the  discharge  of  the  in- 
debtedness is,  in  its  nature,  a  Welsh  mortgage.  But  the  mort- 
gagee in  a  suit  to  foreclose  is  not  entitled  to  a  judgment  with- 
out accounting  for  the  rents.^ 

§  5.  The  English  Law  op  Mortgages. — Chancellor  Kent 
says  that  the  English  law  of  mortgages  seems  to  have  been 
borrowed,  in  a  great  degree,  from  the  civil  law ;  that  the  Roman 
hypotheca  corresponds  very  closely  with  the  description  of  a 
mortgage  at  law  in  England.  The  land  was  retained  by  the 
debtor,  and  the  creditor  was  entitled  to  his  actio  hypothecaria, 
to  obtain  possession  of  the  pledge,  when  the  debtor  made  de- 
fault. On  the  other  hand,  the  debtor  could  regain  possession 
after  payment  of  the  debt,  if  the  creditor  refused  to  restore  the 
land,  and  the  debtor  might  redeem  at  any  time  before  a  sale.* 

It  is  evident  that  the  English  law  of  mortgages  was  taken, 
in  its  most  comprehensive  sense,  from  the  Roman  law.  In  the 
Roman  law,  the  mortgage  could  be  held  for  future  advances,^ 

^  Longuet  v.  Scawen,  1  Ves.  Sr.  402. 
*  Angier  v.  Masterson,  6  Cal.  61. 
» Rankert  v.  Clow,  16  Tex.  9. 
*4  Kent's  Com.  136. 
5Code,  8,  27, 1. 


DEFINITION    AND    DEVELOPMENT.  7 

and  a  covenant  that  the  mortgage  should  be  forfeited  on  de- 
fault was  not  binding,  but  void.^ 

The  mortgagor  was  entitled  to  redeem,  before  his  title  became 
extinguished ;  the  pledge  could  not  be  sold  without  sufficient 
notice,  or  judicial  decree.^  The  general  features  of  similitude 
between  the  Roman  hypotheca  and  the  English  mortgage  are 
striking.^  This  testimony  is  valuable,  but  there  is  opposition 
to  it.  Mr.  Butler  is  of  the  opinion  that  mortgages  were  intro- 
duced less  upon  the  model  of  the  Roman  hypotheca  than  upon 
the  common-law  docrine  of  conditions.^  And  it  appears  that 
Blackstone,  following  Littleton,  expressly  classes  mortgages  as 
estates  on  condition.^ 

The  Norman  judges  improved  the  English  system  which 
existed  long  before  the  Conquest,  by  incorporating  into  it  the 
elaborate  foreign  system  of  law  with  which  they  were  conver- 
sant, by  the  study  of  Italian  law-writers.  So  the  Roman  law 
was  the  spring-head  of  the  English  jurisprudence  upon  the 
subject  of  mortgages.'' 

The  Anglo-Saxon  word  for  pledge  is  etymologically  the  same 
as  the  Roman  word,  vadium.  The  Saxon  law  ran  parallel 
with  the  civil.^ 

The  ancient  law  of  Attica  indicated  a  pledge  without  posses- 
sion by  a  pillar  or  tablet  set  up  on  the  land,  inscribed  with  the 
creditor's  name  and  the  amount  of  the  debt.^ 

§  6.  A  Mortgage  at  Common  Law. — A  mortgage  at  common 
law  is  a  feoffment  upon  the  condition  that  if  the  feoffer  or  his 
heirs  pay  the  debt  to  the  feoffee  or  his  heirs,  the  feoffer  shall 
re-enter  and  repossess  his  lands.  The  estate  passes  to  the 
mortgagee  subject  to  be  defeated  upon  the  performance  of  the 

1  Code,  8,  35,  3. 

2  Code,  8,  28,  4  ;  Code,  .34,  3,  sect.  1. 

^  2  Surge's  Com.  on'  Colonial  and  Foreign  Laws,  164-246 ;  1  BrowTi's  Views 
of  the  Civil  Law,  200-210. 
*  Co.  Litt.,  Butler's  Notes,  1, 
*2B1.  Com.  152-162. 

^Gilrnan  v.  111.  and  Miss.  Telegraph  Co.,  91  U.  S.  603,  615. 
■'2B1.  Com.  342-3. 
*3  Grote's  Hist,  of  Greece,  part  II,  ch.  XL 


8  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

condition.  If  default  is  made  by  the  mortgagor,  his  estate  be- 
comes forfeited,  and  the  mortgagee  holds  the  estate  absolute.^ 

The  transaction  was  governed  by  the  rules  which  govern 
conditions.^ 

A  common-law  mortgage  created  an  estate  absolute  in  its 
form,  but  intended  to  secure  the  performance  of  some  act,  such 
as  the  payment  of  money  by  the  grantor  or  some  other  per- 
son, and  to  become  void  if  the  act  is  performed  according  to 
the  terms  prescribed  at  the  time  of  making  the  conveyance.^ 

Or  a  common-law  mortgage  may  be  defined  to  be  a  debt  by 
specialty,  secured  by  a  pledge  of  land  of  which  the  legal  own- 
ership is  vested  in  the  creditor,  with  a  proviso  that  such  con- 
veyance shall  be  void  on  payment  of  the  obligation  on  a  day 
specified.* 

It  may  be  defined  as  an  estate  upon  a  condition  defeasible 
by  the  performance  of  the  condition  according  to  its  legal 
eff'ect.' 

It  is  not  only  a  lien  for  a  debt,  but  a  transfer  of  the  property 
itself  as  a  security  for  the  debt.® 

"  The  mortgagee  takes  the  place  of  the  mortgagor  as  owner 
of  the  land,  and  the  mortgagor  that  of  the  mortgagee  as  owner 
of  the  money  borrowed,  the  subsequent  repayment  of  the 
money  and  reconveyance  of  the  land  being  regulated  by  what 
is  in  fact  nothing  else  than  a  subsidiary  contract." '' 

The  scheme  of  an  absolute  conveyance  with  a  defeasance 
back  had  its  origin  at  an  early  time.  From  the  plain  system 
of  pledge  of  the  Roman  and  the  Saxon  law,  with  a  foreclosure 
procedure  for  the  benefit  of  the  debtor  that  he  might  redeem, 
the  system  of  pledges  went  through  successive  stages  of  schemes 
by  creditors  to  curtail  the  rights  of  the  debtor.  Courts  of 
equity  had  protected  the  debtor.     Then  the  creditor,  to  evade 

'Litt.,  sect.  332 ;  Story's  Eq.,  sect.  1004. 

^Litt.,  sect.  332 ;  Wade's  Case,  5  Coke,  114 ;  Goodall's  Case,  5  Coke,  96. 

^  1  Washb.  Real  Property,  475. 

*Coote  on  Mortg.  165. 

^Erskine  v.  Townsend,  2  Mass.  493. 

«  Conard  v.  Atlantic  Ins.  Co.,  1  Pet.  (U.  S.)  386. 

^Ames'  Science  of  Jurisprudence,  p.  269. 


DEFINITION    AND    DEVELOPMENT.  9 

the  equitable  rule,  took  a  deed  absolute  of  the  land,  and  con- 
currently with  it  the  creditor  gave  to  the  debtor  a  bond,  which 
came  to  be  known  as  a  bond  of  defeasance,  stipulating  that  if 
the  debtor  returned  a  certain  sum  of  money,  paid  at  a  certain 
time,  the  deed  should  then  become  null  and  void,  or  that  the 
grantee  would  reconvey.  It  was  the  object  by  this  procedure 
to  make  the  transaction  operate  as  a  sale  of  land,  with  an  option 
of  buying  back.^  But  the  courts  of  equity  in  England  and  in 
this  country  declare  that  such  a  transaction,  if  intended  in  fact 
for  a  mere  security,  is  nothing  but  a  mortgage. 

Still  another  device  at  the  present  time  is  used.  The  land 
is  conveyed  to  the  creditor  or  to  some  third  person  upon  the 
trust  that  it  is  to  be  availed  of  by  holding  it  to  the  creditor's  use, 
or  by  selling  it,  in  case  of  failure  to  pay  the  sum  secured,  and 
paying  the  debt  from  the  proceeds.  But  as  a  scheme  to  avoid 
the  law  of  mortgages,  it  is  a  failure,  as  the  courts  have  decided 
that  a  deed,  in  form  a  trust  deed,  but  given  in  fact  as  a  security, 
does  not  convey  a  trust  estate,  but  is  a  mortgage,  and  gives 
nothing  but  a  mortgagee's  estate.^  And  some  of  the  States 
have  enacted  a  law  that  such  trust  deeds  must  be  foreclosed  in 
court  and  the  mortgagor  allowed  the  statutory  period  of  re- 
demption;^ and  such  laws  are  passed  to  prevent  abuse  and 
oppression.* 

This  struggle  between  the  creditor  and  the  courts  has  been 
alluded  to  by  Glanville  and  Bracton  in  speaking  of  the  fact 
that  courts  of  law  have  been  capable  of  equitable  procedure. 
This  equitable  doctrine  to  shield  the  debtor  in  allowing  him  to 
redeem  was  undoubtedly  exercised  in  very  ancient  times. 

The  successive  stages  of  devices  by  creditors  to  curtail  the 

debtor's  rights  if  he  fail  to  comply  with  the  condition  of  the 

contract,  began  in  time  immemorial.     It  has  been  a  struggle 

between  the  courts  of  equity  and  creditors,  with  success  on  the 

part  of  these  courts. 

'Moyle,  Imp.  Just.  Inst.,  1  Vol.,  pp.  315,  316. 

2  Alison,  in  re,  11  Ch.  D.  284;  Locking  v.  Parker,  L.  R.,  8  Ch.  30;  Teal  v. 
Walker,  111  U.  S.  242. 
n  111.  Rev.  Stat.,  ch.  95,  sect.  17. 
*  Ventres  v.  Cobb,  105  III.  33. 


10  nature  and  requisites  of  the  contract. 

§  7.  Mortgages  as  Viewed  in  Courts  op  Equity — Redemp- 
tion.— The  equitable  doctrine  of  mortgages  was  derived  from 
the  civil  law.^  The  courts  of  equity  seized  upon  the  first  op- 
portunity to  mitigate  the  severity  of  a  common-law  mortgage. 
Judge  Story  says :  "  Courts  of  equity,  acting  upon  general  prin- 
ciples, could  not  fail  to  perceive  the  necessity  of  interposing, 
to  prevent  such  manifest  mischief  and  injustice,  which  were 
wholly  irredeemable  at  law.  They  soon  arrived  at  the  just 
conclusion  that  mortgages  ought  to  be  treated,  as  the  Roman 
law  had  treated  them,  as  a  mere  security  for  the  debt  due  to  the 
mortgagee ;  that  the  mortgagee  held  the  estate,  although  for- 
feited at  law,  as  a  trust ;  and  that  the  mortgagor  had  what 
was  significantly  called  an  equity  of  redemption,  which  he 
might  enforce  against  the  mortgagee,  as  he  could  any  other 
trust,  if  he  applied  within  a  reasonable  time  to  redeem,  and 
offered  full  payment  of  the  debt  and  all  equitable  charges."  ^ 

It  is  said  that  a  strict  foreclosure  in  the  case  of  a  mortgage 
was  condemned  by  the  Council  of  Lateran,  A.  D.  1178,  during 
the  reign  of  Henry  II,  but  that  Parliament,  in  1391,  refused  to 
admit  a  redemption  after  forfeiture,  and  such  estates  continued 
irredeemable  during  the  reign  of  Edward  IV.^ 

But  this  doctrine  of  redemption  became  established  in  1629, 
in  the  reign  of  Charles  I.*  It  may  be  unnecessary  particularly 
to  cite  the  old  cases  upon  this  subject ;  but  it  may  be  stated 
generally  that  one  series  of  them  commencing  in  Capper  v. 
Dickinson,'"'  followed  the  notion  of  conditional  sales,  and  the 
other  series  that  of  a  pledge  in  the  way  of  security.  Capper  v. 
Dickinson  went  so  far  as  to  hold  that  if  the  property  was  not 
redeemable  at  the  day  it  was  forfeited ;  and  this  decision, 
though  as  rigorous  and  as  odious  as  the  lex  commissoria  of 
Rome,  which  it  resembled,  was  no  more  than  the  logical  and 
legitimate   result  of  the   premise  upon  which  it  was  based, 

^  Story's  Eq.,  sect.  1005. 
^  Story's  Eq.,  sect.  1013  and  note. 
^2  Washb.  on  Real  Prop,  39. 

*  Co.  Litt.,  Butler's  Note,  204,  b. ;  and  see  1  Spence's  Eq.  603 ;  How  v.  Vig- 
ures,  1  Rep.  in  Ch.  32. 
*1  RoUe,  315. 


DEFINITION    AND    DEVELOPMENT.  11 

namely,  an  absolute  sale  upon  condition  subsequent.  This 
doctrine  could  never  equitably  be  applied  to  cases  of  delivery 
of  property  in  the  way  of  security,  nor  to  cases  where  the  de- 
livery was  expressly  as  collateral  security  and  in  no  respect  a 
sale. 

"  No  sooner,  however,  was  this  equitable  principle  established 
than  the  cupidity  of  creditors  induced  them  to  attempt  its 
invasion,  and  it  was  a  bold  but  necessary  decision  of  equity 
that  the  debtor  could  not,  even  by  the  most  solemn  engage- 
ments entered  into  at  the  time  of  the  loan,  preclude  himself 
from  his  right  to  redeem ;  for  in  every  other  instance,  probably, 
the  rule  of  law,  modus  et  conventio  vicunt  legem,  is  allowed  to 
prevail.  In  truth  it  required  all  the  firmness  and  wisdom  of 
the  eminent  judges  who  successively  presided  in  the  courts  of 
equity  to  prevent  this  equitable  jurisdiction  being  nullified  by 
the  artifice  of  the  parties."  ^ 

So  the  narrow  and  precarious  character  of  the  mortgagor  at 
law  is  changed  under  the  liberal  jurisdiction  of  courts  of 
equity,  whose  influence  has  reached  the  courts  of  law,  "  and 
the  case  of  mortgages  is  one  of  the  most  splendid  instances  in 
the  history  of  our  jurisprudence,  of  the  triumph  of  equitable 
principles  over  technical  rules,  and  of  the  homage  which  those 
principles  have  received  by  their  adoption  in  the  courts  of 
law."  2 

The  original  severity  of  the  common  law,  treating  the  mort- 
gagor's interest  as  resting  upon  the  exact  performance  of  a 
condition,  and  holding  the  forfeiture  or  the  breach  of  a  condi- 
tion to  be  absolute,  by  non-payment  or  tender  at  the  day,  is 
entirely  modified  and  relaxed. 

Equitable  interposition  is  attributed  to  the  courts  of  equity ; 
but  this  doctrine  was  probably  adopted  long  before  the  estab- 
lishment of  distinct  chancery  courts.  In  very  early  times  the 
courts  of  law  in  England  showed  themselves  capable  of  equit- 
able procedure.  The  foreclosure  process  allowing  the  mort- 
gagor to  redeem,  even  after  default  and  suit  brought,  was  dis- 

^  Coote  on  Mortg.  21. 
M  Kent's  Com.  158. 


12  NATURE    AND    REQUISITES   OP   THE   CONTRACT. 

tinctly  equitable,  aud  represented  a  very  ancient  struggle  be- 
tween courts  and  creditors.^  And  this  same  procedure  was 
adopted  in  Roman  law  to  avoid  the  law  of  pledge,  and  thus 
relieve  the  pledgor,  from  the  absolute  loss  of  his  property,  by 
redemption.^ 

§  8.  The  Adoption  of  the  Principles  of  Redemption. — 
This  doctrine  of  redemption  after  forfeiture  was  laid  down  in 
the  reign  of  Charles  I,  at  first  very  cautiously.  "  The  court 
conceived,  as  it  was  observed  in  chancery,  that  the  said  lease 
being  but  a  security,  and  the  money  paid,  though  not  at  the 
day,  the  lease  ought  to  be  void  in  equity."  ^ 

Sir  Matthew  Hale,  when  chief  justice,  showed  that  he  had 
not  accepted  this  doctrine  of  equity,  for  he  complained  very 
severely  of  the  growth  of  equities  of  redemption,  as  having  been 
too  much  favored.  In  14  Rich.  II,  the  Parliament,  he  said, 
would  not  admit  of  this  equity  of  redemption.  By  the  growth 
of  equity  the  heart  of  the  common  law  was  eaten  out.  He 
complained  that  an  equity  of  redemption  was  transferable  from 
one  to  another,  though  at  common  law  a  feoffment  or  fine 
would  have  extinguished  it ;  and  he  declared  he  would  not 
favor  the  equity  of  redemption  beyond  existing  precedents.* 

The  equity  of  redemption  grew  in  favor  with  the  courts  of 
equity ;  "  once  a  mortgage  always  a  mortgage "  became  a 
maxim.^ 

The  object  of  this  rule  is  to  prevent  oppression.  Contracts 
made  with  the  mortgagor,  to  lessen,  embarrass,  or  restrain  the 
right  of  redemption,  are  regarded  with  jealousy,  and  generally 
set  aside  as  dangerous  agreements,  founded  in  WTong  against 
the  mortgagor.^  Hence  the  equity  of  redemption  is  considered 
to  be  the  real  and  beneficial  estate,  tantamount  to  the  fee  at 
law ;  and  accordingly  it  is  descendible  by  inheritance,  devisable 

1 3  Bl.  Com.  40-52. 

■■'Moyle,  Imp.  Just.  Inst.,  1  Vol.,  pp.  315,  316. 

'Emanuel  College  v.  Evans,  1  Rep.  in  Ch.  10. 

*  Rosearrick  v.  Barton,  1  Cases  in  Ch.  217. 

*  Newcomb  v.  Bonham,  1  Vern.  7. 

*  Howard  v.  Harris,  1  Vern.  190. 


DEFINITION    AND    DEVELOPMENT.  13 

by  will,  and  alienable  by  deed,  precisely  as  if  it  were  an  absolute 
estate  of  inheritance  at  law.^ 

Lord  Eldon  said  that  the  doctrine  of  the  court  gave  coun- 
tenance to  the  strong  declaration  of  Lord  Thurlow,  that  no 
agreement  of  the  parties  would  alter  the  right  of  redemption.^ 

Lord  Hardwicke  felt  himself  bound  to  allow  an  assignee, 
who  had  bought  the  equity  of  redemption  for  a  mere  pittance, 
to  redeem.^  Lord  Mansfield  did  much  to  bring  about  the 
adoption  of  this  equitable  doctrine.  "  It  is  an  aflront  to  com- 
mon sense  to  say  the  mortgagor  is  not  the  real  owner."  ■* 

And  it  seems  that  Lord  Mansfield  obviously  considered  a 
mortgage  to  be  even  at  law  a  mere  security  for  the  debt,  and 
not  an  actual  conveyance.^  But  this  view  of  a  common-law 
mortgage  in  a  law  court  is  clearly  erroneous,  as  is  seen  by  the 
decisions  of  the  judges,*'  who  thought  it  a  most  important  part 
of  English  procedure  that  the  jurisdiction  of  the  courts  of  law 
and  equity  should  be  kept  perfectly  distinct,  as  nothing  con- 
tributes more  to  the  administration  of  justice,  though  they  act 
in  a  great  degree  by  the  same  rules,  yet  they  act  in  a  diff'erent 
manner,  and  their  modes  of  affording  relief  are  different.^ 

Courts  of  equity,  from  a  very  early  period,  took  a  very  dif- 
ferent view  of  the  matter  from  that  of  the  courts  of  common 
law.  They  looked  upon  the  forfeiture  of  the  estate  at  law 
because  of  non-payment  on  the  very  day  fixed  by  the  mort- 
gage, as  in  the  nature  of  a  penalty,  and,  as  in  other  cases  of 
penalties,  gave  relief,  by  allowing  the  mortgagor  to  redeem  the 
land  on  equitable  terms,  at  any  time  before  the  right  to  do  so 
was  barred  by  foreclosure.  This  right  to  redeem  after  the 
estate  had  become  absolute  in  law  in  the  mortgagee  was  called 
the  "  equity  of  redemption."     Courts  of  equity  held  that  the 

1  Casbome  v.  Scarfe,  1  Atk.  603 ;  2  Jac.  &  Walk.  190,  n. 
^Seton  V.  Slade,  7  Ves.  273. 
=*  Anon.,  1  Atk.  313. 
*The  King  v.  St.  Michaels,  2  Doug.  630. 

5  Martin  v.  Mowlin,  2  Burr.  978 ;  Wren  v.  Buckley,  1  Doug.  292 ;  Eaton  v. 
Jaques,  2  Doug.  455. 
®  Powell  on  Mortg.,  Mr.  Coventry's  note,  266. 
^  Shannon  v.  Bradstreet,  1  Sch.  &  Lef.  52. 


14  NATURE    AND    REQUISITES    OF    THE   CONTRACT. 

mortgage  was  a  mere  security  for  the  payment  of  the  debt,  and 
that  the  mortgagor  was  the  real  beneficial  owner  of  the  land, 
subject  to  the  lien  of  the  mortgage;  that  the  mortgagee  had  a 
lien  on,  but  not  an  estate  in,  the  land. 

These  two  systems  were  maintained  without  conflict  between 
the  law  and  equity  courts.  The  equity  courts  did  not  attempt 
to  control  the  law  courts,  or  even  to  question  the  legal  doctrine 
which  they  announced,  and  in  case  of  redemption  required  the 
mortgagee  to  re-convey  the  real  estate  to  the  mortgagor,  to 
make  the  latter's  title  available  in  a  court  of  law. 


Article  2. 

The  Araerican  Doctrine. 

§  9..  In  General. 

§  9.  In  General. — The  harsh  and  rigorous  doctrine  of  the 
common  law  that  the  legal  ownership  is  vested  in  the  mort- 
gagee has  been  greatly  modified  by  most  of  the  States  of  this 
Union.  It  is  the  American  doctrine  in  equity  that  until  fore- 
closure the  mortgagor  remains  seized  of  the  freehold  and  the 
mortgagee  has,  in  effect,  but  a  chattel  interest,  which  goes  to 
the  executor,  in  case  of  death  of  the  mortgagee,  as  personal 
assets,  and  though,  technically  speaking,  the  fee  descends  to 
the  heir,  yet  he  is  but  a  trustee  for  the  personal  representative 
and  need  not  be  a  party  to  a  bill  by  the  executor  for  a  fore- 
closure. The  mortgagee  merely  holds  the  legal  title  as  security 
for  a  specific  purpose,  and  neither  in  a  court  of  law  nor  of 
equity  is  he  permitted  to  use  it,  except  for  the  purpose  of  mak- 
ing effectual  the  security,  and  to  prevent  any  violation  of  his 
rights  under  the  mortgage.^ 

As  against  third  parties,  the  mortgagor  is  considered  as 
having  the  legal  estate,  and  may  in  every  respect  deal  with  the 
land  as  his  own,  subject  only  to  the  rights  of  the  mortgagee.^ 

1  Bartlett  v.  Borden,  13  Bush.  (Ky.)  45 ;  Harkrader  v.  Leiby,  4  Ohio  St.  602. 

^  Chamberlain  v.  Thompson,  10  Conn.  243  ;  Schuylkill  Co.  v.  Thoburn,  7 
Scrg.  &  E.  (Pa.)  411 ;  Bradley  v.  Fuller,  23  Pick.  (Mass.)  8 ;  Terry  v.  Rosell, 
32  Ark.  478. 


DEFINITION    AND    DEVELOPMENT.  15 

In  England  there  is  no  conflict  between  the  courts  of  law 
and  of  equity.  But  in  the  United  States  there  is  a  confusion 
and  conflict  in  the  decisions  of  the  courts,  resulting  from  a 
failure  to  keep  in  mind  the  distinction  between  courts  of  law 
and  of  equity.  Many  causes  have  contributed  to  destroy  that 
certainty  and  uniformity  which  formerly  prevailed.  Chiefly 
among  the  causes  may  be  mentioned  the  statutory  lin\'s  enacted 
in  many  of  the  States,  and  the  failure  of  the  courts  and  the 
authors  to  note  these  changes  in  their  expositions  of  the  law  in 
the  different  States.  Another  source  of  confusion  on  this  sub- 
ject is  that  many  of  the  States  have  abolished  the  common-law 
forms  of  action  by  statute,  and  instead  of  them  a  single  statu- 
tory form  has  been  adopted  in  which  legal  and  equitable  rights 
are  administered  at  the  same  time  and  by  the  same  tribunal. 
Under  these  statutory  enactments  and  change  in  procedure  the 
equitable  theory  of  a  mortgage  has,  in  many  of  the  States,  en- 
tirely superseded  the  legal  one. 

The  doctrine  of  some  of  the  States  is  still  similar  to  that  of 
the  common  law,  while  other  States  have  adopted  the  equitable 
rule,  and  still  others  have  a  modified  view. 

In  those  States  where  the  common-law  rule  prevails,  a  mort- 
gage possesses  a  dual  character,  being  one  thing  in  a  court  of 
law  and  another  in  a  court  of  equity — a  conveyance  of  land  in 
the  former  and  a  security  for  a  debt  in  the  latter.^ 

But  these  two  systems  have  been  shorn  of  their  incongrui- 
ties, and  so  adjusted  that  equitable  and  consistent  rules 
prevail.^ 

In  order  to  present  the  doctrine  of  the  courts  in  the  different 
States,  sometimes  modified  by  statutory  provisions,  it  is  imper- 
ative that  the  interpretation  of  the  courts  be  given,  and  when 
regulated  by  statute  the  effect  of  such  provision. 

It  is  nearly  impracticable  to  group  the  States  under  appro- 
priate divisions,  as  the  views  expressed  differ,  though  in  a 
slight  degree.     A  fair  classification  may  be  attempted. 

1  Welsh  V.  Phillips,  54  Ala.  309. 
*  Martindale  on  C!onv.,  sect.  407. 


16  nature  and  requisites  of  the  contract. 

Article  3. 

The  States  Adopting  the  Common-Law  Rule. 

I  10.  In  General.  I  19.  New  Hampshire. 

§  11.  Alabama.  ?  20.  New  Mexico. 

I  12.  Arkansas.  ?  21.  North  Carolina. 

i  13.  Connecticut.  \  22.  Ohio. 

i  14.  District  of  Columbia.  ?  23.  Pennsylvania. 

I  15.  Illinois.  I  24.  Rhode  Island. 

§  16.  Maine.  I  25.  Tennessee. 

i  17.  Maryland.  §  26.  Virginia. 

i  18.  Massachusetts.  §  27.  West  Virginia* 

§  10.  In  General. — The  States  coming  under  this  division 
have  declared  in  favor  of  the  common  law,  though  the  rule 
has  been  modified  and  is  not  as  strict  and  harsh  as  it  was  in 
the  time  of  Lord  Mansfield,  who  endeavored  to  mitigate  its 
severity.  In  fact,  no  State  now  enforces  the  strict  common-law 
doctrine  of  real  estate  mortgages. 

By  the  common  law,  if  the  mortgagor  paid  the  money  at  the 
time  specified  in  the  mortgage,  the  estate  of  the  mortgagee,  by 
reason  of  the  performance  of  the  condition  therein,  at  once  de- 
termined and  was  gone  forever.  But  if  the  mortgagor  failed 
to  pay  on  the  day  named,  the  title  of  the  mortgagee  became 
absolute,  and  the  mortgagor  ceased  to  have  any  interest  what- 
ever in  the  mortgaged  premises.  By  the  execution  of  the 
mortgage  the  entire  legal  estate  passed  to  the  mortgagee,  and 
unless  it  was  expressly  provided  that  the  mortgagor  should 
retain  possession  till  default  in  payment,  the  mortgagee  might 
maintain  ejectment  as  well  before  as  after  default. 

This  rule  has  obtained,  with  certain  limitations,  in  many  of 
the  States.  The  courts  of  law  regard  the  title  of  the  mortgagee 
in  fee  as  in  the  nature  of  a  lease  or  determinable  fee.  The 
term  of  its  life  is  measured  by  that  of  the  mortgaged  debt. 
When  the  latter  is  paid  or  becomes  banned  by  the  statute  of 
limitations,  the  mortgage  title  is  extinguished  by  operation  of 
law. 

An  outline  will  now  be  given  of  the  views  held  in  the  dif- 
ferent States. 


DEFINITION    AND    DEVELOPMENT.  17 

§  11.  Alabama. — In  this  State  the  mortgage  transfers  the 
legal  title,  defeasible  on  performance  of  the  conditions,  and  the 
right  of  immediate  possession,  unless  by  the  terms  of  the  mort- 
gage possession  is  reserved  in  the  mortgagor  for  an  unexpired 
term,  as  between  the  parties.  As  to  the  mortgagee,  the  mort- 
gagor has  only  an  equity ;  but  it  is  uniformly  held  in  all  late 
decisions  of  the  courts  of  this  State,  and  is  now  the  settled  rule, 
as  to  all  persons  except  the  mortgagee  and  those  claiming  in 
his  right,  that  the  mortgagor  is  the  owner  of  the  fee  and  has 
title  under  which  he  may  maintain  ejectment  against  strangers 
who  have  no  connection  with  the  title  of  the  mortgagee.^ 

But  a  purchaser  of  the  equity  of  redemption  in  mortgaged 
lands  at  execution  sale  against  the  mortgagor  ^  acquires  a  title 
on  which  he  may  maintain  ejectment  against  the  mortgagor 
in  possession.  Neither  can  the  mortgagor  set  up  the  outstand- 
ing legal  title  of  the  mortgagee  to  defeat  the  action.^ 

The  courts  hold  that  the  effect  of  a  mortgage  is  different 
from  that  of  any  other  species  of  conveyance  in  some  particu- 
lars. It  is  treated  differently  in  the  two  leading  jurisdictions, 
equity  and  common  law.  In  the  former,  it  is  but  a  security 
for  money — an  incident  to  the  debt  it  secures,  the  debt  being 
the  principal.  In  the  latter,  it  is,  as  between  the  parties,  a 
transfer  of  the  legal  title,  leaving  in  the  mortgagor  only  a  right 
to  redeem,  called  in  the  books  an  equity  of  redemption.  The 
mortgagor  in  possession  holds  in  subordination  to  the  right 
and  title  of  the  mortgagee  and  his  transferee ;  and  the  latter 
may  dispossess  him  at  any  time,  by  action  at  law,  unless  by 
the  terms  of  the  mortgage  possession  is  reserved  in  the  mort- 
gagor for  a  term  not  expired.  A  mortgagee  in  possession  is, 
in  a  law  forum,  the  legal  owner,  holding  possession  under  a 
legal  title.  "  His  holding  is  adverse  to  tlie  mortgagor,  and,  if 
acquiesced  in  for  the  period  of  limitations  for  actions  at  law,  it 
bars  the  mortgagor  of  all  relief,  legal  and  equitable.  As  to 
all  persons,  however,  who  cannot  connect  themselves  wdth  the 

^  Allen  V.  Kellam,  69  Ala.  442  ;  Denby  v.  Mellgrew,  58  Ala.  147. 

"^  Code,  sect.  2892. 

^  Cotton  V.  Carlisle,  85  Ala.  175. 

VOL.  I. — 2 


18  NATURE    AXD    REQUISITES    OF   THE   CONTRACT. 

title  of  the  mortgagee,  the  mortgagor  in  possession  is  the  owner 
of  the  legal  title ;  and  under  sucli  title  he  can  both  maintain 
and  defend  an  action  of  ejectment.  And  as  to  all  rights  and 
privileges,  both  civil  and  political,  of  which  the  ownership  of 
a  freehold  is  one  of  the  conditions,  the  mortgagor  is  a  free- 
holder, while  the  mortgagee,  by  the  mere  virtue  of  his  mort- 
gage title,  cannot  claim  to  be  such."  ^ 

A  mortgagee,  if  there  is  no  stipulation  or  reservation  in  the 
mortgage  to  the  contrary,  has  the  immediate  right  of  entry, 
and  may  eject  the  mortgagor  or  his  tenants.^ 

After  the  law-day  and  default  in  the  performance  of  the 
condition,  the  estate  vests  absolutely  in  the  mortgagee — the  fee 
is  freed  from  the  condition  annexed  to  it.  Nothing  remains 
in  the  mortgagor  but  the  equity  of  redemption,  of  which,  as 
between  mortgagor  and  mortgagee,  courts  of  law  do  not  take 
notice.  Before  default,  all  that  remains  in  the  mortgagor  is 
the  right  to  perform  the  condition,  and  thereby  restore  his 
original  estate.^ 

A  mortgagee  in  possession,  before  or  after  default  in  the 
payment  of  the  mortgage  debt,  and  before  foreclosure,  is  a  trus- 
tee of  the  rents  and  profits  for  the  mortgagor,  and  is  bound  to 
apply  them  in  extinguishment  of  the  mortgage  debt.^ 

The  court  says  that,  under  the  decisions  in  Alabama,  mort- 
gages are  regarded  as  possessing  a  dual  character — a  convey- 
ance of  an  estate  in  lands,  and  a  security  for  a  debt — bearing 
one  character  in  a  court  of  law  and  another  in  a  court  of 
equity.''  It  is  no  defense  to  an  action  of  ejectment  brought  by 
a  mortgagor  against  any  other  person  than  the  mortgagee  that 
the  legal  title  is  in  the  mortgagee  and  the  law-day  of  the 
mortgage  has  arrived.  Because  the  mortgagor  is  the  legal 
owner  as  against  every  stranger,  and  a  defendant  in  ejectment 
is  not  permitted  to  set  up  an  outstanding  legal  title  in  a  mort- 

^  Marks  v.  Robinson,  82  Ala.  69,  opinion  by  Stone,  C.  J. 

2  Duval  v.  McLoskey,  1  Ala.  737  ;  Welsh  v.  Phillips,  54  Ala.  309  ;  Toomer  v. 
Randolph,  60  Ala.  356. 

3  Paulling  V.  Barron,  32  Ala.  11 ;  Barker  v.  Bell,  37  Ala.  358. 

*  Davis  V.  Lassiter,  20  Ala.  561. 

*  Welsh  V.  Phillips,  54  Ala.  309. 


DEFINITION    AND    DEVELOPMENT.  19 

gagee  with  which  he  does  not  connect  himself.  The  better 
and  prevaiHng  doctrine  is  that  a  mortgage  is  a  mere  security' 
as  to  tliird  jDersons,  and  as  to  them  tlie  mortgagor  has  such  a 
title  as  will  support  ejectment.^ 

§12.  Arkansas. — In  this  State  as  between  mortgagor  and 
mortgagee,  the  legal  estate  is  in  the  mortgagee ;  but  as  to  all 
others  it  is  in  the  mortgagor,  and  may  be  conveyed  by  him 
subject  to  the  mortgage.^ 

The  legal  title  to  mortgaged  property  passes,  at  law,  to  the 
mortgagee,  subject  to  be  defeated  by  the  performance  of  the 
conditions  of  the  mortgage ;  and  the  legal  right  of  possession 
follows  the  legal  title  unless  it  is  expressly  provided  in  the  deed, 
or  clearly  appears  to  be  the  intention  of  the  parties,  that  the 
mortgagor  shall  remain  in  possession  until  after  default.^  'And 
after  forfeiture,  the  mortgagee  is  usually  entitled  to  possession 
of  the  mortgaged  premises,  and  must  apply  the  rents  and  pro- 
fits to  the  mortgage  debt,  but  he  is  not  entitled  to  the  rents  and 
profits  until  he  has  taken  possession,  or  the  necessary  steps  to 
obtain  possession.* 

A  deed  of  trust  executed  for  the  purpose  of  securing  a  debt, 
and  to  be  void  upon  payment  of  the  debt,  and  containing 
a  power  of  sale  upon  default,  is,  in  legal  effect,  a  mortgage. 
The  grantor  retains  an  equity  of  redemption,  and  a  purchaser 
at  execution  sale  of  the  equity  of  redemption  succeeds  to  all 
the  rights  of  the  mortgagor,  among  which  is  the  equitable  right 
of  redemption  by  paying  the  mortgage  debt.^ 

In  short,  the  legal  estate  in  the  property  mortgaged  passes 
to  the  mortgagee,  subject  to  be  defeated  by  performance  of  the 
conditions  of  the  mortgage ;  and  the  right  of  possession  follows 
the  legal  title,  unless  controlled  by  stipulations  in  the  deed,  or 
the  apparent  intention  of  the  parties." 

'  Scott  V.  Ware,  65  Ala.  174  ;  Allen  v.  Kellam,  69  Ala.  442. 

2  Terry  v.  Resell,  32  Ark.  478. 

3  Kannady  v.  McCarron,  18  Ark.  166. 

♦  Reynolds  v.  Canal  and  Banking  Co.,  30  Ark.  520. 

*  Turner  v.  Watkins,  31  Ark.  429. 

8  Whittington  r.  Flint,  43  Ark.  504 ;  Fitzgerald  v.  Beebe,  7  Ark.  310. 


20  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

The  mortgagee  who  himself  occupies  the  mortgaged  premises 
consisting  of  improved  property,  is  not  entitled  to  pay  for 
permanent  improvements  made  without  the  mortgagor's  con- 
sent, and  is  chargeable  with  such  rents  only  as  the  land  would 
have  yielded  without  the  improvements/ 

§  13.  Connecticut. — The  title  of  the  mortgagee  is  peculiar. 
It  is  a  legal  title,  but  can  hardly  be  said,  now,  to  be  classed 
with  any  description  of  title  known  to  the  common  law.  Orig- 
inally, it  was  a  conditional  estate  before  forfeiture,  and  an 
absolute  one  afterward.  But  courts  of  equity  have  so  modified 
its  character,  and  courts  of  law  have  so  far  recognized  these 
modifications,  that  this  time  the  title  can  be  no  better  dis- 
tinguished than  by  calling  it  a  mortgage  title,  and  nothing 
more.^ 

The  payment  of  the  mortgage  money  after  forfeiture  does  not 
divest  the  mortgagee  of  his  legal  estate,  but  gives  only  a  right 
to  compel  a  reconveyance  in  chancery.^ 

Payment  of  the  mortgage  money  constitutes  the  mortgagee 
a  trustee  for  the  mortgagor,  who  can  compel  the  execution  of 
the  trust,  by  a  reconveyance.* 

Judge  Ellsworth  says  that  it  is  too  well  settled  to  be  debated, 
that  as  between  the  mortgagor  and  mortgagee,  or  the  assignee 
of  the  mortgagee,  payment  of  the  mortgage  debt,  after  the  law- 
day,  does  not  affect  the  legal  title,  in  courts  of  law.  As  to  the 
parties  themselves,  the  real  and  public  title  remains,  and  pay- 
ment of  the  debt  is  no  extinguishment  or  release  of  the  mort- 
gagee's title.^ 

A  mortgagee  holds  the  legal  title  solely  as  a  means  of  en- 
forcing payment  of  the  mortgage  debt.  For  all  other  purposes 
the  mortgagor  is  regarded  as  the  owner.     When  the  debt  is 

1  Robertson  v.  Read,  52  Ark.  381. 

2  Dudley  v.  Cadwell,  19  Conn.  218. 

^  Phelps  V.  Sage,  2  Day,  151 ;  Smith  v.  Vincent,  15  Conn.  1 ;  Doton  v.  Rus- 
sell, 17  Conn.  140. 

*Gunn  V.  Scovil,  4  Day,  2.34. 

*  Cross  V.  Robinson,  21  Conn.  378 ;  Roath  v.  Smith,  5  Conn.  136 ;  Porter  v. 
Seeley,  13  Conn.  564. 


DEFINITION    AND    DEVELOPMENT.  21 

satisfied,  if  the  legal  title  is  then  vested  in  the  mortgagee,  he 
holds  it  in  trust  for  the  mortgagor.  Inasmuch  as  the  legal 
title  is  in  him,  he  may  defend,  on  that  ground,  an  action  of 
ejectment  brought  against  him  by  the  mortgagor.^ 

The  mortgagee  in  possession,  whether  the  possession  has 
been  acquired  actually  or  by  attornment  of  tenants,  is  bound  to 
appl}^  the  rents  and  profits  in  the  discharge  of  the  debt,  and 
can  be  compelled  to  account  for  them.^ 

The  legal  title  to  the  land  mortgaged  is  not  transferred  by 
mere  payment  of  the  mortgage  debt,  by  a  party  who  claims  an 
interest  in  the  estate.^  And  a  mortgagee  can  maintain  eject- 
ment without  previous  demand,  or  entry,  or  notice  to  ciuit,  in 
order  to  maintain  his  rights,*  and  whatever  doubts  there  may 
be  as  to  the  original  correctness  of  this  rule,  it  has  become  a 
settled  rule  of  practice  in  Connecticut.^ 

• 

§  14.  District  of  Columbia. — When  real  estate  mortgages 
are  given,  they  have  a  defeasance  clause,  and  can  only  be 
enforced  by  foreclosure  in  a  court  of  equity. 

But  mortgages  are  seldom  used.  Deeds  of  trust  take  their 
place,  under  which  the  property  is  sold  by  the  trustee,  after 
default  in  payment  of  the  debt  secured. 

§15.  Illinois. — In  Illinois  a  mortgage  is  a  conveyance  of 
lands,  by  a  debtor  to  his  creditor  as  a  pledge  or  security  for  the 
payment  of  money  due,  with  the  proviso  that  such  conveyance 
shall  be  void  on  payment  of  the  money  and  interest,  on  a  cer- 
tain day ;  and  in  the  event  that  the  money  be  not  paid  at  the 
time  appointed,  the  conveyance  becomes  absolute  at  law,  and 
the  mortgagor  has  only  an  equity  of  redemption — ^that  is,  a  right 
in  equity,  on  payment  of  principal,  interest,  and  cost,  within  a 
reasonable  time,  to  call  for  a  reconveyance  of  the  lands.'' 

^Clinton  v.  Westbrook,  38  Conn.  9 ;  Smith  v.  Vincent,  15  Conn.  1. 
^  Chamberlain  v.  Railroad  Co.,  54  Conn.  472. 
'Savings  Bank  r.  McPartlan,  40  Conn.  90. 

*  Rockwell  V.  Bradley,  2  Conn.  1. 

*  Savings  Bank  v.  McPartlan,  40  Conn.  90. 
^  Hall  V.  Byrne,  1  Scam.  140. 


22  NATURE    AND   REQUISITES   OF   THE    CONTRACT, 

Before  condition  broken,  the  mortgagor  is  considered  in 
equity  the  owner  of  the  fee,  having  the  jus  in  re  as  well  as  jus 
ad  rem,  and  being  so,  is  entitled  to  all  the  rights  and  remedies 
which  the  law  gives  to  the  owner.^ 

As  between  the  parties  the  mortgage  is  regarded  simply  as  a 
security  for  debt.  But  as  between  the  mortgagee  and  a  third 
person,  in  law,  the  former  is  regarded  as  the  owner  of  the  free- 
hold.2 

In  Illinois,  as  in  England,  the  mortgagee  of  lands  is  held  in 
law  to  be  the  owner  in  fee,  and  is  entitled  to  all  the  rights  and 
remedies  which  the  law  gives  to  such  owner ;  he  may  after  condi- 
tion broken,  even  maintain  ejectment  against  the  mortgagor.^ 

The  dual  system  respecting  mortgages  exists  in  this  State, 
precisely  as  it  did  in  England  prior  to  its  adoption  in  this 
country.  The  equitable  theory  of  a  mortgage  has,  in  process 
of  time,  made  in  this  State  material  encroachments  upon  the 
theory  which  is  now  recognized  in  courts  of  law.^  Thus,  it  is 
now  settled  that  the  mortgagor  or  his  assignee  is  the  legal 
owner  of  the  mortgaged  estate,  as  against  all  j^ersons  except  the 
mortgagee  or  his  assigns.^  So  in  case  of  ejectment  by  the 
mortgagor,  against  a  third  party,  the  defendant  cannot  defeat 
the  action  by  showing  an  outstanding  title  in  the  mortgagee.'' 

Courts  of  law  in  this  State  regard  the  title  of  a  mortgagee  in 
fee,  in  the  nature  of  a  lease  or  determinable  fee.  The  terms 
of  its  existence  is  measured  by  that  of  the  mortgage  debt.'' 

§  16.  Maine. — The  common-law  doctrine  is  held  in  this  State. 
As  between  the  parties  to  the  mortgage  the  fee  of  the  estate 
passes  to  the  mortgagee  at  the  execution  of  the  instrument,  and 
he  may  enter  immediately,  or  have  a  writ  of  entry  against  the 

1  Carroll  v.  Ballance,  26  111.  9. 

*  Moore  v.  Titman,  44  111.  367. 

3  Oldham  v.  Pfleger,  84  111.  102 ;  Finlon  v.  Clark,  118  111.  32 ;  Taylor  v.  Adams, 
115  111.  574 ;  Barrett  v.  Hinckley,  124  111.  32. 

*  Barrett  v.  Hinckley,  124  111.  32. 

"Hall  V.  Lance,  25  111.  277 ;  Emory  v.  Keighan,  88  111.  482. 
"HalU.  Lance,  25  111.  277. 

'  Pollock  V.  Maison,  41  111.  516 ;  Harris  v.  Mills,  28  111.  44 ;  Gibson  v.  Eees, 
50  111.  383. 


DEFINITION    AND    DEVELOPMENT.  23 

mortgagor,  unless  there  be  a  stipulation  in  writing  that  the 
mortgagor  shall  retain  possession  and  receive  the  profits.  As 
to  third  persons,  the  mortgagor  is  considered  as  still  having  the 
legal  estate.'  As  the  mortgagee  has  the  right  of  immediate 
possession,  unless  it  is  otherwise  agreed  between  them,  he  may- 
enter  and  harvest  the  croj)s  growing  upon  the  land  which  he 
planted  before  mortgaging,  and  an  action  of  trespass  cannot  be 
maintained  against  him  by  the  mortgagor  for  so  doing.- 

The  agreement  that  the  mortgagor  shall  retain  possession 
must  be  in  writing ;  but  it  need  not  be  in  any  prescribed  form 
of  words.^  It  may  be  deduced  from  language  used  in  the  con- 
dition of  the  mortgage.* 

The  right  of  the  mortgagee  to  recover  possession  of  the  mort- 
gaged premises,  even  before  breach  of  the  condition  of  the 
mortgage,  when  there  is  no  agreement  to  the  contrary,  is  af- 
firmed by  statutory  enactment.^ 

§17.  Maryland. — Upon  the  execution  of  a  mortgage  the 
legal  estate  becomes  immediately  vested  in  the  mortgagee,  and 
the  right  of  possession  follows  as  a  consequence,  subject  only 
to  the  occupancy  of  the  mortgagor,  which  is  only  tacitly  per- 
mitted until  the  will  of  the  mortgagee  is  determined.  As  soon 
as  an  estate  in  mortgage  is  created,  the  mortgagee  may  enter 
into  possession.  This  right  of  possession  is  always  subject  to 
any  agreements  which  may  be  made  in  relation  thereto,  and 
so  stipulations  are  made  in  the  mortgage,  giving  the  right  of 
possession  to  the  mortgagor  until  forfeiture ;  but  where  the 
parties  are  entirely  silent  as  to  the  possession,  the  right  follows 
the  legal  estate,  and  vests  in  the  mortgagee.® 

The  mortgagee  is  entitled  to  this  possession  of  the  premises 
upon  execution,  delivery,  and  registration  of  the  mortgage,  un- 
less there  is  in  the  mortgage  a  covenant  that  the  possession  so 

1  Blaney  v.  Bearce,  2  Me.  1.32. 

^Gilman  v.  Wills,  m  Me.  273. 

3  Norton  v.  Webb,  35  Me.  218. 

*  Brown  v.  Leach,  35  Me.  39. 

^Eev.  Stat.,  ch.  90,  sect.  2.    See,  also,  Hadley  v.  Hadley,  80  Me.  459. 

®  Jamieson  v.  Bruce,  6  Gill  &  J.  72. 


24  NATURE    AND    REQUISITES    OP   THE    CONTRACT. 

remains  in  the  mortgagor,  which  covenant  is  in  effect  a  re- 
demise of  the  premises  from  tlie  mortgagee  to  the  mortgagor.^ 

Until  default,  the  mortgagor  is  regarded  both  at  law  and  in 
equity  as  the  substantial  owner  of  the  property ;  though  for 
any  waste,  destruction,  or  improper  appropriation  of  the  prop- 
erty mortgaged,  whereby  the  security  may  be  impaired,  the 
mortgagee  will  be  entitled  to  remedy  for  his  protection.  And 
therefore,  though  the  mortgagee,  while  not  having  such  pos- 
session as  will  enable  him  to  maintain  trespass  for  a  wrongful 
or  fraudulent  injury  to  the  premises,  may  have  an  action  on 
the  case  against  the  mortgagor  or  other  person  who  has  com- 
m.itted  the  wrongful  act.^ 

So  where  it  is  agreed  that  the  mortgagor  shall  retain  posses- 
sion, the  mortgagee  has  no  right  to  possession  until  condition 
broken.  It  is  only  the  land  itself,  the  specific  thing,  with  the 
improvements  thereon,  that  is  in  pledge ;  the  rents  and  profits 
are  not  pledged,  so  long  as  the  mortgagor  is  entitled  to  posses- 
sion ;  but  they  belong  to  the  tenant  in  possession,  whether  such 
tenant  is  the  mortgagor  or  a  third  person  claiming  under  him.^ 

The  case  of  a  mortgage  forms  an  exception  to  the  general 
rule,  that  a  party  shall  not  be  allowed  to  sue  at  law  and  in 
equity  for  the  same  debt,  and  a  mortgagee  may  pursue  all  his 
remedies  at  once,  yet  he  is  under  no  obligation  to  do  so.* 

The  mortgagor  in  possession  may  maintain  ejectment  against 
a  third  party  who  rests  his  defense  on  the  possession  and  out- 
standing title  of  the  mortgagee.^  He  is  also  entitled  to  sue  for 
damages  done  the  estate  by  a  third  party .•* 

§  18.  Massachusetts. — After  the  creation  of  the  estate  upon 
condition,  the  mortgagee  has  presently  the  same  right  to  enter 
in  pais  and  take  the  profits,  or  by  judgment  and  execution  in 

1  Clagett  V.  Salmon,  5  Gill  &  J.  314  ;  Evans  v.  Merriken,  8  Gill  &  J.  39 ;  Mc- 
Guire  v.  Benoit,  33  Md.  181 ;  Brown  v.  Stewart,  1  Md.  Ch.  87. 

2  Chelton  v.  Green,  65  Md.  272. 
'Chelton  ?;.  Green,  65  Md.  272. 

*  Brown  v.  Stewart,  1  Md.  Ch.  87. 

*  George's  Creek  Coal  and  Iron  Co.  v.  Detmold,  1  Md.  225. 
«  Railroad  Co.  v.  Gantt,  39  Md.  115. 


DEFINITION    AND    DEVELOPMENT.  25 

a  writ  of  entry,  that  he  has  if  the  estate  was  absokite,  subject 
to  account  for  the  profits  if  the  mortgagor  performs  the  con- 
dition, or  redeems.^ 

As  between  the  mortgagor  and  mortgagee,  a  mortgage  is  to 
be  regarded  as  a  conveyance  in  fee.  But  in  all  other  respects, 
until  foreclosure,  when  the  mortgagee  becomes  the  absolute 
owner,  the  mortgage  is  deemed  to  be  a  lien  or  charge,  subject 
to  which  the  estate  may  be  conveyed,  attached,  and  in  all 
other  respects  dealt  with  as  the  estate  of  the  mortgagor.^ 

The  law  of  mortgage  is  a  mixed  system,  derived  partly  from 
the  common  law  in  regard  to  real  property,  partly  from  the 
rules  and  maxims  of  the  English  courts  of  chancery,  but 
principally  from  various  statutes.  Until  condition  broken,  the 
rights  of  the  parties  are  considered  legal ;  the  mortgagee  is 
deemed  to  be  seized  of  a  defeasible  estate,  and  upon  perform- 
ance of  the  condition  by  the  payment  of  the  debt,  at  the  speci- 
fied time,  the  estate  is  defeated  by  force  of  the  condition,  and 
revests  in  the  mortgagor.^ 

Although,  as  between  mortgagee  and  mortgagor,  a  mortgage 
is  the  transmission  of  the  fee,  which  gives  the  mortgagee  a 
remedy  in  the  form  of  a  real  action,  and  constitutes  a  legal 
seisin,  yet  to  most  other  purposes  it  is,  before  the  entry  of  the 
mortgagee,  but  a  pledge  and  real  lien,  leaving  the  mortgagor 
to  most  purposes  the  owner.* 

If  the  mortgagor  remains  in  possession  by  the  wdll  of  the 
mortgagee,  he  cannot  be  called  upon  to  account  for  rents  and 
profits  to  the  mortgagee.^ 

§  19.  New  Hampshire. — As  against  all  persons  but  the  mort- 

'  Erskine  v.  Townsend,  2  Mass.  493 ;  Colman  v.  Packard,  16  Mass.  39 ; 
Goodwin  r.  Eichardson,  11  Mass.  469  ;  Newall  v.  Wright,  3  Mass.  138  ;  Taylor 
V.  Weld,  5  Mass.  120. 

"Ewer  V.  Hobbs,  5  Met.  1. 

3  Fay  V,  Cheney,  14  Pick.  399. 

*Norcross  v.  Norcross,  105  Mass.  265;  Page  v.  Robinson,  10  Cush.  99; 
Bradley  v.  Fuller,  23  Pick.  1 ;  Silloway  v.  Brown,  12  Allen,  30 ;  Hapgood  r. 
Blood,  11  Gray,  400 ;  Green  v.  Kemp,  13  Mass.  515 ;  Fay  v.  Brewer,  3  Pick. 
203. 

^Boston  Bank  v.  Eeed,  8  Pick.  459. 


26  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

gagee,  the  mortgagor  is  considered  as  having  the  legal  estate, 
and  ma}"  in  every  respect  deal  with  the  land  as  his  own,  sub- 
ject to  the  legal  title  of  the  mortgagee  so  far  as  such  legal  title 
is  necessary  to  his  security.^ 

The  relation  of  mortgagee  and  mortgagor  is  peculiar.  The 
mortgagee  is  not,  under  a  general  sense,  the  owner  of  the 
mortgaged  estate.  Before  foreclosure  his  interest  is  not  in  fact 
real  estate ;  but  he  is  entitled  to  have  it  treated  as  such  so  far 
as  it  may  be  necessary  to  enable  him  to  prevent  waste  and  to 
keep  the  land  from  being  in  any  way  damaged  in  value.^ 

The  mortgagee  takes  an  estate  in  fee ;  the  sole  purpose  of 
the  mortgage  is  to  secure  his  debt.  He  is  to  be  regarded  as 
having  the  legal  estate  for  the  purpose  of  all  lawful  protection 
of  his  interests  ;  but  for  other  jDurposes  the  mortgage  is,  in 
general,  held  to  be  a  mere  security.^ 

The  mortgagee  may  maintain  an  action  of  trespass  against 
the  mortgagor  for  taking  down  a  building  or  other  waste  of 
the  property,''  and  for  cutting  and  carrying  away  timber  trees.^ 
And  until  an  entry  under  the  mortgage  title,  or  an  assertion 
of  it  in  some  mode  by  the  mortgagee,  the  mortgagor  is  regarded 
as  the  owner  of  the  land,  notwithstanding  the  mortgage." 

While  the  mortgagor  is  in  possession  without  any  agreement 
to  that  effect,  but  by  the  assent  of  the  mortgagee,  he  is  not 
liable  for  the  rents  and  profits.^  Where  the  mortgagee  is  en- 
titled to  possession,  he  may  at  once  maintain  a  writ  of  entry 
for  tlie  recovery  of  possession,  without  notice  to  quit.^ 

§  20.  New  Mexico  Territory. — The  common-law  form  of 
mortgage  prevails  in  New  Mexico  Territory,  with  this  excep- 
tion :  in  the  absence  of  a  stipulation  to  the  contrary,  the  mort- 

^Southerin  v.  Mendum,  5  N.  H.  420. 

2  Morse  v.  Whitcher,  64  N.  H.  591. 

3  Smith  V.  Moore,  11  N.  H.  55  ;  Fletcher  v.  Chamberlin,  61  N.  H.  438. 
*Pettengill  v.  Evans,  5  N.  H.  54. 

5  Sanders  v.  Reed,  12  N.  H.  558. 
^Rigney  v.  Lovejoy,  13  N.  H.  251. 
'Furbush  v.  Goodwin,  29  N.  H.  312. 
sChelhs  V.  Stearns,  22  N.  H.  321. 


DEFINITION    AND    DEVELOPMENT,  27 

gagor  of  real  estate  has  the  right  of  possession  thereof,  but  in 
other  respects  the  common -law  rule  prevails,  so  far  as  this  rule 
is  recognized  in  this  country/ 

§  21.  North  Carolina. — Upon  the  execution  of  the  mortgage 
the  mortgagor  becomes  the  equitable  owner  of  the  lands,  and 
this  relative  situation  remains  until  the  land  is  redeemed,  or 
the  mortgage  is  foreclosed.  Until  the  day  of  redemption  the 
mortgagor  has  no  special  equity,  but  he  may  pay  the  debt 
according  to  the  proviso,  and  avoid  the  conveyance  at  law.^ 

A  mortgagor  in  possession  is  an  equitable  freeholder.  He 
has  no  legal  estate,  but  in  equity  he  has  the  entire  estate,  sub- 
ject to  the  incumbrance  of  the  debt  secured.  A  freeholder  is 
one  who  owns  land  in  fee,  or  for  life,  or  for  some  indeterminate 
period.  As  there  are  legal  and  equitable  estates,  so  there  are 
legal  and  equitable  freeholds.^ 

The  mortgagee,  after  condition  broken,  is  entitled  to  re- 
cover possession  of  the  land  upon  the  strength  of  his  legal 
title.* 

And  the  mortgagee  of  lands,  in  the  absence  of  any  stipula- 
tions to  the  contrary,  is  entitled  to  all  the  crops  which  may  be 
produced  upon  the  land  from  year  to  year,  until  the  secured 
debt  is  paid,  although  the  crops  are  produced  by  the  mort- 
gagor's cultivation,  under  the  possession  permitted  by  the 
mortgagee.^ 

The  mortgagee  possesses  two  remedies  which  he  may  prose- 
cute at  the  same  time,  namely,  one  is  personam  for  his  debt,  the 
other  in  rem  to  subject  the  mortgaged  property  to  its  payment 
by  foreclosure.*' 

A  mortgagor  allowed  to  remain  in  possession  by  the  long 
acquiescence  and  implied  approval  of  the  mortgagee  is  not  a 
trespasser  but  a  permissive  occupant,  and  as  such  is  entitled 

1  See  Comp.  Laws  of  1884,  sect.  1593 ;  Laws  of  1876,  ch.  36,  sect.  8. 

■•'  Hemphill  v.  Ross,  66  N.  Car.  477. 

3  State  V.  Eagland,  75  N.  Car.  12. 

*  Wittkowski  v.  Watkins,  84  N.  Car.  456. 

^Coor  V.  Smith,  101  N.  Car.  261. 

6  Ellis  V.  Hussey,  66  N.  Car.  501. 


28  NATURE    AND    REQUISITES    OF   THE   CONTRACT. 

to  reasonable  demand  to  terminate  the  implied  license  before 
an  action  can  be  brought  to  recover  possession.^ 

A  purchaser  of  the  mortgagor's  estate  under  execution  is 
entitled  to  the  right  of  the  mortgagor.^ 

After  the  special  day  of  payment  has  passed,  the  mortgagor 
still  has  an  equity  of  redemption,  until  there  is  a  foreclosure, 
and  this  right  is  regarded  as  a  continuance  of  the  old  estate, 
and  so  long  as  he  is  permitted  to  remain  in  possession,  he  is 
considered  to  hold  in  respect  to  his  ownership,  and  is  not 
accountable  for  the  rents  and  profits  of  the  mortgaged  lands.^ 

§  22.  Ohio. — The  title  of  the  mortgaged  premises  remains  in 
the  mortgagor  as  against  all  the  world  except  the  mortgagee, 
and  also  as  against  him,  until  the  deed  becomes  absolute  at 
law,  by  the  non-performance  of  the  condition,  and  the  mort- 
gagee takes  legal  steps  to  reduce  the  premises  to  possession.* 
And  this  legal  title  remains  in  the  mortgagor  while  he  contin- 
ues his  possession,  whether  the  debt  for  which  the  mortgage 
was  given  has  become  due  or  not.^ 

The  lands  mortgaged  may  still  be  sold  on  judgment  and 
execution  against  the  mortgagor.® 

In  equity  a  mortgage  of  real  estate  is  regarded  as  a  mere 
security.^  But  at  law  it  is  incorrect  to  say  that  a  mortgage  is 
no  more  than  a  creation  of  a  mere  lien  upon  the  property.  It 
treats  a  conveyance  of  the  estate  by  way  of  pledge  or  security 
for  the  debt,  giving  to  a  mortgagee  the  benefit  of  all  the  doctrines 
applicable  to  a  bona  fide  purchaser.* 

In  the  case  of  a  mortgage  in  the  usual  form,  the  legal  estate 
remains  in  the  mortgagor  in  possession,  even  after  the  condi- 

'  Hemphill  v.  Giles,  66  N.  Car.  512. 

^  Hemphill  v.  Eoss,  66  N.  Car.  477. 

» Hemphill  v.  Ross,  66  N.  Car.  477. 

*  Ely  V.  McGuire,  2  Ohio,  223. 

5  Phelps  V.  Butler,  2  Ohio,  224. 

^  Farmers'  Bank  v.  Commercial  Bank,  10  Ohio,  71 ;  Perkins  v.  Dibble,  10 
Ohio,  434 ;  Seymour  r.  Kintr,  11  Ohio,  342 ;  McArthur  v.  Franklin,  16  Ohio 
St.  193  ;  Allen  v.  Evcrly,  24  Ohio  St.  97. 

'  Swartz  V.  Leist,  13  Ohio  St.  419. 

«  Harkrader  v.  Leiby,  4  Ohio  St.  602.  < 


DEFINITION    AND    DEVELOPMENT.  29 

tion  broken  as  to  all  the  world,  except  the  mortgagee.  The 
mortgagee  may  maintain  ejectment  or  take  other  legal  steps  to 
obtain  possession  after  condition  broken,  but  until  he  does  so, 
the  mortgagor  is  at  law  owner  of  the  fee.  The  legal  title  re- 
maining in  the  mortgagor  is  liable  to  levy  and  sale  on  execu- 
tion. It  descends  to  his  heirs,  subject  to  the  conditional  estate 
of  the  mortgagee.  The  mortgage  becomes  void  upon  payment 
of  the  debt,  without  a  formal  reconveyance.^ 

§  23.  Pennsylvania. — Mortgages  of  real  estate  are  in  form 
defeasible  sales,  and  in  substance  grants  of  specific  security,  or 
interests  in  lands  for  the  purpose  of  security.  Ejectment  may 
be  maintained  by  the  mortgagee,  or  he  may  hold  possession  on 
the  footing  of  ownership,  with  all  its  incidents.  Though  it  is 
often  decided  to  be  a  security  or  lien,  yet  so  far  as  it  is  neces- 
sary to  render  it  effective  as  a  security,  there  is  always  a  recog- 
nition of  the  fact  that  it  is  a  transfer  of  the  title.''^ 

A  mortgage  is  a  formal  conveyance  of  land.^  The  mortgage 
passes  to  the  mortgagee  the  title  and  right  of  possession  to  hold 
till  payment  shall  be  made  ;  he  may,  therefore,  when  no  stipu- 
lation to  the  contrary,  enter  at  pleasure,  and  take  actual  pos- 
session— use  the  land  and  reap  its  profits.  This  title  or  lawful 
right  to  possess,  and  actual  pedis  possessio,  are  not  ideal  or  con- 
templative merely,  but  are  real  and  tangible.  Until  condition 
is  performed,  the  title  and  possession  are  as  substantial  and 
real  as  though  they  were  absolute.  The  mortgagee  may  dis- 
possess and  hold  out  the  mortgagor  until  he  performs  the  con- 
dition or  until  the  perception  of  the  profits  reaches  the  same 
result."* 

A  mortgagee  may  maintain  ejectment  against  the  mortgagor 
for  the  mortgaged  property  before  condition  broken  unless 
there  be  a  stipulation  to  the  contrary.^ 

1  Martin  v.  Alter,  42  Ohio  St.  94. 
"Tryon  v.  Munson,  77  Pa.  St.  250. 

^Philipa  V.  Bank,  6  Harris,  394 ;  Britton's  Appeal,  9  Wright,  172. 
*Tryon  v.  Munson,  77  Pa.  St.  250. 

^  Youngman  v.  Railroad  Co.,  65  Pa.  St.  278  ;  Simpson  r.  Amnions,  1  Binn.  175 ; 
Smith  V.  Shuler,  12  S.  &  R.  240 ;  Martin  v  Jackson,  3  Casey,  504. 


30  NATUEE    AND    REQUISITES    OF    THE    CONTRACT. 

A  mortgage  is  essentially  a  pledge  or  security,  and  it  is  dis- 
tinguished from  a  trust  in  this  only,  that  the  property  described 
in  it  is  to  revert  to  the  mortgagor  on  the  discharge  of  the  obli- 
gation for  the  performance  of  which  it  was  pledged/ 

A  mortgagee  in  possession  must  account  for  the  rents,  issues, 
and  profits  of  the  mortgaged  premises,  so  that  the  net  proceeds 
thereof  may  be  applied  to  payment  of  the  sum  for  which  the 
proj^erty  was  pledged  as  security.  If  the  same  be  fairly  paid, 
the  mortgagor  is  entitled  to  possession ;  if  not,  the  mortgagee 
has  the  right  to  retain  possession  until  out  of  the  rents,  issues, 
and  profits,  or  otherwise,  the  residue  is  paid.^ 

§  24.  Rhode  Island. — The  rule  of  the  common  law  as  to  real 
estate  mortgages  prevails  in  this  State.  The  mortgagee  may 
maintain  ejectment  to  recover  possession  of  land,  after  condi- 
tion broken.^  He  may  maintain  replevin  against  the  mort- 
gagor for  wood  and  timber  cut  on  the  mortgaged  premises  in 
waste  of  the  same.* 

The  mortgagor  in  possession  is  regarded  as  owner  of  the 
premises,  subject  to  the  mortgage.  A  purchaser  under  a  fore- 
closure sale  by  mortgagee  under  the  power  of  sale,  takes  not  as 
grantee  of  the  mortgagee,  but  as  grantee  of  the  mortgagor, 
even  when  the  deed  is  in  the  name  of  the  mortgagee.  A  mort- 
gagee, in  exercising  the  power  of  sale,  is  a  quasi  not  a  techni- 
cal trustee.  Technically  he  is  the  attorney  of  the  mortgagor.* 
But  the  mortgagor  and  his  assigns  hold  the  mortgaged  realty 
in  privity  with  the  mortgagee,  and  subject  to  the  mortgagee's 
rights.'' 

§  25.  Tennessee. — The  legal  estate  vests  in  the  mortgagee, 
yet  there  is  a  tacit  assent  that  the  mortgagor  shall  retain  the 
possession  until  default  of  payment,  and  while  he  thus  retains 
possession  he  is  not  bound  to  account  for  rents.     But  the  mort- 

1  Lance's  Appeal,  112  Pa.  St.  456. 

2  Mellon  V.  Lemmon,  111  Pa.  St.  56. 
^Carpenter  v.  Carpenter,  6  R.  I.  542. 
*AVaterman  v.  Matteson,  4  R.  I.  539. 
5  Reynolds  v.  Hennessy,  15  R.  I.  215. 
«  Doyle  V.  Mellen,  15  R.  I.  523. 


DEFINITION    AND    DEVELOPMENT.  31 

gagee  may,  at  any  time,  and  before  default,  if  he  chooses,  put  the 
mortgagor  out  of  possession,  by  ejectment,  or  other  proper  suit.^ 

§  26.  Virginia. — The  estate  of  the  mortgagee  in  the  property 
included  in  the  deed,  until  forfeiture  continues  as  at  common 
law,  before  the  interference  of  courts  of  equity.  After  the  for- 
feiture by  failing  to  perform  the  condition,  whereby  the  estate 
becomes  absolute,  the  mortgagee  may  enter  upon  the  premises 
and  take  possession,  without  any  possibility  at  law  of  being 
evicted  by  the  mortgagor.  If  the  possession  be  in  the  mort- 
gagor, the  mortgagee  may  recover  it  by  suit,  unless  there  be 
some  agreement  in  the  deed  varying  the  rights  of  the  parties 
at  common  law.^ 

In  the  technical  sense  of  the  term,  mortgages  are  not  used 
in  this  State,  being  entirely  superseded  in  practice  by  deeds 
of  trust.  Deeds  of  trust  are  foreclosed  by  the  trustee,  without 
necessity  of  resorting  to  courts  of  equity.  The  equity  of  re- 
demption exists  in  the  mortgagor  in  a  mortgage,  and  in  the 
grantor  in  a  deed  of  trust. 

§  27.  West  Virginia. — Mortgages  contain  a  clause  of  defea- 
sance, and  can  only  be  enforced  by  foreclosure  in  a  court  of 
equity.  But  mortgages  are  seldom  used.  Deeds  of  trust  take 
their  place,  under  which  the  property  is  sold  by  the  trustee, 
after  default  in  payment  of  the  debt  secured. 

Article  4. 
The  States  Adopting  the  Equitable  Rule. 

1 28.  In  General.  1 36.  Indiana. 

1 29.  Alaska  Territory.  I  37.  Iowa. 
§30.  Arizona.  §38.  Kangas. 
§31.  California.  §39.  Kentucky. 
§32.  Colorado.  §40.  Michigan. 
§33.  Florida.  §41.  Minnesota. 
§34.  Georgia.  §42.  Montana. 
§35.  Idaho.  §43.  Nebraska. 

1  Henshaw  v.  Wells,  9  Humph.  568  ;  Vance  v.  Johnson,  10  Humph.  214. 
^  Faulkner  v.  Brockenbrough,  4  Rand.  245. 


32  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

1 44.  Nevada.  §  50.  South  Dakota. 

§  45.  New  York.  §  51.  Utah. 

§  46.  North  Dakota.  1 52.  Washington. 

1 47.  Oklahoma.  •  §53.  Wisconsin. 

§48.  Oregon.  §54.  Wyoming. 

§  49.  South  Carolina. 

§  28.  In  General. — Many  of  the  States  have  discarded  the 
doctrine  of  the  common  law  as  to  the  title  conveyed  by  a  mort- 
gage and  now  declare  a  mortgage  on  real  estate  to  be  a  security 
or  lien  and  nothing  more ;  that  the  mortgagee  has  no  right  of 
entry  until  after  default  and  foreclosure.  It  conveys  no  estate 
in  land,  and  the  default  in  the  payment  of  the  debt  secured 
does  not  change  its  character.  Many  of  the  States  have  de- 
clared this  doctrine  by  statutory  provisions.  Thus,  in  Texas, 
a  mortgage  is  but  a  security,  and  the  title  remains  in  the  mort- 
gagor, and  can  only  be  divested  by  default  and  foreclosure.^ 

§  29.  Alaska  Territory. — The  laws  of  Oregon  govern  in  this 
Territory,  and  hence  a  real  estate  mortgage  is  a  mere  security, 
and  a  mortgagor  cannot  be  divested  of  possession  without  fore- 
closure and  sale.  If  the  mortgagor  gives  the  mortgagee  pos- 
session, then  he  may  hold  it  until  the  debt  is  paid,  provided 
no  agreement  exists  as  to  the  duration  of  such  possession.^ 

§  30.  Arizona  Territory. — In  this  Territory  a  mortgage  is 
a  mere  security  of  a  personal  nature,  and  passes  no  estate  in  the 
land.  The  title  remains  in  the  mortgagor  until  foreclosure 
subject  to  the  lien  of  the  mortgage.  The  mortgagee  before 
foreclosure  has  no  legal  interest  in  the  mortgaged  premises,  and 
consequently  is  not  entitled  to  possession.^ 

§  31.  California. — It  is  the  doctrine  in  California  that  a 

iMann  v.  Falcon,  25  Tex.  271. 

^  See  Annot.  Laws  of  Oregon  of  1887,  p.  383,  sect.  326.  The  laws  of  Oregon 
in  force  May  17,  1884,  apply  to  real  estate  mortgages.  No  land  in  this  Terri- 
tory is  held  in  fee  except  twenty-one  lots  in  Sitka  and  one  in  Kodiak,  and 
this  is  by  virtue  of  the  treaty  with  Russia.  This,  however,  does  not  apply  to 
mining  property.  All  other  rights  in  real  estate  are  simply  possessory  and 
dependent  on  the  action  of  Congress. 

=*  Eev.  Stat.  1887,  sect.  797. 


DEFINITION    AND    DEVELOPMENT.  33 

mortgage  is  a  mere  security  for  a  debt,  and  passes  only  a  chattel 
interest ;  that  the  debt  is  the  principal  and  the  land  the  inci- 
dent. The  mortgage  constitutes  simply  a  lien  or  incumbrance, 
and  that  the  equity  of  redemption  is  the  real  and  beneficial 
estate  in  the  land,  which  may  be  sold  and  conveyed  by  the 
mortgagor  in  any  of  the  ordinary  modes  of  assurance,  subject 
only  to  the  lien  of  the  mortgage/ 

A  mortgage  gives  a  mere  lien  upon  the  property,  and  does 
not  give  a  right  of  possession  of  the  property  by  the  mort- 
gagee. If  the  mortgage  provides  for  possession  by  the  mort- 
gagee, he  can  take  it  under  the  statute.^ 

Under  the  present  doctrine  a  mortgage  does  not  convey  the 
title,^  but  only  creates  a  lien  upon  the  property,  the  title 
remaining  in  the  mortgagor  subject  to  the  lien/ 

The  provision  of  the  statute  takes  from  the  instrument  its 
common-law  character,  and  deprives  the  mortgagee  of  all  right 
of  possession,  either  before  or  after  condition  broken/ 

§  32.  Colorado. — The  civil  code  ^  of  Colorado  declares : 
"  A  mortgage  of  real  property  shall  not  be  deemed  a  con- 
veyance, whatever  its  terms,  so  as  to  enable  the  owner  of  the 
mortgage  to  recover  possession  of  the  real  property,  without 
foreclosure  and  sale,  and  the  fact  of  a  deed  being  a  mortgage 
in  effect  may  be  proved  by  oral  testimony ;  but  this  section 
shall  not  apply  to  trust  deeds  with  powers  of  sale." 

A  mortgagee  has  a  lien  merely,  and  if  out  of  possession,  and 
not  entitled  to  possession,  cannot  maintain  an  action  of  tres- 
pass for  damages.  Before  a  right  of  possession  springs  into 
existence,  the  mortgagee  must  foreclose  his  mortgage  and  sell 
the  realty  mortgaged.     Having  no  title  to  the  premises,  and 

1  GodeflFroy  v.  Caldwell,  2  Cal.  491 ;  Peters  v.  Bridge  Co.,  5  Cal.  336 ;  Guy 
V.  Ida,  6  Cal.  99;  McMillan  v.  Richards,  9  Cal.  365;  Smith  v.  Smith,  80 
Cal.  323. 

2  Civil  Code,  sect.  2927. 

'Taylor  v.  Mcl^in,  64  Cal.  514;  Healy  ;;.  O'Brien,  66  Cal.  519;  Eaynor  v. 
Drew,  72  Cal.  307. 
*Harp  r.  Calahan,  46  Cal.  222 ;  Carpentier  v.  Brenham,  40  Cal.  221. 
^Fogarty  v.  Sawyer,  17  Cal.  589. 
6  Sect.  263,  Laws  of  1887,  p.  174. 
VOL.  I. — 3 


34  NATURE    AND    REQUISITES   OF    THE   CONTRACT. 

not  being  in  any  way  authorized  to  possess  or  occupy  the  same, 
he  cannot  recover  damage  thereto/ 

§  33.  Florida. — A  mortgage  is  a  specific  Hen  upon  the  prop- 
erty, and  is  not,  of  itself,  a  conveyance  of  the  legal  title.  The 
title  is  divested  only  by  forfeiture  of  the  conditions  and  a  sale 
under  the  decree  of  the  court.^ 

It  was  enacted  by  the  legislature  ^  "  that  a  mortgage  is,  and 
shall  be  held  in  our  courts  a  specific  lien  upon  property  for  a 
specific  purpose,  in  point  of  fact  as  well  as  law,  the  mortgagee 
is  incapable  of  acquiring  possession  until  after  decree  of  fore- 
closure." 

So  the  mortgage  is  a  specific  lien  on  the  land  it  covers,  and 
a  failure  to  comply  with  its  conditions  does  not  divest  the 
mortgagor  of  the  legal  title,  nor  vest  it  in  the  mortgagee.^ 

The  mortgage  is  not  only  in  equity  merely  a  lien,  but  under 
the  statutory  provisions  it  is  nothing  more  than  this  at  law. 
It  is  not  a  conveyance  of  any  legal  title  or  estate,  but  only  a 
lien  upon  the  land.  It  gives  the  mortgagee  no  right  of  pos- 
session. The  theory  of  any  such  right,  either  actual  or  tech- 
nical, existing  in  the  mortgagee  by  virtue  of  the  mortgage,  is 
entirely  antagonistic  to  both  the  spirit  and  letter  of  the  statute. 
No  decree  gives  the  mortgagee,  as  such,  possession.  It  is  only 
as  purchaser  under  a  decree  of  foreclosure  and  sale,  and  not  as 
simply  mortgagee,  that  assistance  of  the  court  can  be  obtained 
for  giving  him  possession.^ 

When  the  legal  title,  with  full  power  to  sell  and  convey  the 
fee,  is  expressly  given,  and  the  estate  is  to  be  treated  according 
to  the  law  of  trusts,  the  proceeds  of  leases  and  sales  of  the 
lands  only  being  pledged  to  the  use  of  the  bond  creditors,  such 
conveyance  cannot  be  treated  as  a  mortgage." 

§  34.  Georgia. — In  this  State  a  mortgage  on  land,  given  to 

^  Railroad  Co.  v.  Beshoar,  8  Colo.  32. 

■■^McMahon  v.  Russell,  17  Fla.  698 ;  Jordan  v.  Sayre,  10  South.  Rep.  823. 

'Law  of  1853,  ch-  525  ;  Bush.  Dig.  1872,  p.  611. 

*  Berlack  v.  Halle,  22  Fla.  236. 

^  Jordan  v.  Sayre,  24  Fla.  1 . 

«Soutter  V.  Miller,  15  Fla.  625. 


DEFINITION    AND    DEVELOPMENT.  35 

secure  a  debt,  does  not  convey  title,  but  only  creates  a  lien/  It 
is  merely  security  for  a  debt,  and  the  mortgagee  cannot  enter, 
or  maintain  ejectment.  All  he  can  do  is  to  foreclose  and  sell,' 
and  make  his  money  out  of  the  sale.  The  rents  and  the  profits 
belong  to  the  mortgagor  until  the  sale,  for  the  reason  that  the 
title  remains  in  him  until  sale  and  foreclosure,  and  another  is 
put  into  possession.^ 

The  title  passes  from  the  mortgagor  only  by  foreclosure  and 
sale ;  no  title  passes  by  the  mortgage.^ 

However,  a  deed  and  bond,  separately  or  together,  divest  the 
grantor  of  title,  and  vest  the  title  in  the  grantee,  until  the  debt 
is  satisfied  by  the  grantor.^  And  a  deed  absolute  with  a  bond 
to  reconvey  passes  the  legal  title  to  the  grantee.^ 

The  mortgagor  takes  the  rents  and  profits  until  foreclosure 
and  sale.^ 

§35.  Idaho. — The  equity  rule  as  to  real  estate  mortgages 
prevails  in  this  State.  The  mortgagee  cannot  enter  after  de- 
fault, but  must  foreclose  and  sell  in  order  to  avail  himself  of 
his  security.  A  real  estate  mortgage  is  a  mere  security,  and 
the  common-law  doctrine  of  a  conveyance  is  wholly  aban- 
doned.^ 

§  36.  Indiana. — Prior  to  the  statute  of  1843,  the  common-law 
doctrine,  that  the  mortgage  conveyed  the  legal  estate  to  the 
mortgagee,  prevailed.  But  now  a  mortgage  of  lajid  is  only  a 
lien,  and  the  mortgagor  is  considered  the  owner  of  the  real 
estate  covered  by  the  mortgage.^ 

In  the  absence  of  stipulations  to  the  contrary,  the  mortgagor 
may  retain  possession  until  foreclosure. 

'Thomas  v.  Morrisett,  7G  Ga.  .384 ;  Code,  sect.  1954. 

'^  Yason  v.  Ball,  56  Ga.  2G8  ;  Ragland  v.  Justices,  10  Ga.  65 ;  Carter  r.  Gunn,' 
64  Ga.  651. 
3  Burnside  v.  Terry,  45  Ga.  621. 
*  Gibson  V.  Hough,  60  Ga.  588. 

sphinizy  v.  Clark,  62  Ga.  623 ;  Allen  v.  Frost,  62  Ga.  659. 
«Vason  D.  Ball,  56  Ga.  268. 
^  Rev.  Stat.  1887,  sects.  3350-3355. 
8  Francis  v.  Porter,  7  Ind.  213  ;  Grable  v.  McCulloh,  27  Ind.  472. 


36  NATURE    AND   REQUISITES   OF   THE   CONTRACT. 

This  is  a  statutory  provision.' 

Judge  Elliott  says  that  the  common-law  doctrine,  that  the 
legal  estate  vested  in  the  mortgagee,  was  adhered  to  many 
years  in  Indiana,  as  the  earlier  decisions  show,  but  is  no  longer 
the  rule.  "  The  modern  doctrine,  settled  in  this  State,  is 
that  a  mortgage  is  but  a  lien  on  the  land  as  a  security  for  the 
debt,  and  the  legal  title  remains  in  the  mortgagor,  subject  to 
the  lien  of  the  mortgagee."  So  a  suit  in  Indiana  to  foreclose 
a  mortgage  is  simply  a  demand  by  the  mortgagee  that  the  lien 
created  by  the  mortgage  be  enforced,  and  the  land  mortgaged 
be  subjected  to  sale  for  payment  of  the  debt.^ 

§  37.  lowA. — The  common-law  doctrine  is  not  accepted  by 
the  courts  of  this  State.  The  mortgagee's  interest  is  regarded 
as  a  mere  lien  upon  the  land,  which  may  become  a  title  by 
foreclosure.  The  legal  title  remains  in  the  mortgagor  and  is 
an  estate  of  inheritance.  Upon  breach  of  condition  the  mort- 
gagee has  a  right  to  enter.^ 

In  the  absence  of  stipulations  to  the  contrary,  the  mortgagor 
retains  the  legal  title  and  the  right  of  possession,  as  provided 
by  statutory  provisions.* 

But  a  conveyance  of  the  legal  title  to  secure  the  payment  of 
-m.one}''  differs  from  a  statutory  mortgage  in  that  the  legal  title 
passes  to  the  grantee,  the  grantor  reserving  the  right  in  equity 
to  redeem.^ 

By  a  statutory  mortgage  the  legal  title  remains  in  the  mort- 
gagor.    By  a  conveyance  of  the  legal  title  to  secure  the  pay- 

•  G.  &  H.  Stat.  1872,  p.  335. 

« Fletcher  v.  Holmes,  32  Ind.  497. 

Note. — The  foreclosure  of  mortgages  in  Indiana  is  governed  by  the  statute. 
The  statute  of  1881  provides  that  the  mortgagor  shall  retain  possession. 
Under  this  statute  the  mortgagee  has  no  interest  in  the  rents  and  only  upon 
a  showing  of  insolvency  of  the  mortgagor,  and  a  further  showing  that  the 
mortgaged  lands  arc  insufficient  in  value  to  pay  the  mortgaged  debts,  can 
the  rents  be  aj)plied,  and  even  then  this  application  of  rents  must  be  made 
by  the  appointment  of  a  receiver  for  the  mortgaged  premises. 

'White  V.  Rittenmyer,  30  Iowa,  2GS. 

*Rev.  Giide  of  1880,  sect.  1938. 

'Burdick  r.  Wentworth,  42  Iowa,  440. 


DEFINITION    AND    DEVELOPMENT.  37 

ment  of  money  the  grantor  reserves  the  right  in  equity  to  re- 
deem the  property,  and  against  an  action  at  law  for  the  pos- 
session of  the  land  he  may  interpose  his  equitable  defense.^ 

§  38.  Kansas. — The  title  and  right  of  possession  remain  in 
the .  mortgagor  until  a  conveyance  of  the  land  by  foreclosure. 
Until  that  time,  he  is  entitled  to  the  use  of  the  land  and  to  all 
the  crops  grown  thereon  that  are  ripened  and  severed.^ 

Under  the  statute  a  mortgage  does  not  confer  title ;  ^  hence 
a  mortgagee  of  real  estate  cannot  claim,  by  virtue  of  his  mort- 
gage, to  own  a  house  situated  on  the  mortgaged  property.* 

The  mortgagee  has  no  right  to  enter  after  default;  his 
remedy  under  the  statute  is  an  ordinary  action  and  sale  of  the 
mortgaged  premises.^  And  although  a  stipulation  in  a  real 
estate  mortgage  may  seem  to  give  the  mortgagee  the  right, 
after  condition  broken,  to  take  possession  of  the  mortgaged 
property,  and  to  take  the  rents  and  profits  thereof,  still  such  a 
mortgage  gives  only  a  lien  upon  the  mortgaged  property  and 
the  rents  and  profits,  and  this  lien  can  be  enforced  by  an  action 
brought  in  the  courts,  the  same  as  in  other  cases.  Such  a 
stipulation  does  not  transfer  the  title  to  the  rents  and  profits  to 
the  mortgagee.'^ 

"  The  common-law  attributes  of  mortgages  have  been  wholly 
set  aside ;  the  ancient  theories  have  been  demolished  ;  and  if 
we  could  consign  to  oblivion  the  terms  and  phrases — without 
meaning  except  in  reference  to  those  theories — with  which  our 
reflections  are  still  embarrassed,  the  legal  profession,  on  the 
bench  and  at  the  bar,  would  more  readily  understand  and 
fully  realize  the  new  condition  of  things."  ^ 

^  Richards  v.  Crawford,  50  Iowa,  494 ;  Farley  v.  Goocher,  11  Iowa,  570. 

"  Beckman  v.  Sikes,  35  Kans.  120. 

'  Vanderslice  v.  Knapp,  20  Kans.  647 ;  Alexander  v.  Shonyo,  20  Kans. 
705. 

*  Bobbins  v.  Sackett,  23  Kans.  301. 

5  Clark  V.  Reyburn,  1  Kans.  281 ;  Chick  v.  Willetts,  2  Kans.  384  ;  Waterson 
V.  Devoe,  18  Kans.  223. 

«Seckler  v.  Delfs,  25  Kans.  159 ;  Comp.  Laws  of  1879,  p.  555,  sect.  1 ;  p.  654, 
Beet.  399 ;  Dassler's  Stat.  1876,  ch.  68,  sect.  1. 

'  Chick  V.  Willetts,  2  Kans.  384. 


38  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

§  39.  Kentucky. — A  mortgage  on  land  is  a  mere  security  for 
a  debt,  and  substantially  both  at  law  and  in  equity,  the  mort- 
gagor is  the  real  owner  of  the  property  mortgaged.  The  rents 
can  be  claimed  by  the  mortgagee  only  by  virtue  of  his  contract 
with  the  mortgagor.^ 

At  one  time  the  common-law  doctrine  prevailed,  and  it  was 
held  that  the  mortgage  conveyed  the  legal  title  to  the  mort- 
gagee ;  ^  but  under  the  civil  code  the  rule  has  been  changed. 
And  now  rents  are  not  an  incident  to  a  mortgage  of  realty, 
and  can  be  subjected  by  the  mortgagee  only  by  virtue  of  con- 
tract, or,  in  certain  cases,  in  the  method  pointed  out  in  the 
civil  code.^ 

The  rent  goes  with  the  legal  title,  and  the  right  of  possession 
begins  and  ceases  with  it.  Hence  the  location  of  the  legal 
title  and  the  possession  at  any  given  time  determine  the 
right  to  the  rents  and  not  the  unauthorized  assumption  of  con- 
trol of  the  property  by  the  mortgagee.* 

So  the  rents  and  profits  of  the  mortgaged  premises  go  to  the 
mortgagor  until  he  is  divested  of  his  title,  unless  specifically 
pledged  in  the  mortgage.^ 

§  40.  Michigan. — A  mortgagee  cannot  demand  or  enforce 
possession  of  the  mortgaged  premises.  But  if  the  mortgagor  or 
owner  of  the  fee  chooses  to  put  him  in,  the  tenancy  is,  at  least, 
a  tenancy  at  will,  and  cannot  be  set  aside  without  notice.*^  The 
mortgagee  cannot  take  possession  until  foreclosure  absolute.^ 

By  statutory  provisions  the  mortgagee  of  lands  is  not  entitled 
to  possession  until  foreclosure.®  But  this  is  a  provision  for  the 
benefit  of  mortgagors,  and  they  are  not  obliged  to  insist  upon 

nVoolley  V.  Holt,  14  Bush.  788. 
''Stewart  v.  Barrow,  7  Bush.  371. 
3  Civil  Code,  sect.  299. 

*  Taliaferro  r.  Gay,  78  Ky.  496. 

*  Douglass  V.  Cline,  12  Bush.  608. 
^Byers  v.  Byers,  65  Mich.  598. 

^  Reading  t).  Waterman,  46  Mich.  107;  Newton  v.  McKay,  30  Mich.  380; 
Lee  r.  Clary,  38  Mich.  223. 

^  Caruthers  V.  Humphrey,  12  Mich.  270;  Newton  v.  Sly,  15  Mich.  391; 
Wagar  v.  Stone,  36  Mich.  364 ;  Lee  v.  Clary,  38  Mich.  223.  ' 


DEFINITION    AND    DEVELOPMENT.  39 

it.  But  if  they  give  a  deed  which  is  in  form  absolutely  in- 
tended as  a  mortgage,  they  thereby  convey  a  right  to  posses- 
sion.^ 

The  mortgagee  cannot  maintain  ejectment  for  the  recovery 
of  the  mortgaged  premises,  until  the  title  has  become  absolute 
upon  the  foreclosure.^  And  in  general  the  mortgagee  has  no 
legal  title  in  the  land  mortgaged,  but  only  a  lien  for  the  se- 
curity of  the  mortgage  debt.^  Under  the  statute  the  mortgagor 
is  entitled  to  recover  possession  from  his  mortgagee  at  any 
time  before  his  rights  have  been  foreclosed.* 

§  41.  Minnesota. — The  statute  of  this  State  declares  that  a 
mortgage  of  real  estate  shall  not  be  considered  a  conveyance, 
so  as  to  enable  the  owner  of  the  mortgage  to  recover  possession 
of  the  premises  without  foreclosure.^  A  mortgage  is  a  security 
only,  and  until  foreclosure  the  legal  title  to  the  lands  mort- 
gaged remains  in  the  mortgagor.^ 

A  mortgage,  though  it  is  in  effect  but  a  lien  or  security,  is 
in  form  a  conveyance  of  the  estate  or  interest  in  lands.'' 

But  it  is  not  to  be  deemed  a  conveyance  so  as  to  enable  the 
owner  of  it  to  recover  possession  of  the  real  property  without 
foreclosvire.  The  effect  of  the  statute  is  to  cut  off  the  common- 
law  right  to  maintain  an  action  for  the  possession  before  fore- 
closure.^ 

"  And  although  the  mortgagee  may,  by  obtaining  a  strict 
foreclosure,  eventually  secure  possession,  and  thus  complete  his 
title  under  the  mortgage,  yet,  as  the  courts  may,  and  in  prac- 
tice generally  do,  direct  the  property  to  be  sold,  even  when  a 

1  Morse  v.  Byam,  55  Mich.  594 ;  Bennett  v.  Robinson,  27  Mich.  26 ;  Jeffery 
V.  Hursh,  42  Mich.  563. 

"Annot.  Stat,  of  1882,  sect.  7847. 

^'Comp.  Laws  of  1871,  p.  1775;  Caruthers  v.  Humphrey,  12  Mich.  270; 
Wagar  v.  Stone,  36  Mich.  364. 

*  Humphrey  v.  Hurd,  29  Mich.  44. 

5  Gen.  Stat.  1878,  ch.  75,  sect.  29. 

^Berthold  v.  Hohnan,  12  Minn.  335  ;  Humphrey  v.  Buisson,  19  Minn.  221 ; 
Adams  v.  Corriston,  7  Minn.  456 ;  Donnelly  v.  Simonton,  7  Minn.  167. 

'  Morrison  v.  Mendenhall,  18  Minn.  232. 

8  Rice  V.  Railroad  Co.,  24  Minn.  464. 


40  NATURE   AND    REQUISITES   OF    THE   CONTRACT. 

strict  foreclosure  is  asked  for,  he  is  by  no  means  certain  of  ever 
perfecting  that  title  which  the  mortgage  j)urports  to  convey. 
And  if  the  property,  by  direction  of  the  court  or  otherwise,  be 
sold  to  satisfy  the  mortgage,  the  purchaser,  when  he  receives 
his  deed,  takes,  not  the  title  of  the  mortgagee,  for  that  is  ex- 
tinguished by  the  application  of  the  proceeds  of  the  sale ;  nor 
does  he  take  simply  the  title  of  the  mortgagor  at  the  time  of 
the  sale,  for  that  is  incomplete ;  but  he  takes  the  title  which 
was  in  the  mortgagor  at  the  time  the  mortgage  was  given, 
which  is  equivalent  to  both."  ^ 

§  42.  Montana. — By  statute  a  mortgage  of  real  estate  is  not 
deemed  a  conveyance  as  at  common  law.  The  owner  of  the 
mortgage  cannot  recover  possession  of  the  mortgaged  premises 
without  foreclosure  and  sale.  The  mortgagor,  in  absence  of 
an  agreement  to  the  contrary,  has  the  right  of  possession  until 
default  and  foreclosure.^  While  a  mortgage  of  realt}^  shall  not 
be  deemed  a  conveyance,  whatever  its  terms,  so  as  to  enable 
the  mortgagee  to  recover  possession  of  the  premises  without 
foreclosure  and  sale,  yet  where  the  mortgagor,  after  the  maturity 
of  the  mortgage,  gives  the  mortgagee  permission  to  enter,  the 
mortgagee  may  rightfully  do  so,  and  hold  possession  until  the 
debt  is  paid.  Such  possession  will  sustain  his  right  to  hold 
the  premises  in  an  action  of  ejectment.^ 

So  a  conveyance  in  trust  to  secure  a  mortgage  giving  the 
trustee  full  power  to  convey  the  property  to  the  cestui  que  trust 
or  mortgagee,  upon  default  in  the  payment  of  the  debt,  does 
not  entitle  the  cestui  que  trust  or  mortgagee  to  the  possession  of 
the  land  mortgaged  without  foreclosure  and  sale.'* 

§  43.  Nebraska. — The  common-law  rule  has  never  prevailed 
in  this  State,  it  being  held  that  a  mortgage  is  a  mere  security 

^  Adams  v.  Corriston,  7  Minn.  456. 

^^Code  of  Civil  Procedure,  sect.  359  ;  Comp.  Stat,  of  1887. 

*Fee  V.  Swingly,  6  Mont.  596. 

*  Fee  V.  Swingly,  6  Mont.  596.  Judge  Bach  pays  that  a  mortgagee  in  pos- 
session of  the  mortgaged  premises,  after  condition  broken,  and  with  consent 
of  the  mortgagor,  is  entitled  to  possession  until  the  debt  is  paid,  and  the 
mortgagor  cannot  eject  him  until  the  debt  is  paid. 


DEFINITION   AND    DEVELOPMENT.  41 

creating  a  lien  upon  the  mortgaged  property,  but  conferring  no 
title  and  vesting  no  estate/  Hence  a  mortgage  is  not  a  con- 
veyance as  at  common  law.^ 

So  where  the  owner  of  real  estate  executes  an  absolute  deed 
as  security  for  a  payment  of  money,  and  receives  a  defeasance 
in  writing,  the  transaction  is  a  mere  mortgage,  and  the  mort- 
gagor, in  the  absence  of  a  contract  to  the  contrary,  is  entitled 
to  retain  possession  of  the  property.^ 

The  statutes  make  a  mortgage  nothing  but  a  lien.  "  In  the 
absence  of  stipulations  to  the  contrary  the  mortgagor  of  real 
estate  retains  the  legal  title  and  the  right  of  possession 
thereof." ' 

The  mortgagee,  having  neither  the  possession  nor  the  right 
of  possession  of  such  property,  has  no  interest  therein  he  can 
convey  by  lease.^ 

The  mortgagor  has  the  right  to  continue  in  possession  until 
he  is  deprived  of  it  by  an  order  of  judgment  of  the  court  in  a 
foreclosure  proceeding,  unless  voluntarily  surrendered.*^ 

§  44.  Nevada. — The  statute  declares  that  "  a  mortgage  of 
real  property  shall  not  be  deemed  a  conveyance,  whatever  its 
terms,  so  as  to  enable  the  owner  of  the  mortgage  to  recover 
possession  of  the  real  property,  without  foreclosure  and  sale."  ^ 

This  statute  confines  the  mortgagee  and  the  purchaser  of  his 
interest  to  one  remedy  only — that  is,  to  the  remedy  of  fore- 
closure and  sale.* 

A  quit-claim  deed  conveys  whatever  interest  the  mortgagor 

1  Kyger  r.  Ryley,  2  Nebr.  28 ;  AVebb  v.  Hoselton,  4  Nebr.  318 ;  Tootle  v. 
White,  4  Nebr.  403 ;  Hurley  v.  Estes,  6  Nebr.  386 ;  Gregory  v.  Hartley,  6 
Nebr.  362 ;  Simmons  Hardware  Co.  v.  Brokaw,  7  Nebr.  405  ;  Buel  v.  Farwell, 
8  Nebr.  224 ;  Merriman  v.  Hyde,  9  Nebr.  113 ;  Union  Mutual  Ins.  Co.  v. 
Lovitt,  10  Nebr.  301 ;  Davidson  v.  Cox,  11  Nebr.  250;  Blanchard  v.  Jamison, 
14  Nebr.  246. 

-'  McHugh  V.  Smiley,  17  Nebr.  620. 

^Connelly  v.  Giddings,  24  Nebr.  131. 

*Gen.  State,  1881,  ch.  61,  sect.  55 ;  1885,  p.  482. 

5  Union  Mutual  Ins.  Co.  v.  Lovitt,  10  Nebr.  301. 

8  Union  Mutual  Ins.  Co.  r.  lovitt,  10  Nebr.  301. 

T  Gen.  State,  1885,  Civ.  Proced.,  sect.  3284. 

8Hyman  v.  Kelly,  1  Nev.  179. 


42  NATURE   AND   REQUISITES   OF   THE   CONTRACT. 

has  in  the  property  at  the  time  the  conveyance  is  made ;  and 
although  it  is  intended  as  a  mortgage,  it  will,  if  absolute  in 
form,  vest  the  legal  title  in  the  grantee,  and  is  sufficient  to 
protect  the  rights  of  an  innocent  purchaser  for  value/ 

The  title  does  not  pass  from  the  mortgagor  until  default, 
foreclosure  and  sale.^ 

§  45.  New  York. — The  mortgagor  is  the  owner  of  the  free- 
hold, notwithstanding  the  mortgage,  and  may  even  sustain  an 
action  of  trespass  against  the  mortgagee,  or  those  under  him, 
if  he  or  they  enter  while  the  mortgagor  is  in  possession.^ 

Before  foreclosure,  the  mortgagor  remains  seized  of  the  free- 
hold, and  the  mortgagee  has  merely  a  chattel  interest,  a  pledge 
for  his  debt.* 

The  only  right  of  the  mortgagee  to  take  possession  before 
default  is  by  consent  of  the  mortgagor.^  The  mortgagee  can- 
not maintain  an  action  to  recover  possession  of  the  mortgaged 
premises.^ 

A  mortgagor  or  his  assignee  in  possession  may  maintain  tres- 
pass against  the  mortgagee,  and  if  the  mortgagee  reply  liberum 
tenementum,  the  mortgagor  can  reply  freehold  in  himself.^ 

The  mortgagee  has  no  estate  in  the  land  capable  of  being 
sold  or  conveyed.* 

He  has  no  interest  capable  of  being  sold  under  execution.'' 

The  mortgagor  is,  for  every  substantial  purpose,  the  owner 
of  the  land,  and  the  mortgagee  has  merely  a  lien  upon  it.^'^ 

The  legal  title  to  mortgaged  premises  remains  in  the  mort- 
gagor, and  his  title  is  not  affected  by  default  in  payment  or  by 

iBrophy  Min.  Co.  v.  Brophy  &  Dale  Gold  &  Silver  Co.,  15  Nev.  101. 
nVhitmore  v.  Shiverick,  3  Nev.  288. 

^Jackson  r.  Bronson,  19  Johns.  325 ;  Dickinson  v.  Jackson,  6  Cow.  147. 
*  Jackson  v.  Willard,  4  Johns.  41. 

nVaring  v.  Smyth,  2  Barb.  Ch.  119 ;  2  Rev.  Stat.  312,  sect.  57. 
«Civ.  Code  Proced.  1880,  sect.  1498. 
'  Runyan  v.  Mersereau,  11  Johns.  534. 
8  Aymar  v.  Rill,  5  Johns.  Ch.  570. 
^  Morris  v.  Mowatt,  2  Paige,  586. 

1"  Astor  V.  Miller,  2  Paige,  68 ;  Astor  v.  Hoji;,  5  Wend.  603 ;  Waring  v.  Smyth, 
2  Barb.  Ch.  119  ;  Gardner  v.  Heartt,  3  Denio,  232. 


DEFINITION    AND    DEVELOPMENT.  43 

surrender  of  possession  to,  or  the  taking  of  possession  b}'  the 
mortgagee/ 

One  claiming  under  a  conveyance  in  form  of  a  deed,  but  in 
fact  given  as  security  or  mortgage,  cannot  maintain  ejectment 
against  the  grantor  or  any  other  person.  Reconveyance  by 
the  grantee  to  the  grantor  is  not  necessary  to  reinvest  the  latter 
with  the  absolute  title ;  it  is  necessary  only  to  clear  up  the 
record  title.^ 

A  deed  absolute  in  form,  but  in  fact  given  simply  as  security 
for  a  debt,  does  not  convey  the  title,  but  is  both  at  law  and  in 
equity  a  mortgage  only,^ 

The  mortgagor  has  the  legal  estate,  and  yet  it  is  called  the 
equity  of  redemption ;  but  this  is  to  be  said  only  in  respect  of 
his  relation  to  the  mortgagee ;  as  to  all  the  world  he  is  the 
owner.  The  mortgagee  has  a  mere  lien  for  the  payment  of  his 
debt,  and  it  is  a  chattel  interest.  He  has  no  legal  estate  in  the 
land  which  enables  him  to  exercise  dominion  over  it.  He 
may  take  all  needful  measures  to  protect  his  security,  but 
nothing  more.* 

When  an  absolute  deed  is  given  as  a  mortgage,  the  title  does 
not  pass  to  the  grantee.^ 

§  46.  North  Dakota. — A  mortgage  does  not  entitle  the 
mortgagee  to  the  possession.  The  mortgagor  may  agree  to 
the  possession  of  the  mortgagee  upon  a  sufficient  considera- 
tion.^ 

The  equity  rule  prevails  in  this  State,  and  mortgages  of  real 
estate  do  not  convey  the  legal  title  to  the  mortgagee.  The 
mortgagor  has  the  right  of  possession  until  default,  foreclosure, 
and  sale.'' 

'  Trimm  v.  Marsh,  54  N.  Y.  599. 

""  Shattuck  V.  Bapcom,  105  N.  Y.  39 ;  Murray  v.  Walker,  31  N.  Y.  399 ;  Horn 
r.  Keteltas,  46  N.  Y.  605  ;  Carr  r.  Carr,  52  N.  Y.  251. 

3  Barry  v.  Ins.  Co.,  110  N.  Y.  1. 

*  Trimm  v.  Marsh,  54  N.  Y.  599. 

5  Barry  v.  Ins.  Co.,  110  N.  Y.  1 ;  Thorn  v.  Sutherland,  123  N.  Y.  236 ;  Shat- 
tuck r.  Bascom,  105  N.  Y.  46. 

«Rev.  Code,  1883,  sect.  1733. 

"•  Rev.  Code,  1877,  sect.  1733. 


44  NATURE   AND    REQUISITES    OF    THE    CONTRACT. 

§  47.  Oklahoma  Territory. — In  this  Territory  the  doctrine 
is  established  that  the  mortgagee  is  not  seized  of  the  freehold, 
either  at  law  or  in  equity,  either  before  or  after  default.  In 
the  absence  of  stipulations  to  the  contrary,  the  mortgagor  re- 
tains the  legal  title  and  the  right  of  possession. 

§  48.  Oregon. — In  Oregon  a  mortgage  does  not  operate  as  at 
common  law,  to  vest  in  the  mortgagee  an  estate  upon  condition, 
the  breach  of  which  works  a  forfeiture  of  the  estate  which  then 
becomes  absolute.  It  is,  in  fact,  a  mere  security  for  the  pay- 
ment of  the  debt  or  obligation,  and  serves  simply  to  create  a 
lien  upon  the  property.  It  is  still  the  property  of  the  mort- 
gagor, in  law  and  in  equity ;  it  is  liable  for  his  debts ;  may  be 
sold  under  execution,  or  conveyed  or  devised.* 

A  lien  upon  real  estate  other  than  that  of  judgment  o^  de- 
cree, created  by  mortgage  or  otherwise,  shall  be  foreclosed  by 
suit,  and  the  property  adjudged  to  be  sold  to  satisfy  the  debt 
secured  thereby.^  A  mortgage  is  literally  a  security  for  a  debt 
or  the  performance  of  the  acts  there  mentioned  ;  but  in  form  it 
is  a  conveyance.^  But  a  suit  to  foreclose  a  mortgage  is  not  for 
the  determination  of  any  right,  or  claim  to,  or  interest  in,  real 
property.  It  is  the  mere  collection  of  a  debt  charged  upon  specific 
property  by  resorting  to  the  property  as  a  means  of  satisfying  it.* 

A  mortgagor  cannot  be  divested  of  his  possession  of  the  mort- 
gaged premises,  even  after  default,  without  a  foreclosure  sale. 
But  the  mortgagor  may  place  the  mortgagee  in  possession  of 
the  mortgaged  premises  if  he  chooses  to  do  so.  And  where 
the  duration  of  the  possession  of  the  mortgagee  thus  acquired 
is  not  limited  by  his  agreement  with  the  mortgagor,  he  may 
retain  possession  until  the  debt  is  paid.  This  doctrine  does 
not  conflict  with  the  rule  that  a  mortgage  is  simply  a  security 
for  a  debt  and  vests  in  the  mortgagee  no  legal  title  to  or  inter- 
est in  the  mortgaged  premises.^ 

>  Sellwood  V.  De  Lashmutt,  11  Ore.  534. 

'^  Verdier  v.  Eigne,  16  Ore.  208  ;  Hill's  Code,  sect.  414. 

MVatson  V.  Dundee  Mortg.  &  Invest.  Co.,  12  Ore.  474. 

*  Anderson  r.  Baxter,  4  Ore.  105 ;  Annot.  Laws  of  1887,  p.  383,  sect.  326. 

*  Civil  Code  of  1872,  sect.  323 ;  Roberts  v.  Sutherlin,  4  Ore.  219. 


DEFINITION    AND    DEVELOPMENT.  45 

§49.  South  CaroliNxI. — The  legal  title  to  the  real  estate, 
upon  the  execution  of  a  mortgage,  remains  in  the  mortgagor, 
and  the  mortgagee  is  not  entitled  to  maintain  possessory  action^ 
for  the  real  estate  mortgaged,  even  after  default.  The  mort- 
gagor shall  be  deemed  the  owner  of  the  land,  and  the  mortga- 
gee as  owner  of  the  money  lent  or  due.^ 

The  mortgagee  shall  be  entitled  to  recover  satisfaction  for 
the  sum  due  on  the  land  by  foreclosure  and  sale  according  to 
law.^ 

A  mortgage  of  land  since  the  Act  of  1791,^  is  not  an  alien- 
ation, but  a  security  by  lien  for  the  payment  of  the  debt. 
This  act  changed  entirely  the  character  of  a  mortgage,  mak- 
ing it  merely  a  security  for  a  debt  instead  of  a  conveyance  on 
condition,  declaring  that  the  legal  title  shall  remain  in  the 
mortgagor,  and  that  "  when  the  same  lands  are  mortgaged  at 
divers  times,  the  debts  meant  to  be  secured  by  such  mortgage 
shall  be  paid  in  the  order  the  same  are  recorded."  * 

The  mortgage  is  not  restored  to  its  original  character  at 
common  law,  where  it  was  regarded  as  a  conveyance  of  the 
legal  title  to  the  mortgagee,  by  the  provisions  in  the  Act  of 
1797.^ 

§  50.  South  Dakota. — The  equity  rule  prevails  in  this  State.*' 
A  mortgage  on  real  estate  does  not  entitle  the  mortgagee  to 
possession.  But  by  agreement,  the  mortgagee  may  be  entitled 
to  possession,  upon  a  sufficient  consideration.  The  mortgage 
is  not  a  conveyance  of  the  title  to  the  mortgagee,  and  the 
mortgagor  has  the  right  of  possession  of  the  mortgaged  prem- 
ises until  foreclosure  and  sale.^ 

§  51.  Utah  Territory. — In  this  Territory  a  mortgage  does 
not  convey  the  legal  title  to  the  mortgagee.     The  mortgagee 

1  Gen.  Stat.,  sect.  2299  ;  Rev.  Stat.  1873,  p.  536. 
"^  Johnson  v.  Johnson,  27  S.  Car.  309. 
"5  Stat.  169. 

*  Warren  v.  Raymond,  17  S.  Car.  163. 

*  Navassa  Guano  Co.  v.  Richardson,  26  S.  Car.  401. 
«Rev.  Code  of  1883,  sect.  1733. 

■'  Rev.  Code  of  1877,  sect.  1733. 


46  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

cannot  recover  possession  until  default,  foreclosure,  and  sale ; 
so  a  mortgage  is  not  deemed  a  conveyance,  so  as  to  entitle  the 
mortgagee  to  recover  possession  without  foreclosure/ 

§  52.  Washington. — The  equity  rule  prevails  in  this  State. 
It  is  provided  by  statute  that  a  mortgage  of  real  property  shall 
not  be  deemed  a  conveyance,  so  as  to  enable  the  owner  of  the 
mortgage  to  recover  possession  of  the  real  property  without 
foreclosure  and  sale.^ 

§  53.  Wisconsin. — In  Wisconsin  a  mortgage  upon  lands  is  a 
mere  lien  or  security.  The  title  remains  in  the  mortgagor,  and 
the  mortgagee  holds  the  mortgage  as  such  security  for  the 
debt.  And  a  deed  of  trust  given  by  the  mortgagor  to  secure 
the  payment  of  certain  bonds,  containing  a  clause  that  if  the 
bonds  were  duly  paid,  the  estate  thereby  created  should  cease 
and  become  void,  is  in  effect  a  mortgage  and  the  legal  title 
remains  in  the  mortgagor.^ 

Even  a  deed  in  fee  simple,  given  to  secure  a  debt  with  parol 
defeasance,  is  nothing  more  nor  less  than  a  mortgage.  It  leaves 
the  title  in  the  grantor,  and  gives  to  the  grantee  a  mere  security 
for  his  debt,  to  be  enforced  by  an  original  mortgage.^ 

The  statute  ^  has  essentially  changed  the  rule  of  the  common 
law  in  relation  to  the  position  of  the  fee  of  the  mortgaged 
premises  after  condition  broken.  The  fee  does  not  vest  upon 
default  of  the  mortgagor,  in  the  mortgagee,  or  his  assignee. 
The  fee  only  vests  upon  sale  and  foreclosure." 

However,  if  the  mortgagee  obtains  the  peaceable  possession 
of  the  mortgaged  premises  without  foreclosure  sale,  after  condi- 
tion broken,  the  mortgagor  cannot  turn  him  out  of  such 
possession  by  an  action  of  ejectment,  or  by  any  other  legal  or 
equitable  proceeding,  until  he  pays  the  amount  due  on  the 

1  Comp.  Laws  of  1876,  p.  478  ;  Civil  Practice  Act  of  1870,  sect.  260. 
=!  Code  of  1881,  sect.  5-46 ;  Gen.  Laws  of  1877,  sect.  350 ;  Boyd  v.  Forbes, 
3  Wash.  T.  318. 
'Wisconsin  Cent.  R.  R.  Co.  v.  Wisconsin  River  and  Land  Co.,  71  Wis.  94. 
*Schriber  v.  Le  Clair,  66  Wis.  586. 
5  Rev.  Stat.  1871,  p.  1671 ;  1878,  sect.  3095. 
«Wood  V.  Trask,  7  Wis.  566. 


DEFINITION    AND    DEVELOPMENT.  47 

mortgage,  or  until  the  same  has  been  paid  by  the  appUcation 
of  the  rents  and  profits.^ 

But  the  act  of  the  mortgagee's  taking  peaceable  possession, 
does  not  give  him  legal  title  to  the  fee  of  the  land  mortgaged. 
He  can  maintain  his  possession  upon  the  ground  of  equity, 
having  a  lien  upon  the  property  in  his  possession  by  con- 
tract with  the  owner  of  the  fee,  and  his  right  to  2:)ayment 
of  the  amount  of  his  lien  which  has  matured  and  remains 
undischarged ;  it  is  equitable  that  the  lien-holder,  being  in 
possession  of  the  property  to  which  his  lien  attaches  and  out 
of  which  his  debt  is  to  be  paid,  should  be  permitted  to  hold 
such  possession,  and  apply  the  rents  and  profits  which  can  be 
derived  by  such  possession  to  the  discharge  of  his  debt,  until 
the  same  shall  be  paid.^ 

The  mortgagor  in  possession  holds  the  estate  in  some  respects 
as  trustee  for  the  benefit  of  the  mortgagee,  and  a  court  of 
equity  will  interfere  to  prevent  the  destruction  or  waste  of  the 
mortgaged  estate  by  the  mortgagor.^ 

§  54.  Wyoming. — In  this  State  the  common-law  doctrine  of  a 
real  estate  mortgage  does  not  prevail.  A  real  estate  mortgage 
is  simply  a  lien  on  the  land,  or  security  for  the  debt,  and  the 
mortgagee  has  no  title  in  the  fee,  and  has  no  remedy  but  fore- 
closure and  sale  to  satisfy  his  indebtedness  against  the  mort- 
gagor. 

Article  5. 

The  States  Adopting  a  Modification  of  the  Common-Law  Rule. 

§  55.  Delaware.  ^  58.  New  Jersey. 

§  56.  Mississippi.  ?  59.  Vermont. 

^57.  Missouri. 

§  55.  Delaware. — In  this  State  a  mortgage,  as  between  the 
mortgagor  and  the  mortgagee,  so  long  as  the  former  continues 

1  Gillett  V.  Eaton,  6  Wis.  30 ;  Tallman  v.  Ely,  6  Wis.  244  ;  Stark  v.  Brown, 
12  Wis.  572 ;  Hennesy  v.  Farrell,  20  Wis.  42 ;  Roche  v.  Knight,  21  Wis.  324. 

'^Schreiber  v.  Carey,  48  Wis.  208. 

^  Avery  v.  Judd,  21  Wis.  262 ;  Jones  v.  Costigan,  12  Wis.  677 ;  Seatoflf  v.  An- 
derson, 28  Wis.  212 ;  Fairbanks  r.  Cudworth,  33  Wis.  358. 


48  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

in  possession  of  the  mortgaged  premises,  is  merely  a  security 
for  the  payment  of  money,  and  does  not  absolutely  convey  the 
legal  title  to  the  premises,  but  it  is  a  lien  on  the  property  of  so 
high  a  nature  that  it  is  not  divested  by  a  sale  on  judgment 
subsequently  obtained  against  the  mortgagor ;  yet  if  the  mort- 
gagee is  in  possession  under  the  mortgage  after  condition 
broken,  the  mortgagor  cannot  recover  the  possession  in  eject- 
ment. His  only  right  is  to  redeem  the  premises  by  paying  the 
mortgage.  After  condition  broken,  the  mortgagee  being  in 
possession,  he  is  then  the  owner  and  holder  of  the  legal 
title.' 

A  mortgage  creates  no  trust,  and  establishes  no  fiduciary  re- 
lations ;  the  mortgagee  has  but  a  chose  in  action.^ 

Judge  Grubb  says :  "  In  England  and  some  of  the  American 
States,  the  early  common-law  doctrine  prevails,  to  a  greater  or 
less  extent,  that  the  mortgagee  has  the  legal  title  to  mortgaged 
premises,  and  the  right  to  immediate  possession,  both  before 
and  after  default,  as  well  as  the  right  of  strict  foreclosure.  In 
this  State  this  view  has  been  greatly  modified.  Here  a  mort- 
gage, though  in  form  a  conveyance  of  the  land,  is  a  mere 
security  for  the  payment  of  money.  The  mortgagor  in  posses- 
sion is  the  real  owner  of  the  land ;  and  the  mortgagee,  before 
foreclosure,  or  possession  of  the  mortgaged  premises  after  con- 
dition broken,  has  but  a  chattel  interest."  ^ 

The  mortgagee  may,  after  condition  broken,  pursue  his 
remedy  at  law  or  in  equity,  and  he  cannot  be  restrained  from 
proceeding  at  his  election  upon  either  or  both  his  remedies.* 

§  56.  Mississippi. — Upon  the  maturity  of  the  debt  and  default, 
the  legal  title  vests  in  the  mortgagee,  who  has  then  the  right 
of  possession.  But  equity,  looking  to  the  original  design  of  the 
parties,  in  creating  the  mortgage  as  only  a  security  for  a  debt, 
will  not  permit  the  mortgagor  nor  the  mortgagee  to  enjoy  a  legal 

^Hall  V.  Tunnell,  1  Houst.  320. 

'^Cooch  V.  Gerry,  3  Har.  280 ;  Cornog  v.  Cornog,  3  Del.  Ch.  416;  Walker  v. 
Farmers'  Bank,  10  At.  Rep.  94. 
nValker  v.  Farmers'  Bank,  14  At.  Rep.  819. 
♦Newbold  v.  Newbold,  1  Del.  Ch.  310. 


DEFINITION   AND    DEVELOPMENT.  49 

right  to  the  prejudice  of  the  other,  and  will  adopt  the  course  of 
proceeding  which  will  attain  the  proper  end.^ 

The  Revised  Code  of  1857  ^  declares  that  the  mortgagor  or 
grantor  shall  be  deemed  the  owner  of  the  legal  title  of  the 
property  mortgaged,  "  except  as  against  the  mortgagee  and  his 
legal  assigns,  after  breach  of  the  conditions  of  the  mortgage  or 
deed  of  trust."  ^  But  after  breach  of  the  condition,  the  legal 
title  vests  in  the  mortgagee/ 

The  mortgagee's  estate  is  not  in  the  land  before  default,  but 
in  the  security.  The  debt  is  considered  the  principal,  and  the 
mortgage  as  an  incident  only.  Until  foreclosure,  whether  the 
mortgagee  has  possession  or  not,  the  estate  mortgaged  is  a 
pledge  only.  Although  the  mortgagee  has  a  chattel  interest 
only,  yet  in  order  to  render  this  pledge  available  and  give  him 
the  intended  benefit  of  his  security,  it  is  considered  as  real 
property  to  enable  him  to  maintain  ejectment  for  the  recovery 
of  the  possession  of  the  land  mortgaged  after  default ;  when 
contemplated  in  every  other  point  of  view,  it  is  personal  prop- 
erty. The  land  mortgaged  is  only  a  security  for  a  debt.^ 
While  the  legal  title  vests  in  the  mortgagee  after  default,  yet 
the  mortgaged  estate  is  regarded  as  a  pledge  only.® 

The  legal  title  may  be  asserted  by  the  mortgagee  after  de- 
fault, but  only  for  the  protection  of  his  debt,  and  to  make  the 
security  available  for  its  payment.^ 

§  57.  Missouri. — The  legal  title  pro  forma  is  vested  in  the 
mortgagee,  after  forfeiture,  for  the  purpose  of  securing  his  debt. 
So  a  mortgagee  may  maintain  an  action  of  ejectment  against 
the  mortgagor,  or  those  claiming  under  him,  after  condition 
broken.* 

^  Hill  V.  Robertson,  24  Miss.  368. 
2  Rev.  Code,  p.  303,  art.  12. 
'Code  of  1880,  sect.  1204. 

*  Heard  v.  Baird,  40  Miss.  799. 

5  Buckley  v.  Daley,  45  Miss.  338. 

*  Carpenter  v.  Bowen,  42  Miss.  28. 
^Buck  V.  Payne,  52  Miss.  271. 

8  Walcop  V.  McKinney,  10  Mo.  229  ;  Meyer  v.  Campbell,  12  Mo.  603 ;  Sutton 
V.  Mason,  38  Mo.  120 ;  Hubble  v.  Vaughan,  42  Mo.  138. 


50  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

In  a  mortgage  or  deed  of  trust  in  the  nature  of  a  mortgage, 
the  legal  title,  after  condition  broken,  passes  to  the  mortgagee 
or  trustee/ 

Where  a  mortgaged  debt  is  payable  in  installments,  the  con- 
dition is  broken  by  non-payment  of  any  one  of  them,  and  the 
mortgagee  may  thereupon  enter  or  bring  ejectment.^  A  mort- 
gagee in  the  absence  of  agreement  to  the  contrary,  may  main- 
tain ejectment  for  the  mortgaged  premises,  after  breach  of  con- 
ditions, and  so,  it  seems,  may  also  a  trustee  in  a  deed  of  trust.^ 

After  the  condition  is  broken  and  the  legal  title  has  passed 
to  the  mortgagee,  the  mortgage  is  merely  a  security  for  the 
debt,  and  is  extinguished,  and  the  title  revested,  whenever  the 
debt  is  satisfied.'*  The  addition  of  a  power  to  sell,  without 
judicial  proceedings  to  foreclose  will  not  avoid  the  legal  effect 
of  the  grant.^ 

§  58.  New  Jersey. — It  is  the  established  doctrine  of  this  State 
that  a  mortgage  of  lands  is  not  a  common-law  conveyance  on 
condition,  but  a  mere  security  for  the  mortgaged  debt;  the 
legal  estate  being  considered  as  subsisting  in  the  mortgagee 
only  for  that  purpose.  The  consequence  is  the  separation  in 
legal  contemplation,  of  the  estate  of  the  mortgagor  from  that 
of  the  mortgagee,  and  the  recognition  of  an  actual  and  distinct 
legal  estate  in  each.  The  legal  estate  of  the  mortgagee,  after 
breach  of  condition,  has  all  the  incidents  of  a  common-law 
title,  for  the  purpose  of  an  action  of  ejectment ;  but  its  exist- 
ence is,  nevertheless,  regarded  as  compatible  with  a  legal  estate 
at  the  same  time  in  the  mortgagor.  This  legal  estate  of  the 
mortgagor  is  capable  of  conveyance,  mortgage,  or  a  sale  under 
execution  against  him,  at  any  time  before  his  estate  is  divested 
by  foreclosure. 

"  The  cases  clearly  recognize  the  equity  of  redemption  of  a 

1  Johnson  r.  Houston,  47  Mo.  227. 
^  Reddick  v.  Gressman,  49  Mo.  389. 
^  Siemers  v.  Schrader,  88  Mo.  20. 

*  Pease  v.  Pilot  Knob  Iron  Co.,  49  Mo.  124 ;  Logan  v.  Wabash  &  C.  Co.,  43 
Mo.  App.  71. 
nVoods  V.  Hilderbrand,  46  Mo.  284;  Kennett  v.  Plummer,  28  Mo.  142. 


DEFINITION    AND    DEVELOPMENT.  51 

mortgagor  as  a  legal  estate,  and  as  such  it  must  subsist  until 
extinguished  in  the  manner  in  which  legal  estates  are  by  law 
extinguishable.  Entry  on  the  mortgaged  premises  does  not 
work  an  extinguishment.  It  merely  operates  to  transfer  the 
possession  to  the  mortgagee  with  all  the  rights  that  actual  pos- 
session confers,  leaving  the  ultimate  rights  of  the  j)arties  un- 
affected." ' 

The  mortgagee  cannot  enter  immediately  upon  the  execu- 
tion of  the  mortgage  as  at  common  law,  but  only  u]3on  breach 
of  condition.^ 

A  mortgage  on  real  estate  is  regarded  as  a  security  for  the 
debt,^  the  legal  estate  being  considered  as  subsisting  only  for 
that  purpose.* 

If  the  mortgagee  is  in  possession  after  the  condition  is 
broken,  it  is  held  in  courts  of  law  that,  as  to  tresspassers,  he  is 
the  owner  out  and  out.  But  out  of  possession,  he  is  limited  to 
the  redress  of  such  wrongs  as  in  their  consequence,  impair  or 
destroy  his  security.  He,  therefore,  may  sue  for  injuries  di- 
rect or  indirect  which  occasion  loss  to  him  by  reason  of  the 
impairment  of  his  security.'^ 

§  59.  Vermont. — In  this  State  statutory  provisions  declare  for 
the  possession  of  the  mortgagor  until  condition  broken,''  After 
condition  broken,  the  mortgagee  may,  without  notice,  enter 
upon  the  mortgaged  premises  and  take  possession  thereof,  if  he 
can  do  so  peaceably  and  unresisted/ 

Whenever  the  condition  of  a  mortgage  is  broken,  at  law  the 
interest  of  the  mortgagor  in  the  premises  thereupon  becomes 
absolutely  vested  in  the  mortgagee,  and  he  has  a  right  to  the 
immediate  possession  of  the  premises.'^ 

^  Woodaide  v.  Adams,  40  N.  J.  L.  417,  opinion  by  Judge  Depue. 
'^Sanderson  v.  Price,  1  Zab.  637. 
3  Shields  v.  Lozear,  34  N.  J.  L.  496. 

*  Wade  V.  Miller,  32  N.  J.  L.  296 ;  Schalk  v.  Kingsley,  42  N.  J.  L.  .32. 
^  Mayor  v.  Kiernan,  50  N.  J.  L.  246. 

«  Rev.  Stat.  1847,  215,  sects.  7,  8,  11 ;  Rev.  Stat.  1880,  sect.  1258. 
^Wilson  V.  Hooper,  13  Vt.  653;  Lull  v.  Matthews,  19  Vt.  322;  Fuller  v. 
Eddy,  49  Vt.  11. 
^Hagar  v.  Brainerd,  44  Vt.  294. 


52  NATURE   AND    REQUISITES   OF   THE   CONTRACT. 

If  the  mortgagor  is  allowed  to  retain  possession  after  condi- 
tion broken,  he  becomes  a  mere  tenant  at  will/  A  mortgagee 
can  maintain  •  an  action  on  the  case,  in  the  nature  of  waste, 
against  the  mortgagor  for  timber  cut  on  the  mortgaged  prem- 
ises after  decree  of  foreclosure,  and  before  the  expiration  of  the 
time  limited  for  redemption.^ 

An  equity  of  redemption  is  tantamount  to  a  fee  at  law,  and 
is  descendible  by  inheritance,  demisable  by  will,  and  alienable 
by  deed,  precisely  as  if  it  were  an  absolute  inheritance  at  law.^ 

The  mortgagor,  until  condition  broken,  has,  as  against  the 
mortgagee,  the  legal  right  ^  to  the  possession  of  the  mortgaged 
premises,  unless  otherwise  stipulated  in  the  mortgage ;  hence 
whatever  he  severs  from  the  real  estate  before  condition  broken, 
becomes  his  property.^ 

Article  6. 

The  State  whose  Mortgage  is  a  Species  of  a  Pledge. 

I  60.  Louisiana. 

§  60.  Louisiana. — The  Civil  Code®  of  this  State  defines  a 
mortgage  to  be  a  right  granted  to  the  creditor  over  the  property 
of  his  debtor,  for  the  security  of  his  debt,  giving  him  the  power 
of  having  the  property  seized  and  sold  in  default  of  payment. 

It  is  a  species  of  pledge,  the  thing  mortgaged  being  for  the 
payment  of  the  debt  or  fulfillment  of  the  obligation.^  The 
property  cannot  be  engaged  to  a  second  creditor  to  the  preju- 
dice of  the  first.^ 

Mortgages  exist  only  on  immovables,  ships,  steamboats,  and 
other  vessels,  or  such  rights  as  are  described  by  law.  The 
mortgage  subjects  the  property  to  the  rights  of  the  creditor  on 

^  Morey  v.  McGuire,  4  Vt.  327. 

'Lan<?don  v.  Paul,  22  Vt.  205. 

nValker  v.  King,  44  Vt.  601. 

*  Rev.  Stat.,  sect.  1258. 

^  Brunswick-Balke-Collender  Co.  v,  Herrick,  63  Yt.  286. 

6  5tev.  Civil  Code,  1882,  art.  3278. 

'  Rev.  Civil  Code,  1882,  art.  3279. 

»Rev.  Civil  Code,  1882,  art.  3280. 


DEFINITION    AND    DEVELOPMENT.  53 

which  it  is  imposed,  without  its  being  necessary  that  the 
creditor  should  take  actual  possession.^ 

It  only  takes  place  in  such  instances  as  are  authorized  by 
law.^ 

The  conventional  mortgage  is  a  contract  by  which  a  person 
binds  the  whole  of  his  property  or  a  portion  of  it  only,  in  favor 
of  another,  to  secure  the  execution  of  some  engagement,  but 
without  divesting  himself  of  the  possession.^ 

The  provisions  of  the  laws  clearly  repel  the  idea  that  one 
can  buy  property  and  retain,  at  the  same  time,  a  conventional 
mortgage  on  it  in  his  own  favor.* 

A  mortgage  does  not,  of  itself,  operate  a  divestiture  of  title 
from  the  mortgagor  to  the  mortgagee.  The  mortgagor  retains 
the  title,  and  under  it  will  defeat  claims  of  ownership  set  up 
by  the  mortgagee,  as  resulting  from  the  mortgage.  The  com- 
mon-law mortgage  cannot  be  assimilated  in  its  effects  to  a  sale 
under  Louisiana  laws  with  the  clause  of  redemption  known  in 
civil  law  as  the  "  vente  ci  remere."  ^ 

A  common-law  mortgage  does  not  pass  title  to  property  in 
Louisiana,^  and  can  have  no  effect  against  third  parties  as 
a  mortgage.^ 

^  Rev.  avil  Code,  1882,  art.  3281. 

2  Rev.  Ovil  Code,  1882,  art.  3283. 

»Rev.  Civil  Code,  1882,  art.  3286,  3287,  3290. 

*Thibodaux  v.  Anderson,  34  La.  Ann.  797. 

s  Miller  v.  Shotwell,  38  La.  Ann.  890. 

*Howe  V.  Austin,  40  La.  Ann.  323. 

^  Thibodaux  v.  Anderson,  38  La.  Ann.  797. 


CHAPTER  II. 

conditional  sales,  assignments,  and   chattel   mortgages 

distinguished, 

Article  1. 

Whether  a  Conditional  Sale  or  Mortgage. 

§  61.  General  Rule.  §  64.  The  Whole  Circumstances  At- 

§  62.  The   Consideration   may  Deter-  tending  the  Transaction  will 

mine  the  Nature  of  the  Contract.  be  Considered. 

2  63.  An  Instrument  Cannot  Operate,  §  65.  In  Doubtful  Cases. 

atone  and  the  Same  Time,  as  ^  66.  The  Intention  and  Understand- 

a  Mortgage  and  a  Conditional  ing  of  the  Parties  Control. 

Sale. 

§  61.  General  Rule. — The  distinction  between  a  mortgage 
and  a  conditional  sale  is  this :  If  the  relation  of  debtor  and 
creditor  remains  and  a  debt  still  subsists  between  the  parties, 
it  is  a  mortgage ;  but  if  there  is  no  debt  still  subsisting,  and 
the  grantor  has  the  privilege  of  refunding  if  he  pleases  by  a 
given  time  and  thereby  entitling  himself  to  a  reconveyance,  it 
is  a  conditional  sale.^ 

If  the  debt  be  extinguished  by  the  agreement  of  the  parties, 
by  the  execution  of  the  conveyance,  and  the  grantor  has  the 
privilege  of  refunding,  and  to  entitle  himself  to  a  reconveyance 
thereby,  it  is  a  conditional  sale.^ 

In  conditional  sales,  the  rule  is  that  the  vendor  must  com- 
ply with  the  condition  upon  which  his  right  to  a  reconveyance 
depends,  strictly  and  precisely,  or  his  right  to  reclaim  the 
property  is  lost.  If  a  day  be  fixed  for  the  performance  of  the 
condition,  it  must  be  precisely  observed ;  and  if  no  time  be 
fixed,  the  terms  must  be  complied  with  in  a  reasonable  time.^ 

^Slowey  r.  McMurray,  27  Mo.  113 ;  4  Kent's  Com.  145. 
^  Slee  r.  IManhattan  Co.,  1  Paige,  Ch.  56 ;  Conway  v.  Alexander,  7  Cranch 
(U.  S.),  237. 
8  Hoopes  V.  Bailey,  28  Miss.  328. 
54 


CONDITIONAL   SALES,    ETC.,    DISTINGUISHED.  55 

If  the  conveyance  be  a  mortgage  in  its  incejjtion,  the  right 
of  redemption  is  inseparable  from  it.  Even  an  express  covenant 
inserted  in  the  indenture,  that  in  case  the  redemption  should 
not  be  made  within  a  given  time  the  estate  should  be  there- 
after irredeemable,  would  not  destroy  the  equity  of  redemption, 
but  it  would  continue  to  exist  until  it  should  be  foreclosed.^ 

It  is  a  well-settled  principle  of  equity,  that  all  agreements  of 
the  parties,  tending  to  alter  in  any  subsequent  event  the  original 
nature  of  the  mortgage,  and  prevent  the  equity  of  redemption, 
are  void.  If  the  conveyance  was  a  mortgage  in  the  beginning 
it  cannot  be  so  changed  as  to  prevent  redemption  before  fore- 
closure. The  estate  cannot  be  a  mortgage  at  one  time,  and  an 
absolute  sale  at  another.^ 

A  mere  agreement  to  reconvey  the  premises  within  a  limited 
period,  upon  the  repayment  of  the  consideration  money,  or  any 
other  sum,  where  there  is  no  subsisting  debt  or  continuing 
liability  of  the  grantor  for  the  payment  of  the  money,  either 
express  or  implied,  is  not  sufficient  to  convert  such  a  conditional 
sale  into  a  mortgage.^ 

The  test  is  the  existence  or  non-existence  of  a  debt.  If  after 
the  conveyance  no  debt  remains,  there  is  no  mortgage,  but 
only  a  conditional  sale.* 

There  can  be  no  mortgage  where  there  is  no  debt,  and  a 
reservation  or  stii^ulation  for  the  right  to  redeem  where  there 
is  no  debt,  does  not  convert  the  instrument  into  a  mortgage. 
If  the  transaction,  construed  as  a  mortgage,  would  be  void  and 
would  operate  injustice  by  losing  to  the  grantee  his  money 
paid  on  the  land,  then  it  will  be  construed  and  upheld  as  a 
conditional  sale.^ 

1  Clark  V.  Henry,  2  Cow.  (N.  Y.)  327. 

2  Howard  v.  Harris,  1  Vern.  190 ;  James  v.  Oades,  2  Vem.  402 ;  Newcomb 
V.  Bonhan,  1  Vern.  7. 

^Glover  v.  Payn,  19  Wend.  (N.  Y.)  518;  Robinson  v.  Cropsey,  2  Ed.  Ch. 
(N.  Y.)  138  ;  McKinf^try  v.  Conly,  12  Ala.  078 ;  Flagg  v.  Mann,  14  Pick.  (Mass.) 
467  ;  O'Niell  v.  Capelle,  62  Mo.  202 ;  Farmers.  Grose,  42  Cal.  169 ;  Slutz  v.  De- 
senberg,  28  Ohio  St.  371 ;  Plato  v.  Roe,  14  Wis.  457. 

*McNamara  r.  Culver,  22  Kans.  661. 

^Vincent  v.  Walker,  86  Ala.  333. 


56  NATURE   AND    REQUISITES    OF   THE   CONTRACT. 

The  idea  of  a  mortgage  without  a  debt  to  be  secured  by  it 
is  a  legal  myth.^ 

§  62.  The  Consideration  May  Determine  the  Nature 
OF  THE  Contract. — A  gross  inadequacy  of  price  is  always  a 
strong  circumstance  in  favor  of  the  supposition  that  a  sale  of 
property  was  not  intended.  If  the  consideration  paid  is  about 
the  fair  valuation  of  the  property,  the  fact  that  there  is  no 
contract  for  the  repayment  of  the  purchase-money  and  interest 
which  is  binding  upon  the  person  making  the  conveyance,  so 
as  to  make  the  grantor's  right  to  redeem  as  a  mortgagor,  and 
the  corresjDonding  right  of  the  grantee  to  recover  back  his 
money  instead  of  keeping  the  land,  mutual  and  reciprocal,  is 
a  strong  circumstance  in  favor  of  construing  the  contract  to  be 
a  conditional  sale  and  not  a  mortgage.^ 

The  relative  value  of  the  property  and  the  price  actually 
paid  are  to  be  taken  into  consideration  in  determining  the  in- 
tent of  the  parties.^ 

If  there  is  a  gross  inadequacy  of  price,  it  is  always  a  strong 
circumstance  to  show  that  the  parties  did  not  intend  a  sale. 
If  the  consideration  paid  is  equal  to  the  fair  value  of  the 
property  conveyed,  it  is  a  strong  circumstance  in  favor  of  con- 
struing the  contract  as  a  conditional  sale,  and  not  a  mortgage. 
But  neither  adequacy  of  price  nor  the  want  of  an  obligation  to 
repay  the  money,  nor  even  both  circumstances  combined,  are 
to  be  held  as  conclusive  evidence  that  a  conditional  sale  and 
not  a  mortgage  was  intended.  Both,  however,  are  important 
circumstances  in  determining  this  question.* 

The  want  of  a  covenant  to  repay  the  money  is  not  complete 
evidence  that  a  conditional  sale  was  intended,  but  it  is  a  cir- 
cumstance of  no  inconsiderable  importance.® 

Inadequacy  of  price  or  consideration  is  not  sufficient  of 

1  Douglass  V.  M(TOdy,  80  Ala.  61 ;  Mitchell  v.  Wellman,  80  Ala.  16 ;  Peeples 
V.  Stolla,  57  Ala.  53. 
=*  Holmes  v.  Grant,  8  Paige,  Ch.  (N.  Y.)  243. 
3  Robinson  v.  Cropsey,  6  Paige,  Ch.  (N.  Y.)  480. 
*  Brown  v.  Dewey,  2  Barb.  (N.  Y.)  28. 
^Conway  v.  Alexander,  7  Cranch  (U.  S.),  219. 


CONDITIONAL   SALES,    ETC.,    DISTINGUISHED.  57 

itself  to  convert  an  instrument  purporting  to  be  a  conditional 
sale  into  a  mortgage,  or  security  for  the  repayment  of  money, 
although  it  may  be  an  element  of  fact  to  be  considered  in  de- 
termining the  question,  where  there  is  a  debt  in  existence  to 
be  secured.^ 

It  may  be  generally  stated  that  where  no  fraud  is  practiced 
and  no  inequitable  advantage  taken  of  pressing  wants,  owners 
of  property  do  not  sell  it  for  a  consideration  manifestly  inade- 
quate, and,  therefore,  in  cases  on  this  subject,  great  stress  is 
justly  laid  upon  the  fact  that  what  is  alleged  to  have  been  the 
price  bore  no  proportion  to  the  value  of  the  thing  said  to  have 
been  sold.  Such  inadequacy  in  the  price  goes  to  show  that 
the  conveyance  was  a  mortgage.^ 

And  when  the  court  is  interpreting  a  conveyance,  it 
will  consider  the  fact,  if  it  exists,  that  the  price  of  the 
land  sold  is  not  the  real  value  of  the  property,  but  grossly 
inadequate.^ 

§  63.  An  Instrument  Cannot  Operate,  at  one  and  the 

SAME  TIME,  AS  A  MORTGAGE   AND    A    CONDITIONAL   SaLE. It  is 

evident  that  an  instrument  cannot  operate,  at  one  and  the  same 
time,  as  a  mortgage  and  a  conditional  sale,  these  two  classes 
of  conveyances  being  chiefly  distinguished  by  the  existence  of 
a  debt  in  the  mortgage,  and  the  non-existence  of  a  debt  in  a 
conditional  sale.  But  when  the  repugnancy  of  the  provisions 
of  the  instrument  and  the  accompanying  evidence  render  its 
character  doubtful,  it  will  accordingly  be  construed  a  mortgage 
rather  than  a  conditional  sale — at  least  where  such  con- 
struction will  operate  equitably  by  securing  to  the  grantee  or 
creditor  his  debt  with  interest,  and  enable  the  grantor,  or 
debtor,  to  effect  a  repurchase  of  his  land.* 

1  Rapier  v.  Gulf  City  Paper  Co.,  77  Ala.  126 ;  West  v.  Hendrix,  28  Ala.  226. 

2  Morris  v.  Nixon,  1  How.  (U.  S.)  126 ;  Vernon  v.  Bethell,  2  Eden,  110 ;  Old- 
ham V.  Halley,  2  J.  J.  Marsh.  (Ky.)  114  ;  Edrington  v.  Harper,  3  J.  J.  Marsh. 
(Ky.)  354. 

'  Russell  V.  Southard,  12  How.  (U.  S.)  1.39. 

*  Rapier  v.  Gulf  City  Paper  Co.,  77  Ala.  126 ;  Crews  v.  Theadgill,  35  Ala. 
334. 


58  nature  and  requisites  of  the  contract. 

§  64.  The  Whole  Circumstances  Attending  the  Transac- 
tion Will  be  Considered. — Whether  the  trauscaction  consti- 
tutes a  mortgage  or  a  conditional  sale  must  depend  on  the 
whole  circumstances  of  the  contract.^  The  situation  of  the 
parties,  the  circumstances  surrounding  the  transaction,  and  in- 
dependent parol  agreements  not  conflicting  with  the  terms  of 
the  written  agreement,  must  be  considered  in  determining  the 
question.^ 

The  question  is,  whether  the  parties  meant  a  purchase,  and 
a  fixed  price  therefor ;  or  meant  a  loan  of  money,  and  a  se- 
curity or  pledge  for  repayment.  In  the  former  it  is  a  condi- 
tional sale ;  ^  if  the  latter,  it  is  a  mortgage,  carrying  with  it  the 
right  to  redeem.* 

The  solution  of  the  question  whether  a  conveyance  is  a  con- 
ditional sale  or  mortgage  when  it  occurs,  depends  upon  the 
circumstances  of  each  case  and  the  sound  discretion  of  the 
court.^ 

§  65.  In  Doubtful  Cases. — When  the  repugnancy  of  the  pro- 
visions of  the  instrument  and  the  accompanying  evidence 
render  its  character  doubtful,  it  will  accordingly  be  construed 
a  mortgage  rather  than  a  conditional  sale,  at  least  when  such 
construction  will  operate  equitably  by  securing  the  grantee  or 
creditor  his  debt  with  interest,  and  enable  the  grantor,  or  debtor, 
to  effect  a  repurchase  of  his  land." 

Some  of  the  tests  by  which  it  may  be  ascertained  in  doubt- 
ful cases  whether  a  mortgage,  or  conditional  sale,  are :  Did  the 
relation  of  debtor  and  creditor  subsist  before  the  alleged  sale ; 
did  the  transaction  commence  by  a  proposition  to  lend  or  to 
borrow  money ;  was  there  a  great  disparity  between  the  value 
of  the  property  and  the  price  agreed  to  be  paid  for  it ;  did  the 

^  Robertson  v.  Wheeler,  2  Call  (Va.),  421 ;  McNamara  v.  Culber,  22  Kan.  661. 
'^  Pitts  i;.  Cable,  44  111.  103;  Slutz  r.  Desenberjr,  28  Ohio  St.  371;    Rich  «;. 
Doane,  35  Vt.  125  ;  Baup;her  v.  Merryman,  32  Md.  185. 
'Chapman  v.  Turner,  1  Call  (Va.),  280. 

*King  V.  Newman,  2  Munf.  (Va.)  40 ;  Ross  v.  Norvell,  1  Wash.  (Va.)  14. 
^Prather  v.  Norflet,  1  Marsh.  (Ky.)  178. 
•Vincent  v.  Walker,  86  Ala.  333 ;  King  v.  Greve,  42  Mo.  App.  168. 


i 


CONDITIONAL    SALES,    ETC.,    DISTINGUISHED.  59 

vendor  continue  bound  for  the  debts.  These  facts,  or  any  of 
them,  found  to  exist,  go  far  to  show  tliat  a  mortgage  was  in- 
tended, and  not  a  conditional  sale.^ 

The  same  language  which  truly  describes  a  real  sale  may 
also  be  employed  to  cut  otf  the  right  of  redemption,  in  case  of 
a  loan  or  security.  In  doubtful  cases  the  court  leans  to  the 
conclusion  that  the  reality  was  a  mortgage,  and  not  a  sale.^ 

The  distress  for  money  often  places  the  borrower  in  a  con- 
dition where  he  is  obliged  to  submit  to  the  dictations  of  the 
lender  under  the  j^ressure  of  his  wants ;  but  the  court  of  equity 
will  not  consider  a  consent  tluis  obtained  to  be  sufficient  to  fix 
the  rights  of  the  parties.  "  Necessitous  men  are  not,  truly 
speaking,  free  men ;  but,  to  answer  a  present  emergency,  will 
submit  to  any  terms  that  the  crafty  may  impose  upon  them."  ^ 

The  circumstance  that  the  vendor  has  not  promised  in  the 
instrument  to  rej^ay  the  money,  and  has  given  no  personal 
security,  does  not  make  the  conveyance  less  effectual  as  a  mort- 
gage.'' 

It  is  a  question  whether  the  absence  of  the  personal  liability 
of  the  grantor  to  repay  the  money  be  a  conclusive  test  to  de- 
termine whether  the  conveyance  is  a  mortgage ;  ^  but  it  has 
been  held  that  it  is  not  conclusive.^  It  has  also  been  held 
that  the  proviso,  or  condition,  if  not  restrained  by  words  show- 
ing that  the  grantor  had  an  option  to  pay  or  not,  might  consti- 
tute the  grantee  a  creditor.^ 

Chief  Justice  Marshall  says :  "  To  deny  the  power  of  two 

lEiland  r.  Radford,  7  Ala.  724  ;  Rapier  v.  Gulf  City  Paper  Co.,  77  Ala.  126  ; 
Turner  v.  Wilkinson,  72  Ala.  361. 

^  Flagg  r.  Mann,  2  Sumner,  C.  C.  533  ;  Conway  v.  Alexander,  7  Cranch.  (U.  S.) 
218 ;  Secreft  v.  Turner,  2  J.  J.  Marsh.  (Ky.)  471 ;  Edrington  v.  Harper,  3  J.  J. 
Marsh.  (Ky.)  354;  Poindexter  v.  McCannon,  1  Dev.  Eq.  (N.  Car.)  373  ;  Crane 
r.  Bonnell,  1  Green  Ch.  (N.  J.)  26-1;  Robertson  v.  Campbell,  2  Call  (Va.),  421. 

^"ernon  v.  Bethell,  2  Eden,  113. 

*  Fl(iyer  r.  Lavinj^on,  1  P.  Williams.  268  ;  Scott  r.  Fields,  7  AVatts  (Pa.),  360 ; 
Lawley  v.  Hooper,  3  Atk.  278 ;  Flagg  v.  Mann,  2  Sum.  C.  C.  533 ;  Ancaster  v. 
Mayer,  1  Bro.  C.  C.  464. 

*  Russell  V.  Southard,  12  How.  (U.  S.)  139. 
« Brown  r.  Dewey,  1  Sand.  Ch.  (N.  Y.)  56. 

^Ancaster  v.  Mayer,  1  Bro.  C.  C.  464 ;  2  Greenl.  Cruise,  82,  note  3. 


60  NATURE   AND    REQUISITES   OF   THE   CONTRACT. 

individuals,  capable  of  acting  for  themselves,  to  make  a  con- 
tract for  the  purchase  and  sale  of  lands  defeasible  by  the  pay- 
ment of  money  at  a  future  day,  or,  in  other  words,  to  make  a 
sale  with  a  reservation  to  the  vendor  of  a  right  to  repurchase 
the  same  land  at  a  fixed  price  and  at  a  specified  time,  would  be 
to  transfer  to  the  court  of  chancery,  in  a  considerable  degree, 
the  guardianship  of  adults  as  well  as  of  infants.  Such  con- 
tracts are  certainly  not  prohibited  either  by  the  letter  or  the 
policy  of  the  law." 

But  the  policy  of  the  law  does  prohibit  the  conversion  of  a 
real  mortgage  into  a  sale.  And  as  lenders  of  money  are  less 
under  the  pressure  of  circumstances  which  control  the  perfect 
and  free  exercise  of  the  judgment  than  borrowers,  the  effort  is 
frequently  made  by  persons  of  this  description  to  avail  them- 
selves of  the  advantages  of  the  superiority,  in  order  to  obtain 
inequitable  advantages.  For  this  reason  the  leaning  of  courts 
has  been  against  them,  and  doubtful  cases  have  generally  been 
decided  to  be  mortgages.  But  as  a  conditional  sale,  if  really 
intended,  is  valid,  the  inquiry  in  every  case  must  be  whether 
the  contract  in  the  specific  case  is  a  security  for  the  repayment 
of  money  or  an  actual  sale.^ 

In  all  doubtful  cases  the  law  will  construe  a  conveyance  to 
be  a  mortgage,  because  such  construction  will  be  most  apt  to 
attain  the  ends  of  justice  and  prevent  fraud  and  oppression.^ 

Where  it  is  expressly  agreed  that  it  shall  be  optional  with 
the  mortgagors  whether  they  will  repay  the  money  advanced 
or  not,  such  agreement  cannot  have  the  effect  of  converting 
what  would  otherwise  have  been  a  mortgage  into  a  conditional 
sale.^ 

§  66.  The  Intention  and  Understanding  of  the  Parties 
Control. — To  convert  an  instrument,  on  its  face  a  conditional 
sale,  into  a  mortgage,  the  intention  and  understanding  of  both 
parties  to  such  instrument  must  be  shown  to  have  concurred 

'  Conway  v.  Alexander,  7  Cranch.  (U.  S.)  218. 

*  Skinner  r.  Miller,  5  Litt.  (Ky.)  86;  King  v.  Greve,  42  Mo.  App.  168. 

'  Edrington  v.  Harper,  3  J.  J.  Marsh.  (Ky.)  356. 


CONDITIONAL    SALES,    ETC.,    DISTINGUISHED.  61 

that  it  should  so  operate.  The  fact,  however  well  established, 
that  the  grantor  alone  intended  and  considered  the  transaction 
a  mortgage  is  not  sufficient  to  make  it  a  mortgage.^ 

The  intention  of  both  parties  must  be  considered,  and  this 
necessarily  requires  evidence  of  the  situation  of  the  j)arties,  of 
the  price  fixed  in  connection  with  the  value  of  the  property, 
the  conduct  of  the  parties  before  and  after  the  transaction,  and 
all  the  attendant  facts  and  circumstances  so  far  as  they  are 
adapted  to  explain  the  real  character  of  the  conveyance.^ 

As  the  equity  of  the  transaction  arises  from  its  real  character, 
it  is  of  no  consequence  in  what  manner  this  character  is  estab- 
lished, whether  by  deed  or  other  writing,  or  by  parol.  Whether 
the  instrument,  it  not  being  apparent  from  its  face,  is  to  be  re- 
garded as  a  mortgage,  depends  upon  the  circumstances  under 
which  it  was  made  and  the  relations  subsisting  between  the 
parties.  Evidence  of  these  circumstances  and  relations  is  ad- 
mitted, not  for  the  purpose  of  contradicting  or  varying  the 
deed,  but  to  establish  an  equity  superior  to  its  terms.^  It  is 
with  regard  to  the  actual  facts,  and  not  to  the  form  of  the 
transaction,  by  which  equity  will  be  governed  in  ascertaining 
the  real  character  of  the  instrument.  Whether  intended  as  an 
absolute  conveyance,  or  a  mortgage,  the  instrument  is  equally 
valid,  and  equity  will  give  effect  to  it  according  to  the  sub- 
stantial intent  of  the  parties.* 

The  fair  criterion  by  which  a  court  is  to  decide  whether  a 
deed  be  a  mortgage  or  not  is  this  :  Are  the  remedies  mutual 
and  reciprocal  ?  Has  the  grantee  all  the  remedies  a  mortgagee 
is  entitled  to  ?  If  he  has,  the  instrument  is  a  mortgage.^ 

If  a  security  in  the  nature  of  a  mortgage  is  intended,  it  is 
necessary  that  the  mortgagee  should  have  a  remedy  against 
the  person  of  the  debtor.  If  this  remedy  exists,  its  not  being 
reserved  in  terms  will  not  affect  the  case ;  but  the  remedy  must 

^Vincent  v.  Walker,  86  Ala.  333. 
''Stephens  v.  Allen,  11  Ore.  188. 

^Pierce  v.  Robinson,  13  Cal.  116 ;  Brant  v.  Robertson,  16  Mo.  143 ;  Peugh 
V.  Davis,  96  U.  S.  336  ;  Campbell  v.  Dearborn,  109  Mass.  130. 

*  Horn  V.  Kiteltas,  46  N.  Y.  606. 

*  Goodman  v.  Grierson,  2  Ball  &  Beatty,  274. 


62  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

exist  in  order  to  justify  a  construction  which  overrules  the  ex- 
press words  of  the  instrument.^ 

Judge  Clopton  lays  down  the  rule  thus  :  "  When  the  con- 
testation is,  whether  the  parties,  though  making  an  absolute 
conveyance,  contemplated  an  unconditional  sale  or  a  mortgage, 
the  party  asserting  that  a  mortgage  was  intended,  must  show 
such  intention  and  understanding  of  both  parties  by  clear  and 
convincing  evidence.  But  when  it  is  admitted  or  shown  that 
the  transaction  is  not  an  unconditional  sale,  there  being  the 
right  to  repurchase,  or  an  agreement  to  reconvey  on  specific 
conditions,  expressed  either  in  the  deed  or  by  separate  instru- 
ment ;  and  the  controversy  is  whether  a  conditional  sale  or  a 
mortgage  is  intended,  the  same  stringency  of  proof  is  not 
required ;  and  if  the  intention  is  in  doubt,  equity  leans  in 
favor  of  considering  it  a  mortgage,  as  most  generally  accom- 
plishing complete  justice  to  both  parties."  ^ 

It  is  essential  that  the  concurring  intention  of  both  parties 
must  be  shown,  before  the  transaction  can  be  established  and 
treated  as  a  mortgage  ;  and  if  it  appears  that  the  grantee  con- 
sidered and  intended  it  as  a  conditional  sale,  though  the  ven- 
dor intended  it  as  a  mortgage,  this  does  not  make  a  "  doubt- 
ful case,"  nor  require  the  court  to  adopt  the  vendor's  construc- 
tion.^ It  will  be  found  that  the  numerous  adjudications  in 
controversies  of  this  kind  will  suffice  to  show  that  each  case 
must  be  decided  in  view  of  the  peculiar  circumstances  which 
belong  to  it  and  mark  its  character,  and  that  the  only  safe  cri- 
terion is  the  intention  of  the  parties,  to  be  ascertained  by  con- 
sidering their  situation  and  the  attendant  facts,  as  well  as  the 
written  memorials  of  the  transaction.* 

The  intention  of  the  parties  is  the  vital  question,  which 
makes  it  essential  to  attend  to  their  situation,  the  fixed  price 
in  connection  with  the  value  of  the  property,  the  conduct  of 

^Conway  v.  Alexander,  7  Cranch  (U.  S.),  218. 

2  ]\Iitchell  V.  Welhnan,  80  Ala.  16.    See,  also,  McNeill  v.  Norsworthy,  39 
Ala.  156  ;  Turner  r.  Wilkinson,  72  Ala.  361. 

*  Douglass  V.  Moody,  80  Ala.  61. 

*  Cornell  v.  Hall,  22  Mich.  377. 


CONDITIONAL    SALES,    ETC.,    DISTINGUISHED.  63" 

the  parties  before  and  after  the  conveyance,  and  all  the  sur- 
rounding facts  SO  far  as  they  are  adapted  to  develop  and  ex- 
plain the  nature  and  object  of  the  arrangement.^ 

To  determine  the  nature  of  the  conveyance,  the  court  will 
look  into  the  whole  history  of  the  transaction  to  learn  the  in- 
tention of  the  parties,^  but-  will  not  presume  to  change  the 
contracts  which  the  parties  have  made ;  but  will  endeavor 
to  give  them  that  effect  to  which  they  are  entitled  by  the 
principles  administered  in  equity.  While  these  principles 
will  not  permit  a  transaction  which  in  substance  is  a  mortgage 
to  have  the  effect  of  a  sale,  there  is  no  principle  or  maxim  of 
policy  which  forbids  the  making  of  a  conditional  sale,  or 
which  will  allow  the  court"  to  interpose  and  convert  one  into  a 
mortgage.^ 

The  fact  that  no  note  was  given,  or  other  personal  obliga- 
tion, is  not  conclusive  of  the  nature  of  the  transaction.* 


Article  2. 
Construction  and  Illustration. 

I  67.  Conveyances  which  Embody  the    1 68.  Conveyances  which  Embody  the 
Principles  of  a  Mortgage.  Principles    of  a   Conditional 

Sale. 

§  67.  Conveyances  which  Embody  the  Principles  op  a 
^loRTGACiE. — It  is  often  difficult  to  determine  whether  a  trans- 
action is  a  mortgage  or  a  conditional  sale.  A  court  of  equity 
will  not  permit  a  conveyance  which  is  in  substance  a  mortgage 
to  have  the  effect  of  a  sale ;  nor  will  the  court  convert,  by  in- 
terpretation, a  conditional  sale  into  a  mortgage.  In  cases  of 
doubt  the  court  will  lean  to  the  conclusion  that  a  security  was 
meant,  as  more  likely  than  a  sale,  to  subserve  the  ends  of  jus- 
tice.    But  where  the  idea  prevails  that  a  conditional  sale  was 

1  Brewster  v.  Baker,  20  Barb.  (N.  Y.)  369. 

^  S wetland  v.  Swetland,  3  Mich.  482 ;  Holmes  v.  Grant,  8  Paige  (N.  Y.),  243 ; 
Brewster  v.  Baker,  20  Barb.  (N.  Y.)  364  ;  Facey  v.  Otis,  11  Mich.  213 ;  Glover 
V.  Payn,  19  Wend.  (N.  Y.)  518. 

« Cornell  v.  Hall,  22  Mich.  377. 

*  Stephens  v.  Allen,  11  Ore.  188  ;  Brant  v.  Robertson,  16  Mo.  143. 


64  NATURE    AND   REQUISITES   OF    THE    CONTRACT. 

intended,  the  transaction  must  retain  the  stamp  which  the 
parties  themselves  have  given  it.^ 

If  the  relation  of  debtor  and  creditor  continues  to  exist,  the 
transaction  will  be  a  mortgage.^ 

If  the  transaction  is  intended  as  a  loan,  if  there  remains  a 
debt  for  which  the  conveyance  is  only  a  security,  and  the  col- 
lection of  which  may  be  enforced  independent  of  the  security, 
equity  will  interpret  it  as  a  mortgage,  no  matter  whether  the 
transaction  is  evidenced  by  one  or  two  instruments.^ 

So  where  two  instruments  are  contemporaneously  made,  and 
it  appears  that  at  the  time  they  were  executed  there  was  a  pre- 
existing debt  owing  to  the  grantee,  the  subsequent  payment  of 
which  by  the  grantor  would  entitle  him  to  a  re-conveyance  of 
the  property,  and  that  the  grantee  surrendered  no  remedy 
previously  available  to  him  for  the  collection  of  the  debt,  and 
that  the  obligation  of  the  grantor  remained  the  same,  such  in- 
strument constitutes  a  mortgage.^ 

Whatever  form  the  transaction  may  have  assumed,  if  the 
relation  of  debtor  and  creditor,  with  its  reciprocal  rights,  con- 
tinues between  the  contracting  parties,  or  if  such  relation  was 
then  created,  by  a  loan  or  advance,  and  if  the  agreement, 
whether  in  a  deed  or  a  separate  instrument  concurrently  exe- 
cuted, is  such  that  the  debtor,  by  merely  paying  his  debt,  be- 
comes entitled  to  insist  upon  a  re-conveyance,  or  otherwise  to 
defeat  the  estate  conveyed,  the  conveyance  will  be  interpreted 
as  a  mortgage.^ 

And  a  contract  purporting  to  be  a  sale  by  the  terms  of  which 
the  vendee  is  to  sell  the  property,  and  out  of  the  proceeds  of 
the  sale  pay  an  antecedent  debt  to  the  vendor,  with  interest 
and  expenses,  any  excess  to  be  returned  to  the  vendor,  and  any 
deficiency  to  be  made  good  by  him,  is  in  effect  a  mortgage.^ 

» Cornell  v.  Hall,  22  Mich.  377. 

'  Rnffier  v.  Womack,  30  Tex.  340 ;  Magee  v.  Catching,  33  Miss.  673 ;  Slee  v. 
Manhattan  Co.,  1  Paige  (N.  Y.),  56. 
^McNamara  v.  Culver,  22  Kan.  661. 
*Voss  V.  Eller,  109  Ind.  260. 

6Peugh  r.  Da\ns,  96  U.  S.  332 ;  Russell  v.  Southard,  12  How.  (U.  S.)  139. 
"  Cannon  v.  McNab,  48  Ala.  99. 


CONDITIONAL    SALES,    ETC.,    DISTINGUISHED.  65 

A  deed  conveying  land  in  consideration  of  $250  upon  con- 
dition that  if  the  grantor  repays  the  $250  within  a  certain 
time,  the  conveyance  shall  be  void,  there  being  no  agreement 
by  the  grantor  to  repay  the  $250,  is  not  a  mortgage  but  a 
conditional  sale.^  But  where  the  grantee  promises  to  resell 
the  land,  except  a  certain  reserved  rent  to  the  grantor,  at  any 
time  within  a  year  on  repayment  of  the  money  advanced  with 
interest,  the  deed  is  a  mortgage.^ 

§  68.  Conveyances  which  Embody  the  Principles  of  a 
Conditional  Sale. — A  debtor  may  convey  property  to  his 
creditor  in  payment  of  an  existing  debt,  and  at  the  time  of 
conveyance  make  a  contract  so  that  they  thereafter  will  occupy 
the  relation  of  vendor  and  purchaser  toward  each  other  in  re- 
spect to  the  land  conveyed.  If  the  pre-existing  liability  of  the 
debtor  is  extinguished,  and  the  personal  remedy  of  the  creditor 
is  released  in  consideration  of  a  sale  and  conveyance  of  the 
property,  the  fact  that  a  contract  to  resell,  upon  certain  terms 
and  conditions,  is  entered  into,  does  not  constitute  the  transac- 
tion a  mortgage. 

If  the  agreement  extinguishes  the  debt,  leaving  the  grantor 
the  option  to  pay  or  not,  and  thereby  entitles  him  to  a  recon- 
veyance, the  transaction  operates  as  a  conditional  sale.^  And 
whenever  it  satisfactorily  appears  that  a  conditional  sale  was 
intended,  the  transaction  must  be  so  interpreted.* 

The  fact  that  there  was  an  existing  debt  at  the  time  of  the 
contract  does  not  repel  the  presumption  which  may  arise  from 
other  facts  that  the  contract  was  a  conditional  sale.^  The  ques- 
tion is  in  such  case,  was  the  old  debt  surrendered  or  cancelled 
at  the  time  of  the  conveyance.® 

If  the  relation  of  debtor  and  creditor  continues  to  exist,  it  is 

*  McCamant  v.  Roberts,  80  Tex.  316. 
'^Jenkins  v.  Stewart,  (Ky.)  16  S.  W.  Rep.  356. 

'Hays  V.  Carr,  83  Ind.  275  ;  Flagg  v.  Mann,  14  Pick.  (Mass.)  467 ;  Conway 
V.  Alexander,  7  Cranch  (U.  S.),  218 ;  Smith  v.  Crosby,  47  Wis.  160. 

*  Cornell  v.  Hall,  22  Mich.  377  ;  Ruffier  v.  Womack,  30  Tex.  340. 
*Alstin  V.  Cundiff,  52  Tex.  453. 

«Hohnes  v.  Grant,  8  Paige  (N.  Y.),  243. 
VOL.  I. — 5 


66  NATURE   AND    REQUISITES    OP   THE    CONTRACT. 

a  mortgage ;  otherwise,  it  is  a  conditional  sale/  If  after  the 
transaction  no  debt  remains,  there  is  no  mortgage,  but  only  a 
conditional  sale.^ 

Article  3. 
Assignment  and  Deed  of  Trust  in  the  Nature  of  a  Mortgage. 

§  69.  Distinction.  §  73.  Voluntary  Assignments  Under 

§  70.  Interpretation     of    the  Instru-                 the  Illinois  Statute. 

ment.  §  74.  General  Statement. 
§  71.  Construction  and  Effect  of  State    ^  75.  Voluntary  Assignments  do  not 

Statutes.  Embrace  all  Cases  of  Assign- 

§72.  Voluntary    Assignments    Under  ments    Made    by    Insolvent 

the  Statutes  of  Ohio.  Debtors. 

§  69.  Distinction. — An  assignment  for  the  benefit  of  creditors 
inures  to  the  benefit  of  all  the  creditors  of  the  grantor,  while  a 
deed  of  trust  in  the  nature  of  a  mortgage  is  for  the  benefit  of 
those  named  therein.  The  radical  distinction  between  them 
exists  in  the  equitable  interest  which  the  grantor,  in  the  case 
or  a  deed  of  trust,  still  retains  in  the  assigned  property,  which 
interest  is  disclosed  by  a  defeasance.^ 

Judge  Bartley  says  there  is  a  manifest  and  well-settled  dis- 
tinction between  an  unconditional  deed  of  trust  and  a  mortgage 
or  deed  of  trust  in  the  nature  of  a  mortgage.  The  former  is  an 
absolute  and  indefeasible  conveyance  of  the  subject-matter 
thereof  for  the  purpose  expressed,  whereas  the  latter  is  condi- 
tional and  defeasible.* 

An  assignment  is  more  than  a  security  for  the  payment  of 
debts ;  it  is  an  absolute  appropriation  of  property  to  their  pay- 
ment. It  does  not  create  a  lien  in  favor  of  creditors  upon 
property  which  in  equity  is  still  regarded  as  the  assignor's,  but 
it  passes  both  the  legal  and  equitable  title  to  the  property  ab- 
solutely beyond  the  control  of  the  assignor. 

There  remains,  therefore,  no  equity  of  redemption  in  the 

^  Robinson  v.  Cropsey,  2  Edw.,  Ch.  (N.  Y.)  138. 
''McNamara  v.  Culver,  22  Kan.  661. 
^  Hargadine  v.  Henderson,  97  Mo.  375. 
*  Hoflanan  v.  Mackall,  5  Ohio  St.  124. 


CONDITIONAL    SALES,    ETC.,    DISTINGUISHED.  67 

property,  and  the  trust  which  results  to  the  assignor  in  the 
unemployed  balance  does  not  indicate  such  an  equity.^ 

A  deed  of  trust  in  the  nature  of  a  mortgage  is  substantially 
in  law  and  in  equity  the  same  as  a  mortgage,  and  the  radical 
distinction  between  them  exists,  as  in  the  case  of  mortgages,  in 
the  equitable  interest  which  the  grantor  still  retains  in  the  as- 
signed property.^ 

Whenever  the  instrument  conveys  the  property  absolutely 
to  a  trustee  to  be  sold  for  the  payment  of  debts,  it  is  in  effect 
and  form  an  assignment.^ 

§  70.  Interpretation  of  the  Instrument. — The  instrument 
must  be  read  as  a  whole,  in  the  light  of  the  circumstances 
under  which  it  was  executed,  to  determine  whether  it  was  in- 
tended as  a  security,  or  as  an  absolute  unconditional  convey- 
ance, in  prsssenti,  to  the  grantee  of  all  the  grantor's  interest  in 
the  property,  both  legal  and  equitable.  Being  intended  merely 
as  a  security  for  the  payment  of  a  debt,  and  an  indemnity  to 
save  harmless  a  surety,  in  equity  it  will  be  held  to  be  a  deed  of 
trust  in  the  nature  of  a  mortgage,  with  the  right  of  redemption 
in  the  mortgagor,  if  exercised  before  the  property  is  applied  to 
the  purpose  of  the  trust.* 

When  an  instrument,  by  its  recitals,  purports  to  be  a  deed 
of  trust  in  the  nature  of  a  mortgage,  its  real  character  is  not 
thereby  concluded.  That  must  be  determined  by  the  effect  of 
the  operation  of  its  terms  upon  the  property  in  its  situation 
at  the  time  of  the  execution  of  the  deed.^ 

Thus,  a  deed  conveying  land  to  a  trustee  as  mere  collateral 
security  for  the  payment  of  a  debt,  with  the  condition  that  it 
shall  become  void  on  the  payment  of  the  debt  when  due,  and 
with  power  to  the  trustee  to  sell  the  land  and  pay  the  debt  in 

^  Burrill  on  Assignments,  sect.  6. 

^  Burrill  on  Assignments,  sect.  8. 

*8tate  V.  Benoist,  37  Mo.  500 ;  Crow  v.  Beardsley,  68  Mo.  435  ;  Woodiniff  y. 
Robb,  19  Ohio,  212. 

*Gage  V.  Chesebro,  49  Wis.  486;  Waterman  r.  Silberburg,  67  Tex.  100; 
Peck  V.  Merrill,  26  Vt.  686 ;  Schradski  v.  Albright,  93  Mo.  42. 

*  Hargadine  v.  Henderson,  97  Mo.  375. 


68  NATURE    AND   REQUISITES   OF   THE   CONTRACT. 

case  of  default  on  the  part  of  the  debtor,  is  a  deed  of  trust  in 
the  nature  of  a  mortgage.  It  is  a  conveyance  in  trust  for  the 
purpose  of  securing  a  debt,  subject  to  a  condition  of  defeasance/ 
A  mortgage  and  other  writings  executed  at  the  same  time, 
and  all  springing  out  of  the  same  agreement  between  debtor 
and  creditor,  are  to  be  construed  together  as  one  instrument, 
and  when,  in  effect,  an  assignment  for  the  benefit  of  creditors 
they  will  be  so  construed.^ 

§  71.  Construction  and  Effect  of  State  Statutes. — Upon 
the  question  of  the  construction  and  effect  of  a  State  statute, 
>  regulating  assignments  for  the  benefit  of  creditors,  the  decisions 
of  the  highest  courts  of  the  State  are  of  controlling  authority.^ 

The  laws  of  voluntary  assignments  of  the  different  States  are 
not  interpreted  alike  in  some  of  the  States.  But  the  interpre- 
tation within  one  State  becomes  a  part  of  the  law  of  that  State, 
as  much  so  as  if  incorporated  into  the  body  of  it  by  the  legis- 
lature.* Therefore,  in  Missouri,  a  deed  of  trust  given  on  the 
property  of  a  party  to  secure  the  payment  of  his  debts  therein 
named,  and  reserving  in  the  clearest  terms  a  right  of  redemp- 
tion to  the  grantor,  by  providing  that  he  shall  pay  those  debts 
the  deed  shall  be  void,  as  well  as  by  authorizing  the  trustee  to 
sell  the  property  only  in  case  of  his  failing  to  pay  those  debts 
or  any  part  thereof  for  five  days  after  they  become  payable,  is 
a  mortgage  only  and  not  an  assignment.^ 

So,  also,  the  assignment  law  is  inapplicable  to  a  deed  of 
trust,  conveying  all  the  debtor's  property,  real  and  personal 
(except  his  homestead  and  household  furniture  and  a  horse 
and  buggy),  to  a  trustee  in  trust  to  secure  the  payment  of  a  part 
of  his  debts  for  which  he  was  liable  either  as  principal  or 
surety,  which  appeared  upon  a  view  of  all  its  provisions  as  ap- 
plied to  the  facts  of  the  case,  to  be  not  an  absolute  indefeasible 

'  Woodruff  V.  Robb,  19  Ohio,  216. 
"  Kiser  v.  Dannenburg,  (Ga.)  15  S.  E.  Rep.  17. 

'Union  Bank  v.  Kansas  City  Bank,  136  U.  S.  223 ;  Jaffray  v.  McGehee,  107 
V.  S.  361 ;  Peters  v.  Bain,  133  U.  S.  670. 

*  Christy  v.  Pridgeon,  4  Wall.  (U.  S.)  196. 

*  Union  Bank  v.  Kansas  City  Bank,  136  U.  S.  223. 


CONDITIONAL    SALES,    ETC.,    DISTINGUISHED.  69 

assignment  of  all  the  grantor's  title,  both  legal  and  equitable, 
in  the  property,  in  trust  for  his  creditors ;  it  is  a  deed  of  trust 
to  secure  the  payment  of  debts  and  other  liabilities  in  which 
the  grantor  has  an  interest  in  the  property  conveyed,  for  the 
protection  of  which  equity  gives  him  a  right  of  redemption, 
though  no  clause  of  defeasance  is  inserted  in  the  deed.^ 

The  assignment  law  of  Missouri  is  not,  in  letter  or  spirit,  a 
bankrupt  or  insolvent  debtor's  act.  A  debtor,  whether  solvent 
or  insolvent,  may,  in  good  faith,  sell,  deliver  in  payment,  mort- 
gage or  pledge  the  whole  or  any  part  of  his  property  for  the 
benefit  of  one  or  more  of  his  creditors,  to  the  exclusion  of  others, 
even  though  such  transfer  may  have  the  effect  of  delaying  them 
in  the  collection  of  their  debts,  and  the  transaction  will  not  be 
interpreted  as  a  mortgage.^ 

§  72.  Voluntary  Assignments  Under  the  Statutes  of 
Ohio. — In  Ohio,  under  the  statute  of  that  State,  it  has  been 
held  that  mortgages  made  by  a  party  after  he  has  become  in- 
solvent, and  had  ceased  to  do  business,  to  prefer  some  of  his 
creditors,  were  invalid  and  ineffectual  against  his  creditors 
generally,  without  regard  to  the  question  whether  the  mort- 
gages were  or  were  not  parts  of  the  same  transaction  as  an  as- 
signment under  the  statute.^ 

Thus,  where  an  insolvent  party  under  the  statute  granted 
and  assigned  all  his  property,  real  and  personal,  to  an  as- 
signee, in  trust,  to  sell  and  dispose  of  it,  and  to  apply  the  pro- 
ceeds, after  paying  the  expenses  of  executing  the  trust,  to 
the  payment  of  all  his  creditors,  the  asssignor,  contempora- 
neously with  the  assignment,  made  five  mortgages  to  prefer 
creditors.  It  was  held  that  these  mortgages  were  invalid  as 
against  general  creditors,  under  the  Ohio  statute.* 

§  73.  Voluntary  Assignments  Under  the  Illinois  Stat- 
ute.— The  opinion  of  the  United  States  Supreme  Court  holds 

^Hargadine  v.  Henderson,  97  Mo.  375. 

^  Crow  V.  Beardsley,  68  Mo.  4.35.  And  see  Holt  v.  Simmons,  16  Mo.  App.  97 ; 
Sampson  v.  Shaw,  19  Mo.  App.  274 ;  Smith  v.  Thurman,  29  Mo.  App.  186. 
'Eouse  V.  Merchants'  Bank,  46  Ohio  St.  493. 
*  Smith  MiddUngs  Purifier  Co.  v.  McGroarty,  136  U.  S.  237. 


70  NATUKE    AND   REQUISITES   OF   THE    CONTRACT. 

that,  in  Illinois,  the  surrender  by  an  insolvent  debtor  of  the 
dominion  over  his  entire  estate,  with  an  intent  to  evade  the 
operation  of  the  voluntary  assignment  act,  and  the  transfer  of 
the  whole,  or  substantially  the  whole  of  his  property  to  a  part 
of  his  creditors  in  order  to  give  them  a  preference  over  other 
creditors,  whether  made  by  one  instrument  or  more,  and  what- 
ever their  form  may  be,  operate  as  an  assignment  under  the 
act,  the  benefit  of  which  may  be  claimed  by  any  unpreferred 
creditor  who  will  take  appropriate  steps  in  a  court  of  equity 
to  enforce  the  equality  contemplated  by  the  statute.^ 

The  Illinois  Supreme  Court  does  not  accept  the  interpreta- 
tion thus  given.  It  holds  that  the  voluntary  assignment  act 
does  not  affect  the  right  of  a  failing  debtor  to  prefer  creditors 
by  giving  judgment  notes,  though  all  his  property  be  sold  on 
execution  to  satisfy  them,  since  such  notes,  not  being  voluntary 
assignments,  are  not  within  the  purview  of  the  act ;  that  the 
act  does  not  purport,  by  its  terms,  to  regulate  or  prohibit  pref- 
erences generally,  but  only  preferences  in  any  assignment.  An 
assignment  as  to  the  form  and  contents  has  always  been  un- 
derstood to  be  a  written  deed  of  convej^ance,  executed  by  the 
assignor  to  the  assignee,  reciting  the  grantor's  indebtedness  and 
inability  to  pay,  and  conveying  his  property,  real  and  per- 
sonal, by  apt  words  of  sale  and  transfer  to  the  assignee,  in 
trust,  to  take  possession  of  and  sell  the  same,  and  to  collect  the 
outstanding  debts,  and  out  of  the  proceeds  to  pay  the  creditors. 

The  object  of  the  law  is  to  prohibit  discrimination  by  a 
debtor  making  a  voluntary  assignment  in  favor  of  particular 
creditors,  and  it  is  not  preference  of  a  creditor  itself  that  is 
condemned,  but  preference  as  a  feature  of  such  assignment.^ 

Notwithstanding  this  act,  a  debtor  may,  in  good  faith,  sell 
his  property,  mortgage  or  pledge  it  to  secure  a  bona  fide  debt, 
or  create  a  lien  upon  it  by  operation  of  law,  and  such  action 
on  his  i>art  will  not  constitute  an  assignment.^ 

1  White  V.  Cotzhauscn,  129  V.  S.  329. 

'^Farwell  v.  Nillson,  133  111.  45. 

3  Preston  v.  Spauldinj;,  120  111.  20S. 

The  Illinois  Supreme  Court  holds  in  Farwell  v.  Nillson,  133  111.  45,  that  the 


CONDITIONAL   SALES,    ETC.,    DISTINGUISHED.  71 

§  74.  General  Statement. — It  will  serve  no  useful  pur- 
pose to  discuss  the  voluntary  assignment  act,  because  the 
decisions  thereunder  are  made  in  view  of  peculiar  statutes 
in  the  respective  States,  and  may  not  serve  to  illustrate  the  law 
as  generally  held  in  other  jurisdictions.  Still  it  is  generally 
held  that  a  debtor  may  secure  special  creditors.  Thus,  in 
New  Hampshire  it  is  held  that  a  mortgage  or  pledge  by  a 
debtor  of  all  his  property  to  secure  a  portion  of  his  debts,  leav- 
ing others  unprovided  for,  is  not  an  assignment  within  the 
meaning  of  the  statute  providing  for  an  equal  distribution  of 
property  assigned  for  the  benefit  of  creditors.^ 

So,  in  Vermont,  the  statute  prohibiting  general  assignments 
must  be  construed  so  as  to  embrace  only  those  transfers  of 
property  which  are  made  in  trust  for  creditors ;  hence  a  trans- 
fer by  a  debtor  of  all  his  property  is  not  a  general  assignment, 
unless  the  transfer  is  to  a  trustee  in  trust  for  other  creditors, 
and,  consequently,  if  a  debtor  conveys  his  property  directly  to 
creditors  for  their  debts,  and  no  trust  is  created  for  others,  the 
transfer  is  to  be  regarded  as  a  mortgage  or  pledge,  and  not  an 
assignment.^ 

So  an  assignment  by  an  insolvent  debtor  of  all  his  personal 
property,  made  directly  to  a  creditor,  reserving  the  surplus,  if 
an}',  to  the  assignor,  is  in  effect,  a  chattel  mortgage.^ 

§  75.  Voluntary  Assignments  do  not  Embrace  all  Cases 
OF  Assignments  Made  by  Insolvent  Debtors. — The  statutes 

doctrine  of  White  v.  Cotzhausen,  129  U.  S.  329,  is  not  in  accordance  with  the 
decisions  of  that  court.  The  court  says :  "  Much  as  we  respect  the  conclu- 
sions of  that  learned  court,  we  are,  upon  questions  involving  the  construc- 
tion of  statutes  of  our  o"mi  State,  bound  by  the  decisions  of  our  own  Supreme 
Court.  If  our  court  had  not,  as  we  conceive  it  has,  already  made  its  con- 
struction of  the  voluntary  assignment  act  plain,  we  should,  nevertheless, 
find  great  difficulty,  as  ^411  appear  from  what  we  have  already  said,  in  as- 
senting to  the  view  taken  in  White  v.  Cotzhausen." 

^  Low  V.  Wyman,  8  N.  H.  536 ;  Barker  v.  Hall,  13  N.  H.  298 ;  Danforth  v. 
Denny,  25  N.H.  155. 

2  Peck  V.  Merrill,  26  Vt.  686  ;  McGregor  v.  Chase,  37  Vt.  225. 

^Dunham  r.  Whitehead,  21  N.  Y.  131.  See  also.  Gage  v.  Chesebro,  49 
Wis.  486 ;  Briggs  ?'.  Davis,  21  N.  Y.  574 ;  McClelland  v.  Remsen,  3  Abb.  Dec. 
(N.  Y.)  74 ;  Van  Busliirk  v.  Warren,  4  Abb.  Dec.  (N.  Y.)  457. 


72  NATURE   AND    REQUISITES   OF   THE   CONTRACT. 

relating  to  assignments  of  the  property  of  a  failing  debtor,  for 
the  purpose  of  preferring  creditors,  do  not  embrace  all  cases  of 
assignments  made  by  an  insolvent  debtor ;  but  only  refer  to 
those  cases  where  the  assignee  stands  in  the  character  of  a 
trustee,  other  than  his  merely  receiving  a  conveyance  to  secure 
his  own  debt.  Thus,  where  a  party  executes  to  another  cer- 
tain notes  evidencing  a  debt,  and  has,  at  the  same  time,  exe- 
cuted a  bond  and  power  of  attorney  to  confess  judgment  for 
the  same  debt,  and  the  payee  having  assigned  the  notes  to  his 
creditors,  and  having  entered  up  judgment  in  his  own  name 
for  the  amount  of  the  debt  on  the  bond  and  warrant  of  attor- 
ney, and  having  afterward  received  an  assignment  of  property 
from  the  maker  of  the  notes,  who  is  in  failing  circumstances, 
for  the  security  of  the  debt,  the  assignee,,  in  such  case,  must  be 
held  to  be  a  trustee,  and  the  assignment  thus  made  to  him 
must  enure  to  the  benefit  of  all  the  creditors  of  said  debtor, 
under  the  statute.^ 

The  statute  relating  to  conveyances  to  trustees  in  trust  to  prefer 
creditors,  does  not  apply  to  the  case  of  a  creditor  taking  security 
for  a  debt,  from  an  insolvent  debtor,  where  the  security  is  taken 
in  good  faith,  and  where  the  sole  object  of  it  is  to  secure  a  debt,^ 

And  it  is  generally  held  that  a  conveyance  by  a  debtor, 
known  to  be  insolvent,  of  all  his  property,  to  one  or  more  of 
his  creditors,  in  discharge  of  their  debts  and  liabilities,  not  ex- 
ceeding the  amount  due  and  payable  to  them,  and  not  for  the 
benefit  of  the  creditors  at  large,  or  any  of  the  creditors  than 
the  immediate  grantees,  is  not  a  voluntary  assignment,  within 
the  meaning  of  the  act.^ 

Thus,  certain  insolvent  debtors  transferred  their  property 
directly  to  particular  creditors,  and  it  was  held  that  the  statute 
relating  to  assignments  by  debtors  for  the  benefit  of  creditors, 
and  prohibiting  preferences  in  such  assignments,  has  no  appli- 
cation to  cases  of  this  kind.*     Notwithstanding  the  statute  a 

^  Doremus  v.  O'Harra,  1  Ohio  St.  45. 
2  Atkinson  v.  Tomlinson,  1  Ohio  St.  237. 
"United  States  v.  McLelland,  3  Sum.  C.  0.  345. 
*Schroeder  v.  AValsh,  120  111.  403. 


CONDITIONAL    SALES,    ETC.,    DISTINGUISHED.  73 

debtor  may  pay  cue  creditor  in  full,  either  in  money  or  by 
sale  of  his  property.  The  statute  applies  only  to  conveyances 
of  property  to  an  assignee  or  trustee,  in  trust,  to  convert  the 
same  into  money  for  the  benefit  of  creditors  of  the  assignor, 
which  can  be  made  only  under  the  act.  Thus,  where  the  in- 
struments by  which  the  goods  and  chattels  were  transferred  to 
certain  mortgagees  were  in  the  form  of  chattel  mortgages,  and 
each  purported  to  be  given  to  secure  a  promissory  note  executed 
by  the  mortgagor  to  the  mortgagees,  due  one  day  after  date ; 
and  it  was  recited  in  said  mortgages  that  the  possession  of  the 
mortgaged  property  was  given  to  the  mortgagees,  and  they 
were  empowered  to  dispose  of  the  same  at  public  or  private 
sale,  and  in  bulk  or  at  retail ;  and  it  was  provided  that  upon 
payment  of  said  notes,  and  all  costs  and  charges,  said  instru- 
ments should  be  null  and  void,  they  did  not  constitute  a  volun- 
tary assignment  for  the  benefit  of  creditors,  within  the  meaning 
of  the  statute ;  but  were  mere  chattel  mortgages,  executed  for 
the  sole  benefit  of  the  mortgagees,  and  creating  no  trust  in  favor 
of  any  of  the  creditors  of  the  mortgagor.^ 

A  voluntary  assignment  unquestionably  means  an  assign- 
ment of  all  the  debtor's  property  in  trust  to  pay  debts,  as  con- 
tradistinguished from  a  mere  sale  thereof  to  a  creditor  in  pay- 
ment of  his  debt,  or  the  pledge  or  hypothecation  of  the 
property  to  a  particular  creditor,  as  a  mere  security,  in  the 
nature  of  a  mortgage.^ 

A  voluntary  assignment  for  the  benefit  of  creditors  implies 
a  trust,  and  contemplates  the  intervention  of  a  trustee.  As- 
signments directly  to  creditors  and  not  upon  trust  are  not  vol- 
untary assignments  for  the  benefit  of  creditors.  Unless  a  trust 
is  created  by  the  conve3''ance  in  favor  of  creditors,  it  is  not 
within  the  class  of  instruments  known  as  assignments  for  the 
benefit  of  creditors.^ 

MVeber  v.  Mick,  131  111.  520. 

^  Bias  V.  Bouchaud,  10  Paige  (N.  Y.),  445,  opinion  by  Chancellor  Walworth. 

'  Burrill  on  Assignments,  sects.  2,  3. 


74  nature  and  requisites  of  the  contract. 

Article  4. 

A  Chattel  Mortgage  Distinguished. 

§  76.  Distinction.  ?  78.  A  Similar  View  Taken  by  the 

?  77.  This  Distinction  not  Recognized  Massachusetts  Court, 

by  Some  Courts. 

§  76.  Distinction. — Under  the  common  law,  the  principles 
governing  a  chattel  mortgage  are  the  same  that  apply  to  a 
mortgage  of  real  estate.  But  there  is  a  wide  difference  between 
a  mortgage  of  land  and  a  mortgage  of  chattels,  in  those  juris- 
dictions where  the  equitable  rule  applies  to  real  estate  mort- 
gages and  the  common-law  rule  to  chattel  mortgages.  Thus, 
in  New  York,  in  case  of  a  real  estate  mortgage,  the  estate  sub- 
ject to  the  mortgage,  remains  in  the  mortgagor,  and  may  be 
sold  under  execution  against  him,  as  such  mortgage  is  regarded 
merely  as  a  security  for  the  debt,  and  not  as  a  transfer  of  the 
title.  A  mortgage  of  chattels,  however,  in  all  cases,  vests  the 
legal  title  in  the  mortgagee,  and  when  by  the  terms,  or  by  the 
legal  construction  of  the  instrument,  the  mortgagee  has  an  im- 
mediate right  of  possession,  although  the  possession  may  not 
in  fact,  have  been  changed,  and,  in  judgment  of  law,  he  is  the 
absolute  owner,  and  it  is  merely  as  his  bailee  and  by  his  suf- 
ferance that  the  mortgagor  retains  possession,  the  mortgagor 
has  no  interest  that  is  bound  by,  or  can  be  sold  under,  an  exe- 
cution against  him.  Where  by  the  terms  of  the  mortgage  the 
mortgagor  is  to  remain  in  possession  for  a  certain  time,  his 
temporary  interest,  subject  to  the  mortgage,  may  be  levied  on 
and  sold,  but  his  interest,  in  other  cases,  is  a  right  of  redemp- 
tion only,  a  mere  chose  in  action  which,  unless  united  to  a 
right  to  the  possession  for  a  definite  period,  can  never  be  the 
subject  of  a  levy  and  sale  under  execution.^ 

The  interest  of  a  mortgagor  of  personal  property,  even  be- 
fore forfeiture,  where  he  has  not  the  right  of  possession  for  a 
definite  period,  is  but  a  right  of  redemption  merely,  which  is 
not  the  subject  of  levy  and  sale  upon  execution.^ 

^Stewart  V.  Slater,  6  Duer  (N.  Y.),  99. 

==  Mattison  v.  Baucus,  1  Comst.  (N.  Y.)  295  ;  Hull  v.  Carnley,  2  Duer  (N.  Y.), 
105. 


CONDITIONAL    SALES,    ETC.,    DISTINGUISHED.  75 

A  mortgage  upon  real  estate  is  a  mere  security  and  incum- 
brance upon  the  land  and  gives  the  mortgagee  no  title  or 
estate  therein  whatever.  A  chattel  mortgage  is  more  than  a 
security ;  it  is  a  sale  of  the  thing  mortgaged  and  operates  as  a 
transfer  of  the  whole  legal  title  to  the  mortgagee,  subject  only 
to  be  defeated  by  the  full  performance  of  the  condition.^ 

This  rule  has  been  closely  adhered  to  in  New  York.  A  real 
estate  mortgage  is  only  a  lien,  and  conveys  no  title  to  the  land, 
while  a  chattel  mortgage  transfers  the  title  at  once,  subject  to 
a  defeasance  by  performance  of  the  conditions  annexed,  the 
payment  of  the  debt. 

This  distinction  is  of  much  importance  in  case  of  tender  by 
the  mortgagor  after  the  law-day,  because  a  tender  of  money 
due  on  a  real  estate  mortgage,  even  after  default,  is  good  at 
any  time  before  foreclosure  ;  but  otherwise  in  case  of  a  chattel 
mortgage,  when  made  after  default  and  before  foreclosure.^ 

§  77.  This  Distinction  not  Recognized  by  Some  Courts. — 
In  those  jurisdictions  where  a  chattel  mortgage  is  considered 
as  a  mere  lien,  the  same  as  a  mortgage  on  lands,  there  is  no 
distinction,  and  there  is  no  conflict  of  authority.  In  some  States 
where  a  chattel  mortgage  is  not  considered  a  lien,  but  a  sale 
with  a  defeasance,  it  has  been  endeavored  to  apply  the  prin- 
ciples of  a  real  estate  mortgage,  though  the  latter  is  merely 
a  lien  upon  the  property.  Thus  in  Minnesota,  Judge  Collins 
says: 

"  The  character  of  the  real  estate  mortgage,  and  the  status 
of  the  land  covered  thereby,  are  the  same  in  this  State  under 
our  statutes  as  they  were  declared  to  be  by  the  courts  of  New 
York  many  years  ago,  while  the  same  distinction  between 
chattel  mortgages  and  those  upon  real  property  exists  here  as 
it  does  there ;  for  it  has  been  announced  repeatedly  in  the 
decisions  of  this  court  that  the  former  vests  in  the  mortgagee 
a  defeasible  title  in  the  mortgaged  property,  and  upon  default 
he  is  entitled  to  possession  without  foreclosure,  unless  stipulated 

^  Butler  V.  Miller,  1  Comst.  (N.  Y.)  496. 
*Noyes  v.  Wyckoflf,  30  Hun  (N.  Y.),  466. 


76  NATURE   AND    REQUISITES   OF   THE    CONTRACT. 

to  the  contrary,  subject  to  the  mortgagor's  right  of  redemption. 
.  .  .  Although  technically  the  legal  title  to  the  mortgaged 
property  is  vested  in  the  mortgagee,  he  has  been  deprived  of 
many  of  the  rights  which  formerly  resulted  from  that  rule  of 
law." 

The  learned  judge  holds  that  in  truth  very  little  difference 
can  be  pointed  out  between  the  rights,  privileges,  and  remedies 
of  the  mortgagor  of  real  and  personal  property,  either  in  struc- 
ture of  the  mortgage  or  its  effects.  "  We  can  discover  no  reason 
for  a  distinction  which  commends  itself,  and  no  reason  is  sug- 
gested in  the  decisions  cited  by  the  respondent,  except  that 
based  upon  the  technicality  before  referred  to,  that  a  mortgage 
upon  real  estate  is  a  mere  lien,  while  mortgage  on  personal 
property  vests  the  legal  title  thereof  in  the  mortgagee.  This 
is  not  satisfactory,  and,  in  analogy  with  the  rule  laid  down  in 
case  of  real  estate  security,  which  is  well  supported  on  prin- 
ciple and  by  authority,  we  are  of  the  opinion  that  the  effect  of 
a  tender  of  the  amount  of  a  debt  secured  by  a  chattel  mort- 
gage, though  made  after  maturity,  is  to  extinguish  and  dis- 
charge the  lien,  the  debt  only  remaining."  ^ 

§  78.  A  Similar  View  Taken  by  the  Massachusetts  Court. 
— In  Massachusetts  a  mortgage,  both  real  and  chattel,  conveys 
an  estate  or  title  defeasible  on  the  performance  of  a  condition 
subsequent.  If  the  condition  is  performed  according  to  its 
terms,  the  mortgage  immediately  becomes  void,  and  the  mort- 
gagee is  divested  of  his  title.^ 

The  right  of  redemption  in  the  mortgagor  limits  the  right 
and  title  of  the  mortgagee.  This  right  is  not  equitable,  in  the 
sense  that  the  interposition  of  a  court  of  equity  is  required  to 
enforce  it ;  but  it  is  a  legal  right  growing  out  of  the  statute 
under  which  the  parties  make  their  contract.^ 

In  regard  to  tender  the  equitable  rule  of  real  estate  mortgages 
as  it  prevails  in  New  York,  is  adopted  as  to  both  real  and  chattel 

^  Moore  v.  Norman,  43  Minn.  428. 
^Darling  r.  Chapman,  14  Mass.  101. 

'Iron  Works  v.  Montafrue,  108  Mass.  248;  Gordon  r.  Clapp,  111  Mass.  22; 
Stone  V.  Jenks,  142  Mass.  519. 


CONDITIONAL    SALES,    ETC.,    DISTINGUISHED.  77 

mortgages.  The  definition  of  a  chattel  mortgage  is  substan- 
tially the  same  in  New  York  and  Massachusetts.  But  in  the 
former  a  real  estate  mortgage  is  a  mere  lien,  and  in  the  latter 
a  sale  with  a  defeasance.  The  Massachusetts  court,  in  appl}^- 
ing  the  equitable  rule  to  a  chattel  mortgage  in  the  matter  of 
tender  by  the  mortgagor  after  jdefault,  but  before  foreclosure, 
seeks  authority  under  the  statute,  and  declares  that  the  statute 
gives  the  payment  or  tender  of  payment  of  the  debt  and  all 
proper  charges  at  any  time  before  foreclosure  the  same  effect 
upon  the  rights  of  the  parties  in  the  property  which  it  would 
have  had  if  made  when  the  debt  was  due.  In  either  case,  if 
the  mortgagee  refuses  the  tender,  he  may  afterward  sue  for  his 
debt,  but  he  loses  his  security.^ 

This  is  similar  to  that  of  the  Minnesota  court,  but  in  con- 
flict with  the  New  York  decisions  as  to  chattel  mortgages,  and 
with  those  where  the  common-law  doctrine  prevails. 
1  Weeks  v.  Baker,  152  Mass.  20. 


CHAPTER  III. 

absolute  sales  distinguished. 

Article  1. 
Absolute  Conveyance  with  Defeasance. 

§  79.  Absolute  Conveyance  as  Security.    ^  83.  Absolute  Conveyance  with  Sep- 
^  80.  In  Equity.  arate  Defeasance, 

g  81.  Character  of  the  Defeasance  at     g  84.  The  Defeasance  must  be  an  In- 
Law.  strument  of  as  High  a  Nature 

§82.  Character  ofDefeasance  in  Equity.  as  the  Deed  Itself. 

1 85.  Cancellation  of  Defeasance. 

§  79.  Absolute  Conveyance  as  Security. — Where  a  deed 
for  land  is  absolute  on  its  face,  and,  at  the  same  time  it  is  made, 
a  written  agreement  is  entered  into  by  the  parties,  show- 
ing that  the  object  of  the  deed  is  to  secure  to  the  grantee 
money  and  indemnify  him  against  liability,  such  deed  is  only  a 
mortgage,  and  the  right  of  redemption  by  the  mortgagor  is 
incident  to  it.^ 

The  defeasance  need  not  necessarily  be  inserted  in  the  deed. 
It  may  be  added  or  appended  to  the  deed,^  or  written  upon  the 
back  of  the  mortgage  or  deed,  which  taken  together  constitute 
the  mortgage.^ 

The  essence  of  the  defeasance  is  that  it  defeats  the  principal 
deed,  and  makes  it  void  if  the  condition  is  performed,*  but  a 
term  equivalent  to  this  proviso  is  sufficient.^ 

The  instrument  must  have  words  indicating  that  it  is  given 

'Smith  ('.  Smith,  80  Cal.  325  ;  Kelly  t).  Leach  man  (Idaho),  29  Pac.  Eep.  849  ; 
Breckenridge  v.  Auld,  1  Rob.  (Va.)  143. 

2  Perkins  r.  Dibble,  10  Ohio,  433 ;  Baldwin  v.  Jenkins,  23  Miss.  206. 

nVhitney  v.  French,  25  Vt.  663. 

*4  Kent's  Com.  141. 

*  Hoyt  V.  Fass,  64  Wis.  273 ;  Adams  v.  Stevens,  49  Me.  362 ;  Pearce  v.  Wil- 
son,  111    Pa.  St.  14;   Lanfair  v.  Lanfair,  18  Pick.  (Mass.)  299.     See,  also, 
Whitcomb  v.  Sutherland,  18  111.  578  ;  Austin  v.  Downer,  25  Vt.  558  ;  Scott  v. 
McFarland,  13  Mass.  309. 
78 


ABSOLUTE   SALES   DISTINGUISHED.  79 

for  a  security,  either  in  the  condition  expressed  in  the  terms 
or  in  a  separate  defeasance.' 

Where  the  instrument  is  in  the  nature  of  a  mortgage,  it  will 
be  so  declared.^ 

§  80.  In  Equity. — As  to  what  constitutes  a  mortgage  courts 
of  equity  hold  that  the  particular  form  or  words  of  the  con- 
veyance are  unimportant;  and  the  general  rule  is  that 
wherever  a  conveyance  transferring  an  estate  is  originally 
intended  between  the  parties  as  a  security  for  money,  or 
for  any  other  incumbrance,  whether  this  intention  appears 
from  the  same  instrument  or  any  other,  it  is  always  con- 
sidered in  equity  as  a  mortgage,  and  consequently  is  redeema- 
ble upon  the  performance  of  the  condition  or  stipulation  con- 
tained in  it.^ 

In  equity,  the  character  of  the  conveyance  is  determined  by 
the  clear  and  certain  intention  of  the  parties ;  and  any  agree- 
ment in  the  deed,  or  in  a  separate  instrument,  showing  that 
the  parties  intended  that  the  conveyance  should  operate  as  a 
security  for  the  repayment  of  money,  will  make  it  such,  and 
give  to  the  mortgagor  the  right  of  redemption.* 

§  81.  Character  of  the  Defeasance  at  Law. — At  law 
the  defeasance  must  be  in  favor  of  the  grantor  himself,  and  not 
in  favor  of  a  third  party.  The  reconveyance  must  not  be  made 
to  a  third  party,  but  to  the  grantor,  in  order  to  avail  him.  If 
the  reconveyance  is  made  to  a  third  party,  the  instrument  can- 
not be  considered  a  mortgage.^ 

^  Goddard  v.  Coe,  55  Me.  385.    See,  also,  Booth  v.  Hoskins,  75  Cal.  271. 
'^  Fountain  v.  Lumber  Co.  (Mo.),  18  S.  AV.  Rep.  1147  ;  Gray  «.  Shelby  (Tex.), 
18  S.  W.  Rep.  809. 
'Lounsbury  v.  Norton,  .59  Conn.  170;  Elliott  v.  Wood,  53  Barb.  (N.  Y.)  285. 

*  Taylor  v.  Weld,  5  Mass.  109  ;  James  v.  Morey,  2  Cow.  (N.  Y.)  246 ;  Carey 
V.  Rawson,  8  Mass.  159  ;  Wharfs;.  Howell,  5  Binn.  (Pa.)  499  ;  Dabney  v.  Green, 
4  Hen.  &  Munf.  (Va.)  101 ;  Hughes  v.  Edwards,  9  Wheat.  (U.  S.)  489 ;  Hicks 
V.  Hicks,  5  Gill.  &  Johns.  (Md.)  75. 

*  Carr  v.  Rising,  62  111.  14 ;  Magnusson  v.  Johnson,  73  111.  156 ;  Payne  v. 
Patterson,  77  Pa.  St.  134 ;  Shaw  v.  Erskine,  43  Me.  371 ;  Warren  v.  Lovis,  53 
Me.  463. 


80  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

§  82.  Character  of  the  Defeasance  in  Equity. — In 
equity  the  defeasance  may  be  to  some  other  party  than  the 
grantor.  In  equity  it  is  a  question  of  fact  which  may  be  de- 
termined by  the  inquiry  into  the  relation  of  the  parties  and  the 
circumstances  of  the  case,  which  may  indicate  that  the  transac- 
tion was  a  mortgage,  or  a  sale  absolute  or  upon  condition.' 

§  83.  Absolute  Conveyance  with  Separate  Defeasance. 
— An  absolute  deed  and  separate  defeasance  made  at  the  same 
time  constitute  a  mortgage.^  But  to  constitute  a  mortgage  at 
law  the  conveyance  and  defeasance  must  be  a  part  of  the  same 
transaction,  and  must  take  effect  at  the  same  time.^  The  dates 
of  the  two  instruments  need  not  be  the  same,  but  they  must 
be  delivered  at  the  same  time.* 

The  practice  of  placing  the  conveyance  in  fee  and  the  con- 
dition or  defeasance  which  is  to  qualify  it,  in  separate  instru- 
ments, is  liable  to  accident  and  abuse,  and  may  be  productive 
of  injury  to  the  mortgagor ;  and  the  Court  of  Chancery  has  fre- 
quently discouraged  such  transactions.^ 

A  deed  executed  simultaneously  with  the  grantor's  taking 
from  the  grantee  a  bond  for  the  repayment  of  the  money  bor- 
rowed is,  with  the  bond,  a  mortgage.*' 

An  absolute  deed  given  as  a  security  for  the  payment  of 
money  is  a  mortgage  as  much  as  if  a  defeasance  were  expressed 

1  McNees  v.  Swaney,  50  Mo.  388 ;  Micou  v.  Ashurst,  55  Ala.  607 ;  Stinch- 
field  V.  Milliken,  71  Me.  567  ;  Eice  v.  Rice,  4  Pick.  (Mass.)  349 ;  Todd  v.  Camp- 
bell, 32  Pa.  St.  250 ;  Barton  v.  May,  3  Sand.  Ch.  (N.  Y.)  450 ;  Jeflfery  v.  Hursh, 
58  Mich.  246. 

^  Friedley  v.  Hamilton,  17  Sarg.  &  R.  (Pa.)  70 ;  Corpman  v.  Baccastow,  84 
Pa.  St.  363 ;  Jaques  v.  Weeks,  7  Watts  (Pa.),  261 ;  Wilson  v.  Shoenberger,  7 
Casey  (Pa.),  295. 

^Bennock  v.  Whipple,  12  Me.  346.  See,  also,  Newhall  v.  Burt,  7  Pick.  (Mass.) 
157 ;  Swetland  v.  Swetland,  3  Mich.  482 ;  Clement  v.  Bennett,  70  Me.  207 ; 
Montgomery  r.  Chadwick,  7  Iowa,  114 ;  Vance  v.  Lincoln,  38  Cal.  586. 

*  Harrison  v.  Phillips,  12  Mass.  456 ;  Newhall  v.  Burt,  7  Pick.  157 ;  Mclntier 
V.  Shaw,  6  Allen  (Mass.),  83 ;  Haines  v.  Thomson,  70  Pa.  St.  434 ;  Kelleran 
V.  Brown,  4  Mass.  443.     See  Bryan  v.  Co  wart,  21  Ala.  92. 

^  Lord  Talbot,  in  Cotterell  v.  Purchase,  Cases  Temp.  Talbot,  64 ;  Bac.  Tracts, 
37  ;  Baker  v.  Wind,  1  Ves.  160. 

«  Clark  V.  Lyon,  46  Ga.  202. 


ABSOLUTE    SALES   DISTINGUISHED.  81 

in  the  body  thereof  or  executed  simultaneously  with  it.^  And 
this  is  especially  so  if  the  deed  and  the  defeasance  bear  even 
date,  or  are  agreed  upon  at  the  same  time.^ 

§  84.  The  Defeasance  must  be  an  Instrument  of  as 
High  a  Nature  as  the  Deed  Itself. — The  defeasance 
must  be  of  as  high  a  nature  as  the  deed  itself;  hence,  a  writ- 
ing not  under  seal,  at  law,  cannot  operate  as  a  defeasance  of 
an  absolute  deed.^  If  not  under  seal,  the  defeasance  in  equity 
will  constitute  the  agreement  a  mortgage.* 

§  85.  Cancellation  of  Defeasance. — Parties  to  the  trans- 
action can  cancel  the  defeasance,  and  thus  make  the  convey- 
ance absolute,  provided  the  rights  of  third  parties  are  not 
affected,  and  the  transaction  is  conducted  with  fairness,  both 
as  between  the  parties  and  as  against  creditors  of  the  grantor.* 
So  where  an  absolute  deed  is  given,  accompanied  by  a  simul- 
taneous instrument,  operating  by  way  of  defeasance,  and  the 
parties,  by  fair  mutual  stipulations,  agree  that  the  defeasance 
shall  be  surrendered  and  cancelled,  with  an  intent  to  vest  the 
estate  unconditionally  in  the  grantee  by  force  of  the  first  deed, 
the  estate  becomes  absolute  in  the  mortgagee  by  such  surrender 
and  cancellation.  Such  cancellation  operates  as  an  estoppel 
arising  from  the  voluntary  surrender  of  the  legal  evidence.® 

A  separate  deed  of  defeasance,  made  at  the  same  time  with 
the  absolute  deed,  may  afterward,  upon  sufficient  considera- 
tion, be  cancelled  as  between  the  parties  in  such  a  manner  as 
to  give  an  absolute  title  to  the  mortgagee  when  no  intervening 
rights  of  third  parties  are  affected.^ 

1  Odell  V.  Montross,  68  N.  Y.  499. 

^Reitenbaugh  v.  Ludwick,  31  Pa.  St.  131 ;  Shaw  r.  Erskine,  43  Me.  371. 

'  Kelleran  v.  Brown,  4  Mass.  443  ;  Flint  v.  Sheldon,  13  Mass.  443 ;  Murphy 
V.  Galley,  1  Allen  (Mass.),  107  ;  Jewett  v.  Bailey,  5  Me.  87 ;  Warren  v.  Lovis, 
53  Me.  463. 

*  Cutler  V.  Dickinson,  8  Pick.  (Mass.)  386 ;  Eaton  v.  Green,  22  Pick.  (Mass.) 
526. 

*  Harrison  v.  Phillips,  12  Mass.  456;  Rice  v.  Rice,  4  Pick.  (Mass.)  349. 
^  Trull  V.  Skinner,  17  Pick.  (Mass.)  213. 

^Waters  v.  Randall,  6  Met.  (Mass.)  479. 
VOL.  I. — 6 


82  NATURE    AND    REQUISITES   OF    THE   CONTRACT. 

Thus,  if  a  bond  of  defeasance,  which  was  executed  by  the 
grantee  of  land  to  the  grantor  at  the  time  of  taking  the  deed, 
is  surrendered  and  destroyed  at  the  expiration  of  the  time 
limited  therein,  and  a  new  bond  given  upon  a  consideration 
partly  new,  by  which  the  grantee  agrees  to  reconvey  the 
premises  to  the  grantor  upon  the  payment  within  an  addi- 
tional time  of  a  larger  sum,  the  grantor  thereby  surrenders 
and  abandons  his  title  as  mortgagor,  and  the  grantee  becomes 
owner  of  the  land  in  fee,^  and  under  the  new  contract  to  con- 
vey no  mortgage  could  arise.^ 

If  a  party  make  an  absolute  conveyance  of  land  as  a  security 
for  the  payment  of  money,  he  may  abandon  the  payment  of 
the  debt,  cancel  the  secret  agreement,  and  treat  his  conveyance 
as  absolute  instead  of  a  mortgage ;  he  will  be  bound  by  such 
election.* 

So  a  right  to  treat  a  contract  as  a  security  for  a  loan  by  verbal 
agreement  between  the  parties,  may  be  shown  to  have  been 
voluntarily  abandoned  or  rescinded  by  the  agreement  of  the 
parties.  When  such  agreement  appears  in  the  written  con- 
tract then  a  release  or  satisfaction  would  be  necessary.* 

When  the  defeasance  has  been  cancelled  it  cannot  afterward 
be  revived  by  the  grantor  or  his  heirs.^ 

But  this  doctrine  does  not  hold  good  in  those  States  where  a 
i^ortgage,  in  whatever  form,  merely  creates  a  lien  upon  the 
land,  and  the  legal  title  remains  in  the  mortgagor.  So  a  mort- 
gage in  the  shape  of  a  deed  absolute,  with  defeasance  in  a 
separate  writing  must  be  foreclosed  in  the  same  manner  as  a 
pure  mortgage,  and  the  premises  be  sold  by  order  of  court, 
with  like  privilege  of  redemption  to  the  mortgagor.® 

When  a  conveyance,  under  this  rule  that  a  mortgage  is  only 
n  lien  on  tlie  land,  is  shown  to  be  a  mortgage,  no  matter  what 
the  form,  the  title  does  not  pass  to  the  grantee  any  more  than  it 

'  Palis  V.  Conway  Mut.  Fire  Ins.  Co.,  7  Allen  (Mass.),  46. 

*  Stetson  V.  Gulliver,  2  Cush.  (Mass.)  494 ;  Maxfield  v.  Patchen,  29  111.  39. 
^  Carpenter  v.  Carpenter,  70  111.  457. 

*  Maxfield  v.  Patchen,  29  111.  39. 
^Shubert  v.  Stanley,  52  Ind.  4(3. 
^Sage  V.  McLaughlin,  34  Wis.  550. 


ABSOLUTE    SALES    DISTINGUISHED.  83 

does  where  there  is  an  ordinary  mortgage.  By  a  mortgage  in 
its  ordinary  form  there  is  an  absohite  grant  of  the  title  to  the 
lands  in  terms  to  the  mortgagee,  with  a  defeasance  as  a  sepa- 
rate clause ;  the  fact  that  this  separate  clause  is  in  a  separate 
paper  or  by  parol  does  not  in  the  least  enlarge  or  change  the 
nature  of  the  grant.  Hence,  the  cancellation  of  the  defeas- 
ance will  not  give  the  grantee  a  title  in  fee.^ 


Article  2. 
Deed  Intended  as  Security, 

§  86.  An  Absolute  Deed  Intended  as  a  §  88.  "When  Intention  Will  Control. 
Security  Will  be  Declared  a  §  89.  To  Establish  the  Fact  that  an 
Mortgage.  Instrument  is  a  Mortgage. 

§  87.  Once  a  Mortgage  Always  a  Mort- 
gage. 

§  86.  An  Absolute  Deed  Intended  as  a  Secuihty  Will  be 
Declared  a  Mortgage. — It  is  the  general  rule  that  absolute 
deeds  intended  as  a  security  for  money  will  be  in  effect  mort- 
gages, if  it  clearly  appears  from  the  transaction  that  such  was 
the  intent  of  the  parties.^  Thus,  a  debtor  conveyed  real  estate 
to  his  creditor  by  deed  absolute  in  form,  and  also  gave  his 
note  for  the  sum  found  due  on  settlement,  payable  in  two 
years,  with  interest.  At  the  same  time  the  grantee  gave  the 
grantor  a  contract  for  a  reconveyance  of  the  land  upon  pay- 
ment of  the  note  and  interest.  This  agreement  gave  the  cred- 
itor the  right  to  possession,  and  to  rent  or  lease  the  premises, 
and  further  provided  that  the  creditor  should  pay  all  taxes 
and  make  necessary  repairs  from  the  rents  received,  applying 
the  surplus  rents  upon  the  note.  It  was  held  that  the  deed, 
note,  and  contract  to  reconvey  all  constituted  one  transaction, 

^Brinkman  v.  Jones,  44  Wis.  498. 

^  Kemp  V.  Small  (Neb.),  49  N.  W.  Rep.  169  ;  Lounsbury  ?'.  Norton,  59  Conn. 
170 ;  Weide  v.  Gehl,  21  Minn.  449 ;  O'Neill  v.  Capelle,  62  Mo.  202 ;  Little- 
wort  V.  Da\ds,  50  Miss.  403 ;  Judge  v.  Reese,  24  N.  J.  Eq.  387 ;  Steinruck's 
Appeal,  70  Pa.  St.  289  ;  Meehan  r.  Forrester,  52  N.  Y.  277  ;  Church  v.  Cole, 
36  Ind.  34  ;  French  v.  Burns,  35  Conn.  359  ;  Jackson  v.  Lynch,  129  111.  72  ; 
Stahl  V.  Dehn,  72  Mich.  645  ;  Walbridge  v.  Hammack,  7  Maekey  (D.  C),  154. 


84  NATURE   AND    REQUISITES   OF    THE   CONTRACT. 

which  was  a  mortgage,  and  not  an  absolute  sale  and  resale, 
and  that  the  relation  of  the  creditor  to  the  debtor  was  that  of 
a  mortgagee  in  possession.^ 

So  an  absolute  deed  executed  by  a  judgment  debtor  to  in- 
demnify against  loss  one  who  has  become  liable  as  replevin 
bail,  is,  in  legal  effect,  a  mortgage.^ 

Whatever  form  a  contract  or  instrument  may  have,  if  the 
attending  circumstances  show  it  to  have  been  intended  a 
security  for  a  debt  or  loan  of  money,  or  anything  but  a  clear- 
cut  bargain  and  sale,  a  court  of  equity  will  always  decree 
redemption.^ 

The  doctrine  that  a  deed  absolute  on  its  face  may  be  shown 
to  be  a  mortgage  is  old  and  well-established  by  all  the  courts.'' 

Chief  Justice  Andrews  says  that  where  a  party  to  real  estate 
is  entitled  to  a  reconveyance  on  the  payment  of  a  stipulated 
sum,  which  sum  is  the  amount  of  a  debt  owed  by  him  to  the 
grantee,  either  previously  existing  or  arising  so  that  the  pay- 
ment of  the  stipulated  sum  would  be  the  payment  of  the  debt, 
then  the  whole  transaction  amounts  to  a  mortgage,  whatever 
language  the  parties  may  have  used  or  whatever  stipulations 
they  may  have  inserted  in  the  instrument.^    But  if  the  grantee 

'Jackson  v.  Lynch,  129  111.  72.  See,  also,  Glass  v.  Doane,  15  111.  App.  66  ; 
Sutphen  v.  Cushman,  35  111.  186  ;  Snyder  v.  Griswold,  37  111.  216. 

^  Ashton  V.  Shepherd,  120  Ind.  69.  See,  also,  Butcher  v.  Stultz,  60  Ind.  170 ; 
Franklin  v.  Ayer,  22  Fla.  654. 

3  Taylor  r.  Luther,  2  Sumn.  C.  C.  228  ;  Eogan  v.  Walker,  1  Wis.  527  ;  Wood- 
ward V.  Pickett,  8  Gray  (Mass.),  617. 

*  Daniels  v.  Lowery,  92  Ala.  519;  Johnson  v.  Van  Velsor,  43  Mich. 
208 ;  Barber  v.  Milner,  43  Mich.  248 ;  Dow  v.  Chamberlin,  5  McLean, 
C.  C,  282  ;  Rogan  v.  Walker,  1  Wis.  527  ;  Wilson  v.  Drumrite,  21  Mo.  325  ; 
Bloodgood  V.  Zeily,  2  Gaines'  Gas.  124  ;  Strong  v.  Stewart,  4  Johns.  Ch.  167  ; 
Eiseman  v.  Gallagher,  24  Neb.  79  ;  Van  Buren  v.  Olmstead,  5  Paige  (N.  Y.), 
9  ;  Jackson  v.  Green,  4  Johns.  187  ;  Wadworth  v.  Loranger,  Har.  Ch.  (Mich.) 
113  ;  Swetland  v.  Swetland,  3  Mich.  482 ;  Fuller  v.  Parrish,  3  Mich.  214  ; 
Adams  v.  Cooty,  60  Vt.  395  ;  Reilly  v.  Brown  87  Mich.  163  ;  Gazley  v.  Her- 
ring (Tex.  Sup.),  17  S.  W.  Rep.  17;  Murdock  v.  Clarke,  90  Cal.  427.  See 
Keough  V.  Meyers,  43  La.  Ann.  952. 

*Lounsbury  v.  Norton,  59  Conn.  170;  Rogers  v.  Jones,  92  Cal.  80;  Sibley  v. 
Ross  (Mich.),  50  N.  W.  Rep.  379  ;  Conant  v.  Riseborough  (111.),  28  N.  E.  Rep. 
789,  affirming  30  111.  App.  498 ;  Moisant  v.  McPhee,  92  Cal.  76 ;  Marshall 
V.  WilUams  (Ore.),  28  Pac.  Rep.  137. 


1 


ABSOLUTE   SALES   DISTINGUISHED.  85 

is  to  sell  the  land  and  deduct  the  amount  of  the  grantor's  debt 
and  pay  him  the  surplus,  the  deed  does  not  thereby  become  a 
mortgage/ 

§  87.  Once  a  Mortgage  Always  a  Mortgage. — The  fact 
once  established  that  a  deed  is  intended  for  a  mortgage,  the 
rights  of  the  parties  are  measured  by  the  rules  of  law  applica- 
ble to  mortgagors  and  mortgagees.  The  conveyance  remains 
a  mortgage  until  the  equity  of  redemption  is  foreclosed.^ 

The  relation  of  mortgagor  and  mortgagee,  once  established, 
continues  until  the  mortgage  is  redeemed  and  discharged  or 
the  right  of  redemption  is  legally  barred.  No  other  subse- 
quent change  in  the  circumstances  or  conditions  will  change  it. 

"  Once  a  mortgage  always  a  mortgage."  ^ 

But  it  is  well  settled  that  from  the  mere  fact  of  an  agree- 
ment to  reconvey,  either  with  or  without  an  advance  in  price, 
an  absolute  conveyance  will  not  be  turned  into  a  mortgage.* 

If  the  transaction  was  originally  a  mortgage,  its  character 
cannot  be  changed  except  by  a  subsequent  agreement,  and  no 
intervening  interests  of  other  parties  have  arisen.^ 

The  subsequent  release  must  be  upon  a  sufficient  considera- 
tion.^    Such  release  must  be  clear  and  unequivocal.^ 

§  88.  When  Intention  Will  Control. — Contracts  for  re- 
purchase, made  contemporaneously  with  conveyances  of  real 
estate,  absolute  in  form,  are  sometimes  strong  evidence  tending 
to  show  that  the  conveyances  are  intended  to  be  mortgages ; 
but  when  it  appears  that  the  parties  really  intended  an  abso- 

'  Wilson  V.  Parshall,  120  N.  Y.  223. 

2  HoUiday  v.  Arthur,  25  Iowa,  19 ;  Murray  v.  Walker,  31  N.  Y.  399  ;  Decamp 
V.  Crane,  4  Green  (N.  J.),  166. 

2  Reed  v.  Reed,  75  Me.  264 ;  McPherson  v.  Hay  ward,  81  Me.  329  ;  IMiller  v. 
Thomas,  14  111.  428. 

*  Glover  v.  Payn,  19  Wend.  (N.  Y.)  518 ;  Stahl  v.  Dehn,  72  Mich.  045. 

*  Cooper  r.  Whitney,  3  Hill  (N.  Y.),  95;  Elliott  v.  Wood,  53  Barb. 
(N.  Y.)  285 ;  Henry  i'.  Davis,  7  Johns.  Ch.  (N.  Y.)  40  ;  Williams  r.  Thorn,  11 
Paige  (X.  Y.),  459. 

^Niggeler  r.  Maurin,  34  Minn.  118 ;  Linnell  v.  Lyford,  72  Me.  280. 
^Peugh  r.  Davis,  96  U.  S.  332. 


86  NATURE    AND    REQUISITES    OP    THE    CONTRACT. 

lute  sale,  and  a  contract  allowing  grantor  to  repurchase,  such 
intention  must  control.^ 

To  ascertain  the  intention  of  the  parties  whether  a  deed  is 
absolute  in  fact  as  in  form,  or  merely  a  conveyance  to  secure 
an  indebtedness,  the  court  will  look  beyond  the  writings  to  the 
circumstances  surrounding  the  transaction ;  and  judging  from 
such  circumstances  attending,  it  must  appear  clear  that  the 
parties  at  the  time  regarded  it  as  an  absolute  sale,  with  simply 
an  option  on  the  part  of  the  grantor  to  repurchase  at  an  ad- 
vanced price ;  such  intention  must  control.^ 

But  an  absolute  deed,  with  a  bond  or  separate  defeasance  or 
agreement  to  reconvey  the  estate  upon  the  payment  of  a  cer- 
tain sum  of  money,  constitutes  a  mortgage,  if  the  instruments 
are  of  the  same  date,  or  executed  and  delivered  at  the  same 
time  and  as  one  transaction,  in  which  case  it  is  a  conclusion 
of  law  that  they  constitute  a  legal  mortgage.^ 

Where  the  deed  does  not  contain  the  defeasance,  the  pre- 
sumption arises  that  the  conveyance  is  absolute ;  the  c^uestion 
is,  what  was  the  understanding  and  the  intention  of  the  j)ar- 
ties  at  the  time  the  instrument  was  made ;  and  this  depends 
for  its  support  upon  what  was  said  and  done  by  the  parties  at 
the  time,  together  with  all  the  other  circumstances  bearing 
upon  the  question.* 

A  deed  containing  no  words  of  defeasance,  conveying  land 
in  trust  for  the  benefit  of  designated  parties,  which  contains  no 
direction  as  to  how  the  property  is  to  be  available,  and  which 
is  made  for  the  sole  use  and  benefit  of  parties  named  therein 
in  proportion  to  the  debts  specified  as  being  due  to  each  from 
the  grantor,  conveys  an  absolute  title  to  be  disposed  of  by  the 
trustee  as  the  beneficiaries  may  direct.^ 

Where  a  conveyance  is  in  form  absolute,  in  order  to  change 

1  Hanford  v.  Blessing,  80  111.  188 ;  Smith  v.  Crosby,  47  AVis.  160 ;  Stahl  v. 
Dehn,  72  Mich.  (>45. 

''Stahl  V.  Dehn,  72  Mich.  645;  Brant  v.  Robertson,  16  Mo.  129;  O'Neill  v. 
Capelle,  62  Mo.  202. 

3  Jeffery  v.  Hursh,  58  Mich.  257. 

*  McMillan  v.  Bissell,  63  Mich.  66. 

^Catlett  V.  Starr,  70  Tex.  485. 


ABSOLUTE    SALES    DISTINGUISHED.  87 

its  character  to  that  of  a  mortgage  it  must  be  clearly  shown 
that  such  was  the  intent  of  the  parties/ 

§  89.  To  Establish  the  Fact  that  an  Instrument  is  a 
Mortgage. — In  establishing  the  fact  that  an  instrument  was 
intended  to  operate  as  a  mortgage,  it  is  not  necessary  to  show 
any  particular  time  was  agreed  upon  when  the  mortgage  was 
to  be  paid.  This  will  be  implied.  Neither  is  it  necessary  to 
show  what  interest  was  agreed  upon  between  the  parties  the 
mortgagor  should  pay.  If  the  mortgage  was  due  presently, 
the  law  will  imjjly  the  agreement  as  to  interest,  and  also  fix 
the  rate.^ 

A  debt  owing  to  the  mortgagee,  or  a  liability  incurred  for 
the  grantor,  either  pre-existing  or  created  at  the  time  the  deed 
is  made,  is  essential  to  give  the  deed  the  character  of  a  mort- 
gage. The  relation  of  debtor  and  creditor  must  appear ;  the 
existence  of  the  debt  is  one  of  the  tests.^ 

A  deed  absolute  in  form,  with  general  warranty,  will  not 
operate  as  a  mortgage  unless  it  is  clearly  shown  to  have  been 
intended  as  a  security  for  a  loan  or  debt.  The  proof  must  be 
clear,  unequivocal,  and  convincing."* 

Where  one  has  a  contract  for  a  conveyance  of  land  to  him, 
and  procures  another  to  complete  the  payments  for  him,  and 
such  other  person  does  so,  and  takes  the  deed  in  his  own  name 
as  security  for  his  advances,  the  transaction  constitutes  a  mort- 
gage of  the  land  between  the  parties.^ 

If  the  purchaser  has  a  complete  equitable  title,  having  paid 

^Bailey  v.  Bailey,  115  111.  551 ;  Darst  r.  INIiirphy,  119  111.  216;  Workman  v. 
Greening,  115  111.  477 ;  Strong  v.  Strong,  126  111.  301 ;  Freeman  v.  Baldwin, 
13  Ala.  246;  Lund  v.  Lund,  1  N.  H.  41;  Kelly  v.  Thompson,  7  Watta  (Pa.), 
404 ;  ]Mason  v.  Moody,  26  :\Iiss.  184. 

2  McMillan  v.  Bipsell,  63  Mich.  66. 

^  Crane  v.  Buchanan,  29  Ind.  570;  McNamara  v.  Culver,  22  Kan.  661; 
McMillan  v.  Bissell,  63  Mich.  66 ;  Pace  v.  Bartles,  47  N.  J.  Eq.  170. 

*Coyle  V.  Davis,  116  U.  S.  108 ;  Wallace  v.  Johnstone,  129  U.  S.  58 ;  Cadman 
V,  Peter,  118  U.  S.  73  ;  Rowland  r.  Blake,  97  U.  S.  624. 

*  Stoddard  v.  Whiting,  46  N.  Y.  627 ;  Carr  r.  Carr,  52  N.  Y.  251 ;  Smith  v. 
Cremer,  71  111.  185 ;  Houser  v.  Lamont,  55  Pa.  St.  311 ;  McPherson  v.  Hay- 
ward,  81  Me.  329. 


88  NATURE   AND    REQUISITES    OF    THE   CONTRACT. 

the  purchase-money,  and  takes  a  conveyance  from  his  vendor 
to  a  creditor  as  a  security  for  a  debt,  the  deed  may  be  declared 
and  enforced  in  equity  as  a  mortgage.^ 

When  a  deed  absolute  in  form,  is  declared  a  mortgage,  it 
must  be  made  to  appear  that  such  a  conveyance  was  intended 
to  be  a  mortgage  at  the  time  of  its  execution.  The  question  is 
one  of  intention  to  be  ascertained  from  all  the  circumstances.^ 

Thus,  the  owner  of  a  lot  of  ground,  desiring  to  make  a  sale 
of  it,  but  finding  it  impracticable  to  do  so  except  in  connection 
with  certain  premises  adjoining,  which  he  did  not  own,  ap- 
plied to  the  owner  of  the  latter  premises  to  convey  them  to 
him  for  a  certain  sum  mentioned,  a  part  to  be  paid  in  cash  on 
the  sale  of  the  entire  premises,  and  certain  deferred  payments 
to  be  secured.  The  conveyance  was  made,  and  the  grantee 
sold  the  entire  property,  but  did  not  make  the  cash  payment 
as  agreed,  nor  did  he  secure  the  deferred  payments.  On  the 
question  whether  the  transaction  relating  to  the  conveyance  of 
the  adjoining  premises,  as  had  been  sought,  was  a  mere  mort- 
gage, or  a  sale,  it  was  held  to  be  an  absolute  sale.  The  failure 
on  the  part  of  the  grantee  to  perform,  did  not  convert  the  deed 
into  a  mortgage,  nor  change  his  estate  into  a  mere  naked  trust. 
The  interest  remaining  in  the  grantor  was  merely  that  of  a 
vendor's  lien.^ 

A  conveyance  of  land  to  secure  the  payment  of  money, 
though  the  grantee  is  put  into  possession,  under  an  agreement 
for  an  accounting  for  the  rents  and  profits,  is  only  a  mortgage, 
and  does  not  pass  the  legal  title.*  If  a  deed  absolute  in  form 
is  made  merely  to  secure  the  payment  of  money  to  the  grantee, 
it  is  a  mortgage,  and  does  not  pass  the  title.  Such  a  deed 
gives  a  mere  lien  upon  the  property  as  if  the  parties  had  put 
their  agreement  in  the  form  of  a  mortgage,  and  consequently 

^  Parmer  v.  Parmer,  88  Ala.  545. 

"Sharp  V.  Smitherman,  85  111.  153 ;  Bartling  v.  Brasuhn,  102  111.  441 ;  Bent- 
ley  V.  O'Bryan,  111  111.  53;  Workman  v.  Greening,  115  111.  477;  Helm  t?. 
Boyd,  124  111.  370 ;  Strong  v.  Strong,  126  111.  301. 

» Strong  V.  Strong,  126  111.  301.  See,  also,  Howe  v.  Austin,  40  La.  Ann.  323 ; 
Miller  v.  Shotwell,  38  La.  Ann.  890. 

♦  Murdock  v.  Clarke,  90  Cal.  427. 


ABSOLUTE    SALES    DISTINGUISHED.  89 

does  not  give  the  right  of  possession  to  the  grantee/  but  merely 
operates  as  a  mortgage  between  them ;  yet,  being  absolute  in 
form,  it  constitutes  a  cloud  on  the  title  of  the  grantor  which 
he  may  remove  upon  doing  equity  by  redemption  and  pay- 
ment of  the  mortgage  debt,  regardless  of  possession  by  the 
grantee.^ 

Article  3. 
Agreement  to  Reconvey. 

§  90.  Deed  \fith.  Agreement  to  Recon-  1 94.  Conveyance    and    Subsequent 

vey.  '          Defeasance. 

§  91.  Construction    of  Agreement    to  §  95.  When  Not  a  Sale  and  Resale. 

Reconvey.  ^  90.  To    Determine    the    Question 

§92.  Pre-existing  Debt  Owing  to  the  Whether  a  Mortgage  or  an 

Grantee.  Agreement  to  Reconvey. 

1 93.  The  Grantee  in  Possession. 

§  90.  Deed  with  Ageement  to  Reconvey. — A  deed  with 
agreement  to  reconvey  is  only  a  mortgage.  Thus,  where  a 
party  advances  money,  and  at  the  same  time  receives  a  deed 
and  gives  a  bond  to  the  grantor  for  a  reconveyance,  the  trans- 
action is  a  loan  and  a  security  in  the  nature  of  a  mortgage.^ 

But  a  deed  of  bargain  and  sale,  absolute  in  terms,  and  pur- 
porting to  convey  the  fee  for  money  advanced,  passes  title  ;  and 
an  entry  indorsed  upon  it  and  signed  by  the  grantee  to  the 
effect  that  the  deed  is  to  be  returned  to  the  grantor  cancelled, 
on  condition  that  the  grantor  shall  pay  the  grantee  the  sum  of 
money  advanced  by  a  specified  date,  with  interest,  do  not 
convert  the  instrument  into  a  mere  mortgage.  In  this  case 
Chief  Justice  Bleckley  says : 

"  It  will  be  noticed  that  this  entry  does  not  recite  that  there 
is  any  debt  due  from  one  of  these  parties  to  the  other.  It 
simply  gives  an  option  to  the  party  who  made  the  deed  to 

'Smith  V.  Smith,  80  Cal.  323;  Booth  v.  Iloskins,  75  Cal.  271;  Healy  v. 
O'Brien,  66  Cal.  519. 

^  Hall  V.  Arnott,  80  Cal.  348. 

^  Lounsbury  v.  Norton,  59  Conn.  170 ;  Holton  v.  Meighen,  15  INIinn.  69 
Sharkey  v.  Sharkey,  47  Mo.  543 ;  Fiedler  v.  Darrin,  59  Barb.  (N.  Y.)  651 
Robinson  v.  Willoughby,  65  N.  Car.  520 ;  Bunker  v.  Barron,  79  Me.  62 
Peterson  v.  Clark,  15  Johns.  (N.  Y.)  205. 


90  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

have  it  returned  cancelled,  on  condition  that  he  pays  the  sum 
specified,  with  interest  from,  date,  and  a  time  is  appointed  for 
the  payment  to  be  made.  Now  this  may  have  been  a  debt,  or 
it  may  have  been  a  contract  simply  to  allow  the  maker  of  the 
deed  to  have  the  land  back  on  condition  that  he  paid  for  it  the 
price  agreed  upon.  The  parties  did  not  put  in  writing,  either 
in  the  deed  itself  or  in  the  indorsement  any  evidence  that  it 
was  made  to  secure  a  debt.  They  left  that  in  parol;  and 
to  constitute  a  mere  mortgage,  passing  no  title  and  creating 
only  a  lien,  the  mortgage  as  a  whole  must  be  in  writing.  It 
must  show  a  debt,  and  it  must  show  a  purpose  to  secure  the 
payment  of  the  debt.  There  could  be  no  action  maintained 
upon  the  indorsement  in  favor  of  the  holder  of  the  deed  against 
the  maker."  This  indorsement  contained  no  promise  to  pay ; 
no  obligation  was  taken  by  the  grantor  upon  himself  to  pay 
the  money  advanced.  He  simply  had  the  option  to  make  the 
payment,  and  get  his  deed  back  if  he  did  make  it.  "  Upon 
the  question  whether  the  deed  was  in  fact  given  as  a  security, 
the  indorsement,  though  not  direct,  is  very  powerful  circum- 
stantial evidence,  and  aided  by  other  evidence,  might  establish 
the  fact  in  a  proceeding  to  redeem,  but  the  objection  was  made 
to  the  instrument  simply  upon  its  own  terms  when  it  was 
tendered  in  evidence ;  and  we  think  the  objection  was  properly 
overruled,  for  the  deed,  with  or  without  the  indorsement,  is  a 
conveyance  of  title  and  not  a  mortgage.  Though  no  particular 
form  is  necessary  to  constitute  a  mortgage,  it  must  clearly  in- 
dicate the  creation  of  a  lien,  specify  the  debt  to  secure  which 
it  is  given,  and  the  property  upon  which  it  is  to  take  effect."  ^ 

This  doctrine  does  not  seem  to  accord  with  a  decision  in 
Vermont.  It  was  held  that  where  a  deed  absolute  upon  its 
face  was  indorsed  with  a  condition  that  if  the  grantor  paid  a 
certain  note  described  in  said  condition,  then  said  deed  should 
become  void,  was  in  effect  a  mortgage.  The  condition  was  of 
even  date  with  the  deed,  but  not  signed.  The  condition,  it  was 
held,  formed  a  part  of  the  deed.^ 

1  Jay  V.  Whelchel,  78  Ga.  786. 

2  Whitney  v.  French,  25  Vt.  663. 


ABSOLUTE   SALES    DISTINGUISHED.  91 

However,  the  authorities  agree  that  an  agreement  indorsed 
upon  a  deed  absolute  in  form,  to  the  effect  that  the  grantee 
shall  execute  certain  notes  for  the  purchase-money,  with  se- 
curity, and  that  the  agreement  shall  "  act  as  a  lien  "  U23on  the 
land  mentioned  in  the  deed  until  the  notes  shall  be  satisfied  in 
full,  signed,  sealed,  and  acknowledged  by  the  grantor  and 
grantee,  and  recorded  with  the  deed,  is  to  be  regarded  as  a  part 
of  the  deed,  and  operates  as  a  deed  upon  the  land.^ 

Where  it  appears  that  the  parties  to  the  deed,  absolute  on  its 
face,  intended  an  absolute  sale,  with  simply  the  right  to  re- 
purchase, the  bond  for  reconveyance  containing  no  condition 
which  might  stamp  the  transaction  as  a  mortgage,  such  inten- 
tion must  control,  and  the  instrument  declared  a  deed.^ 

Under  the  code  of  Georgia,^  which  provides  that  whenever  a 
person  conveys  real  estate  by  deed  to  secure  a  debt,  and  takes 
back  a  bond  for  reconveyance  on  payment  of  the  debt,  the 
conveyance  shall  pass  the  title  to  the  vendee,  applies  only  where 
an  absolute  deed  is  made  and  bond  for  reconveyance  taken ; 
and  a  mortgage  which  recites  that  it  is  executed  under  the 
statute  is  nevertheless  only  a  mortgage,  and  under  section  1954 
conveys  no  title  to  the  grantee.* 

'  Baldwin  v.  Jenkins,  23  Miss.  206 ;  Harrison  v.  Trustees,  12  Mass.  456. 

2  Pitts  ('.  Cable,  44  111.  103 ;  Morrison  v.  Brand,  56  N.  Y.  657.  See,  also, 
Bunker  v.  Barron,  79  Me.  62 ;  Brinkman  v.  Jones,  44  Wis.  498 ;  HoflEman  v. 
Ryan,  21  W.  Va.  415 ;  Reynolds  v.  Scott,  Brayton  (Vt.),  75 ;  Lanahan  v.  Sears, 
102  U.  S.  318 ;  Teal  v.  Walker,  111  U.  S.  242 ;"  Dow  v.  Chamberlin,  5  McLean 
C.  C.  281 ;  Baxter  v.  Dear,  24  Tex.  17  ;  Hammonds  v.  Hopkins,  3  Yerg.  (Tenn.) 
525 ;  Sims  v.  Gaines,  64  Ala.  392 ;  Walker  v.  Tiffin  Min.  Co.,  2  Colo.  89 ; 
Guthrie  v.  Kahle,  46  Pa.  St.  331 ;  Marshall  v.  Stewart,  17  Ohio,  356 ;  Robinson  v. 
Willoughby,  65  N.  Car.  520 ;  Clark  v.  Lyon,  46  Ga.  202 ;  Bearss  v.  Ford,  108 
111.  16 ;  Lentz  v.  Martin,  75  Ind.  228 ;  Radford  v.  Folsom,  58  Iowa,  473  ;  Over- 
street  V.  Baxter,  30  Kan.  55;  Peterson  v.  Clark,  15  Johns.  205;  Vliet  v. 
Young,  34  N.  J.  Eq.  15 ;  Sharkey  v.  Sharkey,  47  Mo.  543 ;  Butman  v.  James, 
.34  Minn.  .547;  Honore  r.  Hutchins,  8  Bush  (Ky.),  687;  Warren  v.  Lovis,  53 
Me.  463  ;  Judd  r.  Flint,  4  Gray,  557  ;  Ferris  v.  Wilcox,  51  Mich.  105  ;  Enos  v. 
Sutherland,  11  Mich.  538  ;  Clement  v.  Bennett,  70  Me.  207  ;  Ewart  v.  Walling, 
42  111.  453;  Kerr  v.  Gilmore,  6  AVatts  (Pa.),  405;  Plato  v.  Roe,  14  Wis.  453; 
Friedley  v.  Hamilton,  17  Sarg.  &  R.  70 ;  Lane  v.  Shears,  1  Wend.  (N.  Y.)  433 ; 
Crassen  r.  Swoveland,  22  Ind.  427. 

'Civil  Code,  1873,  sects.  1969-1971. 

*  Woodward  v.  Jewell,  140  U.  S.  247. 


92  NATURE   AND    REQUISITES    OP    THE   CONTRACT. 

§  91.  Construction  of  Agreement  to  Reconvey.  —  A 
grantor  can  redeem,  from  a  deed  absolute  on  its  face  which  was 
intended  as  a  mortgage,  but  he  is  entitled  to  a  reconveyance 
only  of  the  interest  conveyed  by  him,  and  cannot  claim  a  con- 
veyance of  any  adverse  or  superior  title  which  may  have  been 
thereafter  acquired  by  the  grantee.  The  grantor  cannot  obtain 
nor  require  in  such  a  conveyance  any  adverse  or  superior  title 
subsequently  and  in  good  faith  acquired  by  the  grantee  ;  and  a 
reconveyance  from  the  mortgagee  or  grantee  must  be  limited 
to  the  interest  conveyed  by  the  deed  of  the  grantor.^ 

Where,  in  an  action  by  the  grantor  to  have  a  deed  declared 
a  mortgage,  to  secure  the  sum  of  $60  debt  and  $440  to  be 
thereafter  advanced,  the  grantee  answered,  admitting  the  debt, 
but  denying  the  agreement  for  future  advances,  and  alleging 
that  the  deed  was  intended  as  a  conveyance  upon  an  adequate 
consideration  consisting  of  board,  lodging,  and  services  ren- 
dered by  the  grantee  to  the  grantor  to  the  value  of  $700.  But 
the  grantee  failed  to  bring  clear  and  unequivocal  proof  of  his 
claim,  and  the  court  allowed  the  grantor  to  redeem.^ 

A  party's  land  was  about  to  be  sold  under  a  judgment.  His 
brother-in-law  paid  the  debt,  taking  a,  deed  from  the  owner, 
and  by  conveyance  gave  the  owner's  wife  the  use  of  the  land 
for  life.  At  the  same  time  he  executed  an  agreement  to  recon- 
vey to  the  owner  on  payment  to  him  during  his  lifetime  of  the 
amount  of  the  judgment  and  interest.  The  brother-in-law 
died,  leaving  the  land  by  will  to  another  party.  The  wife  of 
the  original  owner  died  three  years  later.  The  owner  had 
made  several  payments  on  the  debt  according  to  the  agreement 
with  his  brother-in-law.  It  was  held  by  the  court  that  the 
conveyance  to  the  brother-in-law  was  a  mortgage,  and  that  he 
could  redeem  by  paying  the  balance  due  on  the  judgment.* 

A  debtor  conveyed  real  estate  to  his  creditor  by  deed  absolute 
in  form,  and  also  gave  his  note  for  the  sum  found  due  on  settle- 
ment, payable  in  two  years,  with  interest.     The  grantee  at  the 

1  Hall  V.  Arnott,  80  Cal.  348. 

^  Newman  v.  Edwards,  22  Neb.  248. 

.^Sherrer  v.  Harris  (Ark.),  13  S.  W.  Rep.  730. 


! 


II 


ABSOLUTE    SALES    DISTINGUISHED.  93 

same  time  gave  the  grantor  a  contract  for  a  reconveyance  of  the 
premises  upon  payment  of  the  note  and  interest.  The  contract 
gave  the  creditor  the  right  to  possession,  and  to  rent  or  lease 
the  premises,  and  further  provided  that  the  creditor  should 
pay  all  taxes  and  make  necessary  repairs  from  the  rents  re- 
ceived, applying  the  surplus  rents  upon  the  note.  It  was  held 
that  the  deed,  note,  and  contract  to  reconvey  all  constituted 
but  one  transaction,  which  was  a  mortgage,  and  not  an  abso- 
lute sale  and  resale,  and  that  the  relation  of  the  creditor  to  the 
debtor  was  that  of  a  mortgagee  in  possession.  Justice  Schol- 
field  says  that  this  transaction  was  a  mortgage,  and  not  an  ab- 
solute sale  and  resale,  because  the  original  indebtedness  is  not 
extinguished,  but  is  put  in  the  form  of  a  promissory  note,  pay- 
able two  years  after  date,  wdth  interest  at  the  rate  of  ten  per 
cent,  per  annum.  This  note  the  grantee  may  sue  upon  and 
collect  at  any  time  after  maturity,  notwithstanding  anything 
that  appears  in  the  contract  between  them.  The  grantee  is 
required  to  account  for  rents  and  profits,  and,  after  payment 
for  repairs  and  taxes,  to  apj)ly  the  amount  due  on  account 
thereof  in  liquidation  of  the  note.  He  has  no  discretion  in 
this  respect,  and  should  the  amount  ultimately  equal  or  exceed 
the  amount  due  upon  the  note,  he  would  be  compelled  at  once 
to  reconvey  to  the  grantor,  thus  occupying  the  relation  to  the 
grantor  of  a  mortgagee  in  possession.^ 

A  case  arose  in  Kansas  where  a  grantor  executed  a  convey- 
ance of  real  estate  to  the  clerk  of  the  district  court,  as  his  friend 
or  agent,  with  the  understanding  that  if  the  clerk  should  obtain 
the  satisfaction  of  a  judgment  rendered  in  the  court  against 
the  grantor,  then  the  deed  should  be  recorded  and  the  land 
belong  to  the  judgment  creditor.  Subsequently  the  judgment 
creditor  at  the  instance  of  the  clerk  accepted  the  deed  and  de- 
livered to  the  clerk  a  written  satisfaction  of  the  judgment  and 
paid  the  costs  thereof,  and  also  the  taxes  on  the  land.  It  was 
held  that  the  land  belonged  to  the  judgment  creditor,  notwith- 
standing the  clerk  failed  to  file  or  record  the  satisfaction  of  the 
judgment  and  the  deed.     A  satisfaction  of  a  judgment  by  a  con- 

^  Jackson  v.  Lynch,  129  111.  72. 


94  NATURE   AND   REQUISITES    OF    THE   CONTRACT. 

veyauce  of  land,  though  accompanied  by  a  verbal  agreement 
that  if  the  grantor  makes  a  sale  of  the  land  within  five  or  six 
months  the  land  should  be  reconveyed  to  him,  is  not  a  mort- 


So,  also,  an  absolute  deed  containing  an  agreement  on  the 
part  of  the  grantee  to  give  to  the  grantor  a  bond  to  reconvey 
upon  the  payment  of  a  certain  sum,  does  not  show  a  debt  to 
be  secured  from  the  grantor  to  the  grantee,  and,  hence,  is  not  a 
mortgage.^ 

But  the  following  transaction  is  a  mortgage.  A  third  party 
advanced  money  to  mortgagors  to  redeem  the  land  from  fore- 
closure sale  by  the  mortgagee.  In  consideration  thereof  he 
received  a  deed  absolute  in  form  from  the  mortgagors,  and 
entered  into  a  simultaneous  agreement,  under  which  the  mort- 
gagors agreed  to  purchase  the  land  for  a  sum  equal  to  the 
amount  paid  for  redemption,  the  expenses  of  preparing  instru- 
ments, the  premiums  on  policies  of  insurance,  and  an  addi- 
tional sum  as  compensation  to  the  party  advancing  the  money ; 
and  it  was  stipulated  that  time  should  be  the  essence  of  the 
contract,  and  that  upon  failure  to  fulfill  the  agreement  to  re- 
purchase, the  grantee  of  the  deed  would  be  released  from  all 
obligations  to  reconvey  said  property,  and  should  be  entitled 
to  immediate  possession  of  the  same,  but  there  was  no  agree- 
ment that  in  any  contingency  the  grantors  should  be  released 
from  their  obligation  to  pay,  and  the  court  held  the  transaction 
a  mortgage.^ 

§  92.  Pre-existing  Debt  Owing  to  the  Grantee. — ^Upon 
construing  a  deed  absolute  on  its  face  and  a  contemporaneous 
written  contract,  if  it  appears  that  at  the  time  they  were  exe- 
cuted there  was  a  pre-existing  debt  owing  to  the  grantee,  the 
subsequent  payment  of  which  by  the  grantor  would  entitle  him 
to  a  reconveyance  of  the  property,  and  that  the  grantee  sur- 
rendered no  remedy  previously  available  to  him  for  the  coUec- 

^  Elston  V.  Chamberlain,  41  Kan.  354. 
^  Cnandler  v.  Chandler,  76  Iowa,  574. 
'  Baker  v.  Fireman's  Fund  Ins.  Co.j  79  Cal.  34. 


ABSOLUTE    SALES   DISTINGUISHED.  95 

tion  of  his  debt,  and  that  the  obligation  of  the  grantor  remained 
the  same,  such  deed  and  contract  constitute  a  mortgage,  and 
not  a  conditional  sale.  An  absolute  conveyance  without  any 
other  consideration  than  that  assumed,  coupled  with  an  agree- 
ment to  reconvey,  will  be  regarded  as  a  mortgage/ 

Whatever  form  the  transaction  may  have  assumed,  if  the 
relation  of  debtor  and  creditor,  with  its  reciprocal  rights,  con- 
tinues between  the  contracting  parties,  or  if  such  relation  was 
then  created  by  a  loan  or  advance,  and  if  the  agreement, 
whether  in  the  deed  or  in  a  separate  instrument  concurrently 
executed  is  such  that  the  debtor,  by  merely  paying  his  debt, 
becomes  entitled  to  insist  upon  a  reconveyance  or  otherwise  to 
defeat  the  estate  conveyed,  the  conveyance  w^ill  be  regarded  as 
a  security  for  such  continuing  or  newly  incurred  debt.^ 

It  does  not  follow,  however,  that  a  debtor  may  not  convey 
property  to  his  creditor  in  payment  of  an  existing  debt,  nor 
that  the  parties  may  not,  by  an  agreement  made  at  the  time 
of  a  conveyance  so  made  thereafter  occupy  the  relation  of 
grantor  and  grantee  toward  each  other  in  respect  to  the  prop- 
erty conveyed.  If  the  pre-existing  liability  of  the  grantor  is 
extinguished  and  the  personal  remedy  of  the  grantee  is  released 
in  consideration  of  a  sale  and  conveyance  of  the  property,  the 
fact  that  a  contract  to  reconvey,  upon  certain  terms  and  condi- 
tions, is  entered  into,  does  not  constitute  the  transaction  a 
mortgage.  Or  if,  as  a  result  of  the  agreement,  the  debt  is  ex- 
tinguished, leaving  the  grantor  the  oj^tion  to  pay  or  not,  as  he 
pleases,  and  thereby  entitle  himself  to  a  reconveyance,  the 
transaction  operates  as  a  conditional  sale,  and  is  not  a  mort- 
gage.^ 

§  93.  The  Grantee  in  Possession. — The  grantee  in  posses- 
sion under  a  deed  absolute  in  form,  but  given  by  w^ay  of 

1  Voss  V.  Eller,  109  Ind.  260. 

2  Cornell  r.  Hall,  22  Mich.  377  ;  Cox  r.  Ratcliffe,  105  Ind.  374 ;  Peugh  v. 
Davis,  96  U.  S.  332 ;  Russell  v.  Southard,  12  How.  (U.  S.)  139 ;  Hanlon  v. 
Doherty,  109  Ind.  37  ;  Voss  v.  Eller,  109  Ind.  260. 

^  Hays  V.  Carr,  83  Ind.  275  ;  Flagg  v.  Mann,  14  Pick.  (Mass.)  467  ;  Conway  v. 
Alexander,  7  Cranch  (U.  S.),  218  ;  Smith  v.  Crosby,  47  Wis.  160. 


96  NATURE    AND    REQUISITES    OF   THE    CONTRACT. 

security  merely,  does  not  stand  in  exactly  the  same  position  in 
reference  to  an  accounting  for  the  rents  and  profits  as  ordinary 
mortgagees  who  have  taken  possession  by  way  of  enforcing 
their  security ;  he  is  an  agent  of  the  grantor  as  well  as  mort- 
gagee, and  is  chargeable  for  any  failure  to  obtain  full  rental 
value  for  the  premises  only  on  the  same  ground  as  an  agent 
thus  put  in  possession.^ 

But  such  a  deed  gives  a  mere  lien  upon  the  property  as  if 
the  parties  had  put  their  agreement  in  the  form  of  a  mortgage, 
and  consequently  does  not  give  the  right  of  possession  to  the 
grantee,^  because  the  deed  is  made  to  secure  an  indebtedness 
to  the  grantee,  and  does  not  pass  the  title.^ 

The  mortgagor  is  entitled  to  retain  possession  under  such  a 
conveyance.  Thus,  where  the  owner  of  real  estate  executes  an 
absolute  deed  as  security  for  the  payment  of  money  and  re- 
ceives a  defeasance  in  writing,  the  transaction  is  a  mere  mort- 
gage, and  the  mortgagor,  in  the  absence  of  a  contract  to  the 
contrary,  is  entitled  to  retain  possession  of  the  property,  and  a 
lease  executed  by  the  grantee  in  the  deed  will  not  entitle  the 
lessee  to  possession.'* 

Where  one  tries  to  enforce  a  parol  trust  and  to  redeem,  and 
alleges  an  advance  of  a  certain  sum  for  which  the  land  is  held 
as  security,  and  offers  to  pay  that  sum  only,  he  cannot  recover 
on  proving  an  advance  of  a  larger  sum,  which  there  is  no  oflfer 
to  repay .^ 

§  94.  Conveyance  and  Subsequent  Defeasance. — If  the 
deed  and  the  defeasance  are  of  the  same  date  and  executed  at 
the  same  time,  and  are  one  transaction,  the  transaction  will  be 
considered  as  a  mortgage.® 

It  is  sufficient  that  the  deed  and  written  agreement  be  sub- 

1  Barnard  v.  Jcnnison,  27  Mich.  230. 
=>  Smith  V.  Smith,  80  Cal.  323. 

3  Raynor  v.  Drew,  72  Cal.  307.    See  Thaxton  v.  Roberts,  66  Ga.  704. 
*  Connolly  v.  Giddings,  24  Neb.  131. 
^  Edwards  v.  Rogers,  81  Ala.  568. 

^Newhall  v.  Burt,  7  Pick.  (Mass.)  157  ;  Nugent  v.  Riley,  1  Met.  (Mass.)  117; 
Lanfair  v.  Lanfair,  18  Pick.  (Mass.)  299. 


ABSOLUTE    SALES   DISTINGUISHED.  97 

stantially  contemporaneous  and  are  manifestly  intended  to 
constitute  one  transaction.^ 

And  a  conveyance  absolute  on  its  face,  and  a  defeasance 
subsequently  executed  in  pursuance  of  an  agreement  made  at 
the  time  the  conveyance  was  signed,  will  be  regarded  as  con- 
temporaneous acts,  and  construed  as  forming  one  contract  and 
transaction.^ 

The  character  of  the  deed  must  be  determined  by  the  inten- 
tion of  the  parties  clearly  and  satisfactorily  proved.  When  it 
is  shown  by  a  separate  written  instrument  that  the  transaction 
is  not  an  unconditional  sale,  as  the  deed  imports,  but  either  a 
mortgage  or  a  sale  with  right  to  repurchase,  the  court,  in  the 
interest  of  complete  justice,  is  inclined  to  construe  the  transac- 
tion as  a  mortgage.  Any  doubt  arising  as  to  the  intention  will 
be  resolved  in  favor  of  the  construction  that  the  conveyance  is 
a  security  for  a  debt.^ 

A  deed  was  made  and  recorded  without  the  knowledge  of 
the  grantee.  Upon  his  being  informed  of  the  transaction,  he 
made  defeasance  to  reconvey.  Held,  that  the  transaction 
amounted  to  a  mortgage,  and  that  the  two  instruments  were 
substantially  contemporaneous.* 

It  is  only  necessary  that  the  deed  and  defeasance  be  executed 
at  the  same  time,  or  are  agreed  upon  at  the  same  time.  The 
law  will  conclude  that  they  form  a  legal  mortgage.^ 

If  the  two  instruments  are  of  different  dates,  it  may  be 
shown  that  they  are  parts  of  the  same  transaction,  and  that 
together  they  are  intended  to  constitute  a  mortgage.*^ 

In  general,  if  at  the  time  of  executing  an  absolute  deed  the 
parties  verbally  agree  that  a  defeasance  shall  be  subsequently 

'  Jeffery  v.  Hursh,  58  Mich.  246. 
^  Cosby  V.  Buchanan,  81  Ala.  574. 
'Mitchell  V.  Wellman,  80  Ala.  16. 

*  Harrison  v.  Trustees,  12  Mass.  456. 

*  Jeffery  v.  Hursh,  58  Mich.  246  ;  Reitenbaugh  v.  Ludwick,  31  Pa.  St.  131 ; 
Wilson  V.  Shoenberger,  31  Pa.  St.  295. 

« Kelly  V.  Thompson,  7  Watts  (Pa.),  401 ;  Tillson  v.  Moulton,  23  111.  648  ; 
Preschbaker  v.  Feaman,  32  111.  475  ;  Gay  v.  Hamilton,  33  Cal.  686 ;  Newhall  v. 
Burt,  7  Pick.  (Mass.)  157. 

VOL.  I. — 7 


98  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

executed,  such  defeasance  will  relate  back  to  the  deed  and 
make  it  a  mortgage/ 

When  a  contemporaneous  agreement  with  the  deed  is  after- 
ward reduced  to  writing,  it  relates  back  to  the  execution  of  the 
deed.^ 

§  95.  When  not  a  Sale  and  Resale. — The  whole  transac- 
tion must  be  taken  into  consideration  to  determine  its  nature. 
Thus,  a  debtor  conveyed  real  estate  to  his  creditor  by  deed 
absolute  in  form  and  also  gave  his  note  for  the  sum  found  due 
on  settlement,  payable  in  two  years,  with  interest.  The  grantee 
at  the  same  time  gave  the  grantor  a  contract  for  a  reconvey- 
ance of  the  premises  upon  payment  of  note  and  interest.  This 
contract  gave  the  grantee  the  right  to  possession  and  to  rent  or 
lease  the  premises,  and  further  provided  that  the  grantee 
should  pay  all  taxes  and  make  necessary  repairs  from  the  rents 
received,  applying  the  surplus  rents  upon  the  note.  It  was 
held  that  the  deed,  note,  and  contract  to  reconvey  all  consti- 
tuted but  one  transaction,  which  was  a  mortgage,  and  not  an 
absolute  sale  and  resale,  and  that  the  relation  of  the  grantee  to 
the  grantor  was  that  of  mortgagee  in  possession.  Judge  Schol- 
field  said  this  transaction  was  a  mortgage,  and  not  an  absolute 
sale  and  resale,  because  the  indebtedness  was  not  extinguished, 
but  put  in  the  form  of  a  promissory  note,  which  the  grantee 
may  sue  upon  and  collect  at  any  time  after  maturity,  notwith- 
standing anything  that  appeared  in  the  contract  between  them. 
The  grantee  was  required  to  account  for  rents  and  profits,  and, 
after  2:)ayment  for  repairs  and  taxes,  to  apply  the  amount  due 
on  account  thereof  in  liquidation  of  the  note  ;  that  the  grantee 
had  no  discretion  in  this  respect,  and  should  the  amount  ulti- 
mately equal  or  exceed  the  amount  due  upon  the  note,  he 

'  Cosby  V.  Buchanan,  81  Ala.  574  ;  Lovering  v.  Fogg,  18  Pick.  (Mass.)  540 ; 
Scott  V.  Henry,  13  Ark.  112  ;  Lund  v.  Lund,  1  N.  H.  39. 

*  Waters  v.  Crabtree,  105  N.  Car.  394.  This  case  holds  such  defeasance  may 
afterward  be  executed,  but  only  in  pursuance  of  the  agreement  made  at  the 
time  the  deed  was  executed,  and,  in  that  case,  it  will  relate  back  to  that  time. 
Such  writing,  whether  deed  or  not,  becomes  evidence  of  the  nature  and  pur- 
pose of  the  deed  absolute  upon  its  face. 


ABSOLUTE    SALES   DISTINGUISHED.  99 

would  be  compelled  at  once  to  reconvey  to  the  grantor,  thus 
occupying  the  relation  to  the  grantor  of  a  mortgagee  in  posses- 
sion/ 

However,  parties  may  make  a  valid  sale  and  resale  of  prop- 
erty which  is  not  in  the  nature  of  a  mortgage.  Thus,  a  grantor 
conveyed  land  to  a  grantee  who,  by  a  contemporaneous  agi-ee- 
ment,  stipulated  to  reconvey  on  payment  of  a  stated  -b'^itii 
within  a  year.  Two  days  thereafter  the '  gratti^e  leased  the 
land  to  the  grantor  for  one  year,  at^a  't^tated  rental.  Th!? 
agreement  to  reconvey  was  signed  by  the  grantor  only.  The 
grantor  did  not  agree  to  pay  the  amount  in  the  agreeiaent  to 
reconvey.  No  loan  was  referred '  toi  Held,  that  the  transac- 
tion was  not  a  mortgage,  but  a  si^le  and  resale.'^ 

It  is  quite  impossible  to  conceive  of  a  conveyance  that  would 
or  could  be  a  mortgage  unless  such  conveyance  is  given  to  secure 
the  performance  of  some  act  or  obligation.  No  conveyance 
can  be  a  mortgage  unless  it  is  made  for  the  purpose  of  securing 
the  payment  of  a  debt  or  the  performance  of  a  duty,  either  ex- 
isting at  the  time  the  conveyance  is  made  or  to  be  created,  or 
to  arise  in  the  future.^ 

The  promise  to  pay  the  debt  may  be  implied  from  the 
facts.  But  the  absence  of  any  writing  showing  an  exj)ress 
promise  to  pay  is  strong  evidence  that  the  transaction  was  a 
sale.* 

A  sale  of  land  with  contract  to  reconvey  will  be  upheld 
where  a  sale,  and  not  a  mortgage,  is  intended.^ 

So  a  conveyance  of  land  in  satisfaction  of  a  judgment, 
though  accompanied  by  a  verbal  agreement  that  if  the 
grantor  makes  a  sale  of  the  land  within  five  or  six  months, 
the  land  should  be  reconveyed  to  him,  is  not  a  mortgage, 
but  a  sale.  This  did  not  render  the  conveyance  a  mort- 
gage,  and   the    grantee   was   not   compelled   by   any   agree- 

1  Jackson  v.  Lynch,  129  111.  72. 
*  Gassert  v.  Bogk,  7  Mont.  585. 
'Worley  r.  Dryden,  57  Mo.  226. 

*Horn  V.  Keteltas,  46  N.  Y.  605  ;  Morris  v.  Budlong,  78  N.  Y.  543. 
^Trucks  V.  Lindgey,  18  Iowa,  504  ;  Scott  i'.  Newhirter, 49  Iowa, 487  ;  Presch- 
baker  v.  Feaman,  32  111.  475  ;  Clark  v.  Finlon,  90  111.  245. 


100  NATURE   AND    REQUISITES   OF    THE    CONTRACT. 

ment  to  resell,  and  the  rights  of  the  verbal  understanding 
were  not  reciprocal.^ 

So  the  following  transaction  is  not  in  the  nature  of  a  mort- 
gage. It  was  a  deed  by  the  grantor  to  the  grantee  which  con- 
tains the  following  unilateral  contract  entered  into  by  the 
graiij;ee:  That  the  grantee  hereby  assumes  the  payment  of  a 
coriain  mortgage  on  the  premises  conveyed  ;  that  the  grantee 
agrees  to  ghef  the  grantor  a  bond,  binding  the  obligor  to 
redeed  the  property  when  the  grantor  shall  have  paid  the  sum 
o)[  tWenty-five  hundred' ^>3llars. 

The  court  holds,  per- "Judge  Beck,  that  this  deed  cannot  be 
interpreted,  so  as  to  show-ai;!  indebtedness  from  the  grantee. 
"It  expresses  tM',G^igation'6iHhe  grantee  to  reconvey  the  land 
when  twenty-five  hiuidi'ed  dollars  is  paid  to  him  by  defend- 
ants, or  rather  that  the  grantee  shall  execute  a  bond  to  that 
effect.  But  it  is  not  said,  and  it  cannot  be  so  understood,  that 
the  defendants  owe  the  grantee  twenty-five  hundred  dollars. 
The  language  rather  implies  an  obligation  to  sell  the  land  to  de- 
fendants and  convey  it  to  them  in  consideration  of  twenty-five 
hundred  dollars.  But  certain  it  is  the  language  of  the  instru- 
ment does  not  show  the  existence  of  a  debt  from  defendants  to  the 
grantee,  and  that  the  instrument  is  made  as  security  therefor."  ^ 

§  96.  To  Determine  the  Question  Whether  a  Mortgage 
OR  AN  Agreement  to  Reconvey. — To  determine  this  ques- 
tion all  the  evidence  in  the  case  will  be  considered.  Thus,  a 
separate  agreement  was  executed  between  the  grantor  and 
grantee,  by  which  the  latter  agreed  to  reconvey  to  the  former 
on  payment  of  a  specified  sum.  It  was  held  that  this  did  not 
show  conclusively  that  such  deed  was  executed  to  secure  a 
debt,  but  the  question  whether  the  transaction  was  a  sale,  with 
an  optional  right  to  purchase,  or  a  mortgage,  must  be  deter- 
mined from  all  the  evidence  in  the  case.^ 

'  Elston  V.  Chamberlain,  41  Kan.  354.    See,  also,  McNamara  v.  Culver,  22 
Kan.  661 ;  Eckert  v.  McBee,  27  Kan.  232. 
"^  Chandler  v.  Chandler,  76  Iowa,  574. 
'Devere  v.  Woodrufi;  1  N.  Dak.  143. 


ABSOLUTE   SALES   DISTINGUISHED,  101 

A  deed  absolute  upon  its  face  is  not  to  be  considered  a  mort- 
gage, unless  it  be  made  to  appear  clearly  to  have  been  so  in- 
tended at  the  time  of  its  execution/  and  where  the  original  in- 
tention of  the  parties  was  to  execute  a  conveyance  to  secure  a 
debt,  the  transaction  is  a  mortgage.^  And  when  a  grantee  in 
an  absolute  deed  of  real  estate  at  the  same  time  executes  an 
instrument  to  reconvey  the  premises  to  his  grantor  on  payment 
of  certain  specified  debts,  such  instrument  is  a  defeasance,  and 
converts  what  would  otherwise  be  an  absolute  deed  into  a 
mortgage.^ 

In  general,  if  the  instrument  of  defeasance  is  in  other  re- 
spects sufficient,  the  fact  that  it  provides  for  a  reconveyance, 
instead  of  declaring  that  the  absolute  deed  shall  become  void, 
is  immaterial,  and  such  instruments  are  valid  defeasances.^ 

While  a  deed  absolute  on  its  face  may  be  and  is  treated  in 
equity  as  a  mortgage,  yet  this  can  be  done  only  where  the  par- 
ties to  it  certainly  so  intended  and  agreed  by  mere  words  or 
some  writing  to  be  evidence  of  such  intention  and  purpose. 
Such  purpose  and  agreement  must  appear  by  strong  and  satis- 
factory proof.  Otherwise,  the  deed  must  be  accepted  as  ex- 
pressing the  settled  intention  of  the  parties  to  it.  It  is  gener- 
ally made  as  the  strongest  evidence  of  that  purpose,  and  will 
be  so  accepted  and  treated  until  it  shall  appear  that  some  con- 
dition or  modification  in  connection  with  and  part  of  it  has 
been  omitted  from  it.^ 

^Sutphen  r.  Cushman,  35  111.  186;  Remington  v.  Campbell,  60  111.  516; 
Magnusson  v.  Johnson,  73  111.  156. 

'Tedens  v.  Clark,  24  111.  App.  510. 

'Snow  V.  Pressey,  82  Me.  552.  This  case  holds  that  mortgages  of  real  estate 
include  not  only  those  made  in  the  usual  form,  in  which  the  condition  is  set 
forth  in  the  deed  itself,  but  also  those  in  which  an  absolute  deed  is  given 
and  a  separate  defeasance  is  executed.  Clark  v.  Woodruff  (Mich.),  51  IST.  W. 
Rep.  357. 

*  Bunker  v.  Barron,  79  Me.  62;  Bayley  r.  Bailey,  5  Gray  (^Mass.),  505; 
Knight  V.  Dyer,  57  Me.  174 ;  Newhall  r.  Burt,  7  Pick.  (INIass.)  156 ;  Smith  v. 
Ins.  Co.,  50  Me.  96 ;  Reed  v.  Reed,  75  Me.  264. 

*  Waters  v.  Crabtree,  105  N.  Car.  394;  Robinson  v.  Willoughby,  65  N.  Car. 
520. 

In  Waters  ?'.  Crabtree,  105  N.  Car.  394,  Chief  Justice  Merriman  says : 
"  Neither  courts  of  law  nor  courts  of  equity  can  make  or  modify  valid  con- 


102  NATURE   AND   REQUISITES   OF   THE    CONTRACT. 

In  determining  whether  an  absolute  sale  of  land,  together 
with  a  contract  to  reconvey  upon  payment  of  a  fixed  sum  on  a 
future  day,  constitutes  a  mortgage  or  not,  Vice-Chancellor  Pit- 
ney ably  says  that  the  court  will  look  at  all  the  circumstances, 
the  most  important  of  which  are:  1.  Is  there  an  obligation  on 
the  part  of  the  grantor  to  pay  the  purchase-money  which  is 
enforceable  at  law  ?  2.  Is  the  land  conveyed  worth  consider- 
able more  than  the  purchase  price  ?  3.  Does  the  grantor  re- 
tain possession  of  the  land  granted  upon  terms  of  paying  a 
rent  equal  to  the  interest  on  the  purchase  price  ?  ^ 

The  first  of  these,  the  continuance  of  the  debt,  has  always 
been  looked  upon  as  a  strong  circumstance,  and  as  being 
almost,  if  not  absolutely  controlling.  With  regard  to  the 
second,  the  difference  of  value  has  been  applied  freely  in 
cases  of  absolute  assignments  of  moneyed  securities,  bonds, 
mortgages,  and  the  like,  whose  value  was  easily  ascertainable 
with  approximate  certainty,  and  where  the  assignment  has 
been  for  a  consideration  much  less  than  the  intrinsic  and  ab- 
solute value  of  the  security  assigned.  The  third  is  found  in 
the  conduct  of  the  parties  with  regard  to  the  possession  and 
use  of  the  subject  of  the  grant  after  the  date  of  the  grant. 

The  line  of  distinction  between  a  defeasance  and  a  contract 
to  reconvey  is  very  shadowy  and  indistinct.  But  an  agree- 
ment, to  be  sufficient  to  convert  an  absolute  deed  into  a  mort- 
gage, should  be  mutual — that  is,  that  the  grantor  should  be 
bound  to  pay  the  debt,  and  the  grantee  to  reconvey  on  pay- 
ment. It  is  not,  perhaps,  necessary  in  all  cases  to  convert 
an  absolute  deed  into  a  mortgage,  that  the  liability  of  the 
grantor  to  pay  the  debt  should  remain ;  and  yet  a  continu- 

traets  ;  they  can  only  determine  what  they  are  and  give  them  effect.  Courts 
of  equity  can  onlj'  give  to  and  administer  rights  created  by  and  growing  out 
of  them,  tliat  courts  of  law  cannot,  by  reason  of  their  peculiar  organization 
and  vigorous  methods  of  procedure." 

^  Pace  V.  Bartles,  47  N.  J.  Eq.  170.  See,  also,  Goodman  v.  Grierson,  2  Ball 
&  B.  274 ;  Slutz  v.  Desenberg,  28  Ohio  St.  371 ;  Williams  v.  Owen,  5  Myl.  & 
C.  303 ;  Flagg  v.  Mann,  14  Pick.  (Mass.)  478 ;  Brown  v.  Dewey,  1  Sandf.  Ch. 
(N.  Y.)  56 ;  Holmes  I'.  Grant,  8  Paige  (N.  Y.),  243;  Robinson  v.  Cropsey,  2 
Edw.  (N.  Y.)  138 ;  6  Paige  (N.  Y.),  480 ;  Glover  v.  Payn,  19  Wend.  (N.  Y.) 
518. 


ABSOLUTE   SALES   DISTINGUISHED.  103 

ing  debt  seems  so  much  a  part  of  a  mortgage  that  the  proof 
that  an  absolute  deed  was  intended  as  a  mortgage  must  be 
very  plain  where  the  debt  does  not  remain,  or  is  considered  as 
paid  by  giving  the  deed.^  When  the  question  is  whether  the 
transaction  constitutes  a  mortgage,  or  is  a  sale  with  an  agree- 
ment to  reconvey,  the  fact  whether  there  is  a  continued  debt 
or  liability  of  the  mortgagor  is  very  important.^  The  fact  that 
there  is  no  continuing  debt  is  a  strong  circumstance,  where 
there  is  any  doubt,  to  show  that  a  transaction  is  a  contract  for 
repurchase,  and  not  a  mortgage.^ 

Article  4. 

Sale  with  Right  to  Repurchase. 

I  97.  Sale  with  Contract  to  Eepurchase.  ?  99,  Collateral  Agreement  by  the 
§  98.  Sale  A  Remere.  Grantee  to  Reconvey  to  the 

Grantor. 

§  97.  Sale  with  Contract  to  Repurchase. — The  question 
whether  a  particular  transaction  amounts  to  a  mortgage,  or  to  a 
sale  with  right  of  repurchase,  must,  to  a  large  extent,  depend  on 
its  own  special  circumstances,  because  such  question  finally  turns 
in  all  cases  upon  the  real  intention  of  the  parties,  as  shown  upon 
the  face  of  the  writings,  or  as  disclosed  by  extrinsic  evidence. 

If  a  loan  is  made  to  the  grantor  at  the  time  of  the  convey- 
ance and  the  continued  existence  of  his  indebtedness  is  evi- 
denced by  some  collateral  agreement  given  by  the  grantor, 
such  as  a  note  or  bond,  the  case  would  be  simple,  and  the 
transaction  clearly  a  mortgage.  However,  if  this  antecedent 
debt  is  wholly  satisfied  and  extinguished  by  the  conveyance, 
so  that  no  liability  remains  under  any  circumstances  against 
the  grantor  then  there  is  no  mortgage,  since  there  is  no  debt  to 
be  secured  thereby.* 

'  Hogan  V.  Jaques,  19  N.  J.  Eq.  123,  128. 

*  De  Camp  v.  Crane,  19  N.  J.  Eq.  166,  171. 

^Pliillips  V.  Hulsizer,  20  N.  J.  Eq.  308,  314  ;  Goodman  v.  Grierson,  2  Ball  & 
B.  274 ;  Williams  v.  Owens,  5  Myln.  &  C.  303 ;  Conway  v.  Alexander,  7 
Cranch  (U.  S.),  218. 

*  Pomeroy's  Eq.  Jur.  1195. 


104  NATURE   AND    REQUISITES   OF    THE   CONTRACT. 

Thus,  where  it  appears  from  the  terms  of  a  deed  which 
acknowledges  the  payment  of  the  consideration  and  contains 
a  clause  of  warranty,  and  from  the  possession  and  use  of  the 
land  by  the  grantee  for  ten  years  without  question,  or  anything 
being  said  about  a  debt,  such  transaction  will  be  construed  a 
deed,  although  based  upon  an  inadequate  consideration,  and 
was  accompanied  by  a  verbal  agreement,  afterward  reduced  to 
writing  and  lost,  that  the  grantee  would  reconvey  to  the  grantor 
on  the  payment  of  the  purchase-money,  with  interest  and  taxes/ 

In  an  action  to  have  a  deed  declared  a  mortgage  and  to 
redeem  therefrom,  it  was  agreed  b}^  the  parties  at  the  trial  that 
the  deed  was  executed  and  recorded  in  1858 ;  that  thereafter, 
until  1887,  the  grantor  never  made  any  claim  to  the  land  or 
to  any  interest  therein,  and  never  paid  any  taxes  thereon  or  in 
any  way  exercised  any  ownership  thereof ;  that  on  the  settle- 
ment of  other  loans  made  to  him  by  the  grantee  no  claim  was 
made  by  either  party  that  the  matter  of  this  deed  was  an  un- 
settled transaction.  At  the  trial  the  grantor  tried  to  show  that 
the  grantee  had  promised  to  reconvey  the  same  lands  to  the 
grantor  at  any  time  he  should  be  required  to  do  so  by  the 
grantor  upon  the  payment  of  the  amount  of  purchase-money, 
with  interest.  The  court  decided  that  this  transaction  was 
not  in  the  nature  of  a  mortgage.^ 

If  the  party  procures  the  conveyance  of  the  property  to  one 
who  pays  the  price  or  makes  an  advance  upon  it,  with  an 
arrangement  that  upon  the  payment  of  the  money  the  property 
shall  be  reconveyed,  he  has  a  right  to  redeem.^ 

The  grantee  has  a  lien  upon  all  the  land,  though  he  advances 
but  a  part  of  the  purchase-money,  and  not  merely  upon  an  undi- 
vided interest  in  proportion  to  the  amount  of  his  payment.* 

1  Hodge  V.  Weeks,  31  S.  Car.  276. 

*  Becker  v.  Howard,  75  Wis.  415. 

'Rector  v.  Shirk,  92  Ind.  31 ;  Stinchfleld  v.  Milliken,  71  Me.  567  ;  Fisk  v. 
Stewart,  24  Minn.  97  ;  Carr  v.  Carr,  52  N.  Y.  251  ;  Wright  v.  Shumway,  1 
Biss.  C.  C.  23  ;  Lindsay  v.  Matthews,  17  Fla.  575  ;  Sweet  v.  Mitchell,  15  Wis. 
641 ;  Hardin  v.  Eames,  5  111.  App.  153  ;  Smith  v.  Knoebel,  82  111.  392 ;  Bar- 
nett  V.  Nelson,  46  Iowa,  495. 

*  Hidden  v.  Jordan,  21  Cal.  92. 


ABSOLUTE    SALES    DISTINGUISHED.  105 

§  98.  Sale  A  IIem6r6. — In  Louisiana,  in  a  contract  relating 
to  real  estate  situated  in  this  State,  between  parties  residing  in 
a  State  where  the  common  law  prevails,  it  was  stated  substan- 
tially that  one  of  the  parties  sells  to  the  other  the  immovable 
for  a  designated  price,  and  further,  that  the  said  sum  men- 
tioned as  the  price  was  a  debt  owing  to  the  alleged  purchaser  by 
the  vendor,  and  that  should  said  debt  be  paid  by  a  time  stated, 
the  act  or  conveyance  should  be  void.  The  act  was  termed 
by  the  parties  "  a  deed  of  mortgage,"  and  was  recorded  in  the 
mortgage  book  of  the  parish  where  the  property  was  situated. 
It  was  held  that  the  instrument  was  a  common-law  mortgage 
and  did  not  have  the  effect  of  passing  title  to  the  property.^ 

An  instrument  purporting  to  be  a  sale,  with  condition  that 
on  payment  of  the  debt,  the  property  shall  be  reconveyed,  does 
not  convey  a  title  to  the  property,  and  is  only  a  mortgage 
given  to  secure  the  payment  of  a  debt.^ 

So  a  contract  purporting  to  be  a  sale  cl  remere,  which  divides 
the  price,  which  was  for  an  antecedent  debt,  to  be  returned  in 
two  installments,  and  declared  the  forfeiture  of  the  right  to 
redeem  on  a  failure  to  pay  the  first  installment,  is  pignorative 
in  character,  and  an  antichresis.  The  mortgage  rights  of  the 
creditor  are  nor  destroyed  by  the  pledge  of  the  immovable  to 
him,  if  they  have  been  preserved  on  the  property.^ 

§  99.  Collateral  Agreement  by  the  Grantee  to  Re- 
convey  TO  the  Grantor. — The  fact  of  a  collateral  agreement 
by  the  grantee  in  a  deed  of  real  estate  to  reconvey  to  the 
grantor  on  the  payment  of  a  sum  of  money  at  a  future  day  is 
not  inconsistent  with  the  idea  of  a  sale.^  Hence,  a  deed  of 
lands,  absolute  in  form,  with  general  warranty  of  title,  and  an 
agreement  by  the  grantee  to  reconvey  the  property  to  the 
grantor,  or  to  a  third  person,  upon  his  payment  of  a  fixed  sum 
within  a  specific  time,  do  not  of  themselves  constitute  a  mort- 
gage ;  nor  will  they  be  held  to  operate  as  a  mortgage  unless  it 

1  Howe  V.  Austin,  40  La.  Ann.  323. 

*  Miller  v.  Shotwell,  38  La.  Ann.  890. 
'  Payne  v.  Habbard,  42  La.  Ann.  395. 

*  Wallace  v.  Johnstone,  129  U.  S.  58. 


106  NATURE   AND    REQUISITES   OF   THE    CONTRACT. 

is  clearly  shown,  either  by  parol  evidence  or  by  the  attendant 
circumstances,  such  as  the  condition  and  relation  of  the  parties, 
or  gross  inadequacy  of  price,  to  have  been  intended  by  the 
parties  as  a  security  for  a  loan  or  existing  debt/ 

Such  deeds  generally  have  none  of  the  indicia  by  which 
courts  are  led  to  construe  such  instruments  to  be  intended  as  a 
mortgage  or  a  security  for  a  loan ;  nothing  from  which  there 
can  be  inferred  the  existence  of  a  debt  or  the  relation  of  bor- 
rower and  lender  between  the  parties  to  the  instruments.^ 

Article  5. 
Purchasing  at  Judicial  Sales. 

§100.  Sheriff's  Deed — Agreement  to    §  101.  Advancement  of  Money  by 
Reconvey.  Third  Parties  to  Redeem  at 

Foreclosure  Sale. 

§  100.  Sheriff's  Deed — Agreement  to  Reconvey. — Often- 
times when  the  debtor's  land  is  sold  under  order  of  court,  he 
agrees  with  his  creditors  to  bid  for  and  buy  the  land,  with  the 
understanding  that  it  shall  be  reconveyed  to  the  debtor  so  soon 
as  he  pays  off  the  debt  and  expenses  incurred.  Then  the 
question  arises  whether  such  a  transaction  is  in  the  nature  of 
a  mortgage.  Thus,  a  creditor  had  obtained  a  judgment  against 
his  debtor,  and  it  was  agreed  that  the  creditor  should  bid  in 
the  debtor's  land,  which  was  to  be  sold  to  satisfy  the  judg- 
ment ;  and  on  payment  of  the  judgment  and  the  costs  of  the 
sale,  the  land  was  to  be  reconveyed  to  the  debtor.  Under  this 
agreement  the  creditor  bid  in  the  land,  worth  $12,000,  for 
$625,  and  received  a  sheriff's  deed  therefor.  The  debtor  re- 
mained in  possession  of  part  of  the  property  without  payment 
of  rent,  made  valuable  improvements,  and  paid  off  an  incum- 

^Cadman  v.  Peter,  118  U.  S.  73 ;  Coyle  v.  Davis,  116  V.  S.  108 ;  Howland  v. 
Blake,  97  U.  S.  624 ;  Horbach  v.  Hill,  112  U.  S.  144 ;  Corbit  v.  Smith,  7  Iowa, 
60  ;  71  Am.  Dec.  431 ;  Knight  r.  McCord,  63  Iowa,  429 ;  Budd  v.  Van  Orden, 
33  N.  J.  Eq.  143 ;  Saxton  v.  Hitchcock,  47  Barb.  (N.  Y.)  220 ;  Spence  v.  Stead- 
man,  49  Ga.  133 ;  West  v.  Hendrix,  28  Ala.  226 ;  Ruffier  v.  Womack,  30  Tex. 
332. 

=*  Wallace  v.  Johnstone,  129  U.  S.  58. 


ABSOLUTE    SALES    DISTINGUISHED.  107 

brance  of  $1,500  th.reon.  Other  parts  of  the  land  were  sold 
by  the  creditor,  but  always  on  consultation  with  the  debtor, 
who  also  fixed  the  price  ;  and  for  a  number  of  years  the  cred- 
itor, by  his  acts  and  declarations,  recognized  the  debtor's  rights 
under  the  agreement.  It  was  decided  by  the  court  that  the 
agreement  and  subsequent  transactions  between  the  parties 
converted  the  sherifi"'s  deed  into  a  mortgage,  and  the  fact  that 
they  resorted  to  the  court  to  carry  out  the  agreement,  would 
not  defeat  it  so  as  to  enable  the  creditor  to  perpetrate  a  fraud 
on  the  debtor.^  . 

A  sheriff 's  deed  under  such  circumstances  may  be  converted 
into  a  mortgage  by  a  parol  agreement  which  allows  the  debtor 
to  redeem  the  property.^ 

The  evidence  in  such  a  case  must  be  clear,  explicit,  and  un- 
equivocal in  respect  of  the  facts  to  be  established  and  relevant 
to  the  issue,  in  order  to  make  a  sheriff's  deed  a  mortgage.^ 

In  general,  parol  agreement  between  a  judgment  creditor 
and  his  debtor  that  the  creditor  should  become  the  purchaser 
at  a  sheriff's  sale  of  the  land  of  the  debtor,  and  hold  the  same 
as  collateral  security  for  his  debt,  is  in  effect  a  mortgage,  and 
the  debtor  may  redeem.  Thus,  a  creditor  purchased  the  land 
and  took  possession  of  it,  and  afterward  attempted  to  collect 
the  portion  of  the  judgment  which  was  not  paid  by  the  sheriff's 
sale.  It  was  held  that  he  must  account  for  the  rents  and 
profits  according  to  the  terms  of  the  parol  agreement,  because 
he  was  a  mortgagee  in  possession  and  bound  to  apply  the  rents 
of  the  property  to  the  debt  for  which  it  was  pledged.* 

A  sheriff 's  deed  may  be  converted  into  a  mortgage  by  proof 
of  a  parol  agreement  that  it  was  made  as  security  for  a  debt  or 
loan.-^     And  when  a  party  purchases  at  a  sheriff's  sale,  it  may 

'  Gaines  v.  BrockerhofF,  130  Pa.  St.  17o  ;  26  Week.  N.  C.  258.  The  cases 
of  Fox  r.  Hefftier,  1  Watts  &  S.  372,  and  Jackman  v.  Ringland,  4  Watts  &  S. 
149,  are  distinguished. 

■■'Sweetzer's  Appeal,  71  Pa.  St.  264.  See,  also,  Heath's  Appeal,  100  Pa.  St.  1 ; 
Logue's  Appeal,  104  Pa.  St.  136 ;  Saunders  v.  Gould,  124  Pa.  St.  237. 

'Jones  /'.  Pierce,  134  Pa.  St.  5.33. 

*  Harrison  v.  Soles,  6  Pa.  St.  393. 

*  Logue's  Appeal,  104  Pa.  St.  136. 


f 


108  NATURE   AND    REQUISITES   OF    THE    CONTRACT. 

be  shown  that  he  acted  for  the  owner,  and  was  to  reconvey  on 
payment  of  the  purchase  price/  And  when  a  grantor  under 
an  agreement  with  his  debtor  to  hold  land  as  security  for  the 
debt,  got  a  title  thereto  by  levy  of  execution  and  judgment 
obtained  by  consent  and  by  foreclosure  of  the  mortgagor,  it 
was  held  that  the  transaction  was  a  mortgage,  and  that  the 
general  devisee  of  the  grantee  could  be  compelled  to  reconvey.^ 

§  101.  Advancement  op  Money  by  Third  Parties  to  Re- 
deem AT  Foreclosure  Sale. — Third  parties  advanced  money 
to  the  mortgagor  to  redeem  land  from  a  foreclosure  sale  by  the 
mortgagee.  In  consideration  thereof  the  third  parties  received 
a  deed  -absolute  in  form  from  the  mortgagor  and  entered  into  a 
simultaneous  agreement,  under  Mdiich  the  mortgagor  agreed  to 
purchase  the  land  for  a  sum  equal  to  the  amount  paid  for 
redemption,  the  expenses  of  preparing  the  instruments,  the 
premiums  on  policies  of  insurance,  and  an  additional  sum  as 
compensation  to  the  party  advancing  the  money.  It  was  also 
stipulated  that  time  was  the  essence  of  the  contract,  and  that 
upon  failure  to  fulfill  the  agreement  of  purchase  the  grantee 
of  the  deed  "  shall  be  released  from  all  obligations  to  convey 
said  property,  and  shall  be  entitled  to  immediate  possession  of 
the  same,"  but  there  was  no  agreement  that  in  any  contingency 
the  parties  of  the  second  part  are  to  be  released  from  their  ob- 
ligation to  pay ;  held,  that  the  transaction  was  a  mortgage.^ 

And  where  a  third  party  agrees  to  buy  land  at  a  judicial 
sale  and  then  agrees  to  reconvey  it  to  the  rightful  owner  in 
order  to  save  further  litigation,  he  is  bound  by  his  contract, 
and  a  party  buying  from  him,  acquainted  with  all  the  circum- 
stances, cannot  hold  the  real  estate  discharged  of  the  first 
owner's  lien.* 

iGuinn  v.  Locke,  1  Head  (Tenn.),  110;  Price  v.  Evans,  26  Mo.  30;  Sweet- 
zer's  Appeal,  71  Pa.  St.  264. 

*  Cullen  V.  Carey,  146  Maps.  50. 
»Bakerr.  Ins.  Co.,  79Cal.  34. 

*  Blake  v.  McMurtry,  25  Neb.  290.  Chief  Justice  Reese  held  that  even 
though  a  specific  performance  of  a  contract  to  convey  real  estate  might  not 
be  enforced  where  the  vendor  had  no  title  at  the  time  the  contract  was  made, 


ABSOLUTE    SALES    DISTINGUISHED.  109 

Not  wishing  to  deprive  the  owner  of  his  land,  and  desiring 
to  avoid  further  Ktigation,  a  party  can  compromise  with  the 
owner,  agreeing  to  buy  and  then  reconvey ;  where  such  a  con- 
tract is  needed,  it  is  supported  by  ample  consideration.^ 

The  party  thus  buying  at  a  foreclosure  sale,  is  deemed  a 
trustee  of  the  party  for  whom  he  buys.^  Thus,  land  having 
been  advertised  for  sale  under  a  senior  mortgage,  the  owner 
and  the  junior  mortgagee  agreed  with  a  third  party  to  purchase 
the  land  for  the  amount  of  both  mortgages,  and  the  junior  mort- 
gagee furnished  the  amount  of  money  due  on  the  senior  mort- 
gage, with  the  understanding  that  the  owner  might  have  fur- 
ther time  to  redeem.  This  was  held  to  be  a  mortgage,  and 
that  the  owner  could  pay  off  the  incumbrance  according  to  the 
agreement  with  the  junior  mortgagee.^ 

Article  6, 
The  Rights  of  the  Parties  Under  Deeds  of  Trust. 

?  102.  Deed  by  Mortgagor  to  a  Third    I  103.  The  Court  will  Look  through 
Person  aa  Trustee.  the  Form  into  the  Actual 

Character  of  the  Trangac- 
tion. 

§  102.  Deed  by  Mortgagor  to  a  Third  Person  as  Trustee. 
— If  the  conveyance  be  in  the  form  of  a  trust  deed  and  intended 
as  a  security  it  will  be  construed  as  a  mortgage.  It  is  the  gen- 
eral rule  that  whenever  property  is  transferred,  no  matter  in 
what  form,  if  in  reality  as  a  security  for  the  debt,  the  transfer 
will  be  treated  as  in  effect  a  mortgage,  and  the  relation  of 
mortgagor  and  mortgagee  be  held  to  exist.  Tlius,  if  a  third 
person  is  appointed  as  a  trustee  of  the  legal  title  as  between 

yet  such  written  contract  having  l:)een  made  after  purchase,  in  pursuance  of 
the  previous  agreement,  and  by  which  the  owner  had  been  induced  to  forego 
further  litigation,  the  maker  of  such  contract  and  those  holding  under  him 
with  notice  of  all  the  circumstances,  would  not  be  heard  to  assert  its  inval- 
idity. 

1  Hewett  V.  Currier,  G3  Wis.  386  ;  Parker  v.  Enslow,  102  111.  272. 

''Ryan  v.  Dox,  34  N.  Y.  307  ;  Reece  v.  Roush,  2  Mont.  586;  SandfoGS  v. 
Jones,  35  Cal.  481 ;  McDonough  v.  O'Neil,  113  Mass.  92 ;  Brown  v.  Lynch,  1 
Paige  (N.  Y.),  147. 

*  Klock  V.  Walter,  70  111.  416.    See  Pemberton  v.  Simmons,  100  N.  Car.  316. 


110  NATURE    AND    REQUISITES   OF   THE   CONTRACT. 

the  parties,  and  the  transaction  be  in  effect  a  mortgage,  it  will 
thus  be  held  by  the  courts ;  and  it  is  not  material  that  a  third 
person  be  made  a  trustee  of  the  legal  title  and  that  new  securi- 
ties be  substituted  for  the  old,  nor  that  any  personal  obligation 
of  the  debtor  be  preserved/ 

So  a  trust  deed  of  lands  given  by  a  railroad  company  to 
secure  the  payment  of  bonds  and  providing  that  if  there  should 
be  no  default  the  estate,  right,  title,  and  interest  of  the  trustee 
should  cease,  determine,  and  become  void,  is  in  effect  a  mort- 
gage, and  leaves  the  legal  title  in  the  grantor.^ 

When  such  a  trust  deed  is  given  as  a  mere  security  for 
money  it  is,  in  legal  effect,  nothing  more  than  a  mortgage.^ 

Such  a  trust  deed  is,  in  legal  effect,  a  mortgage,  and  leaves 
whatever  right,  title,  or  interest  the  grantor  has  in  the  land  at 
the  time  of  giving  the  conveyance  still  in  him,  subject  to  the 
lien  thereby  created.*  The  general  rule  is,  that  where  a  deed 
of  trust  is  executed  with  the  understanding  between  the  parties 
that  it  is  a  mere  security  for  a  debt,  and  that  when  the  debt 
is  paid  the  title  shall  revest  in  the  grantor,  such  deed  of  trust 
is  a  mortgage.^ 

§  103.  The  Court  will  Look  through  the  Form  into  the 
Actual  Character  of  the  Transaction. — It  may  be  laid 
down  as  a  general  rule  that  whenever  property  is  transferred, 
no  matter  by  what  conveyance  or  contrivance  for  the  transfer 
thereof,  equity  will  treat  the  transfer  as  a  mortgage  when  so 
intended ;  and  it  is  not  material  that  the  person  in  whom  the 
right  of  redemption  is  recognized  has  only  an  equitable  title, 
or  that  the  conveyance  is  made  by  a  third  party,  nor  whether 
any  personal  obligation  of  the  debtor,  or  personal  remedy,  is 
preserved  against  him  or  not.  The  courts  will  look  through 
the  form  into  the  actual  character  of  the  transaction.® 

1  Marshall  v.  Thompson,  39  Minn.  137. 

^  Wisconsin  Cent.  R.  R.  Co.  v.  Wisconsin  Riv.  L.  Co.,  71  Wis.  94. 

^Hoyt  V.  Fass,  &4  Wis.  279. 

*  Bernstein  v.  Humes,  71  Ala.  265. 

5  McDonald  v.  Kellogg,  30  Kan.  170. 

^Niggeler  v.  Maurin,  34  Minn.  118;  Marshall  v.  Thompson,  39  Minn.  137; 


absolute  sales  distinguished.  ill 

Article  7. 
Rights  of  Subsequent  Purchasers  for  Value  and  Without  Notice. 

I  104.  Rights  of  Third  Persons.  ?  105.  Liability  of  Grantee  who  Sells 

Mortgaged  Property. 

§  104.  Rights  of  Third  Persons. — If  the  purpose  of  a  deed 
absolute  on  its  face  with  a  separate  defeasance  or  trust  deed  is, 
in  effect,  a  mortgage  as  between  the  parties,  it  cannot  have 
that  effect  against  subsequent  bona  fide  purchasers  for  value 
and  without  notice.^  As  to  them,  it  is  secret,  fraudulent,  and 
void,  and  a  court  of  equity  will  not  enforce  it  against  them.^ 

In  such  conveyances  there  is  a  subsisting  equity  of  redemp- 
tion in  the  mortgagor.^ 

The  debtor  is  not  allowed  to  agree  in  the  transaction  that  he 
waives  his  right  of  redemption.* 

The  grantee,  as  to  third  persons,  can  exercise  all  the  rights 
of  an  absolute  owner.^  And  a  purchaser  who  has  knowledge 
that  his  grantor  holds  the  property  only  as  a  mortgagee,  ac- 
quires only  a  defeasible  estate,  controlled  by  the  same  terms 
and  conditions  as  those  in  the  hands  of  the  grantee.^   And  one 

Hoile  V.  Bailey,  58  Wis.  434  ;  Russell  v.  Southard,  12  How.  (U.  S.)  139 ;  Carr 
V.  Carr,  52  N.  Y.  251 ;  Morris  v.  Budlong,  78  N.  Y.  543 ;  Church  v.  Kidd,  3 
Hun  (N.  Y.),  254 ;  Bowery  Nat.  Bank  v.  Duncan,  12  Hun  (N.  Y.),  405 ;  King 
V.  Remington,  36  Minn.  15 ;  Fisk  v.  Stewart,  24  Minn.  97. 

^  Gruber  v.  Baker,  20  Nev.  453 ;  Waters  v.  Crabtree,  105  N.  Car.  394. 

^  Gregory  v.  Perkins,  4  Dev.  (N.  Car.)  50. 

^  Snow  V.  Pressey,  82  Me.  552 ;  Linnell  v.  Lyford,  72  Me.  284 ;  Wyman  r, 
Babcock,  2  Curt.  C.  C.  386. 

*  Clark  V.  Condit,  18  N.  J.  Eq.  358 ;  Pierce  v.  Robinson,  13  Cal.  116 ;  Clark  v, 
Henry,  3  Cow.  (N.  Y.)  324 ;  Cherry  v.  Bowen,  4  Sneed  (Tenn.),  415 ;  Simon  v. 
Schmidt,  41  Hun  (N.  Y.),  318;  Henry  v.  Davis,  7  Johns.  (N.  Y.)  Ch.  40; 
Wright  V.  Bates,  13  Vt.  341 ;  Enos  v.  Sutherland,  11  Mich.  538. 

5  Jenkins  v.  Rosenberg,  105  111.  157;  Frink  v.  Adams,  36  N.  J.  Eq.  485; 
Digby  V.  Jones,  67  Mo.  104 ;  Fiedler  v.  Darrin,  59  Barb.  (N.  Y.)  651 ;  McCar- 
thy V.  McCarthy,  36  Conn.  177 ;  Pico  v.  Gallardo,  52  Cal.  206;  Weide  v.  Gehl, 
21  Minn.  449 ;  Turner  v.  Wilkinson,  72  Ala.  361 ;  Pancake  v.  Cauffman,  114 
Pa.  St.  113. 

"Zane  v.  Fink,  18  W.  Va.  693  ;  Houser  v.  Lamont,  55  Pa.  St.  311 ;  Bartling 
r.  Brasuhn,  102  111.  441 ;  Radford  v.  Folsom,  58  Iowa,  473 ;  Lawrence  v.  Du 
Bois,  16  W.  Va.  443 ;  Kuhn  v.  Rumpp,  46  Cal.  299 ;  Graham  v.  Graham,  55 
Ind.  23. 


112  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

who  deals  with  an  agent  is  bound  to  know  by  what  authority- 
he  acts  in  conveying  the  property/ 

§  105.  Liability  of  Grantee  who  Sells  Mortgaged  Prop- 
erty.— A  grantee  is  Hable  to  the  grantor  for  the  sale  of  the 
property,  but  he  can  deduct  the  amount  due  him,  with  reason- 
able compensation  for  making  the  sale.^  And  the  grantee  can 
deduct  the  amount  paid  to  quiet  an  outstanding  title.^ 

But  w^hen  the  grantee  has  conveyed  the  land  without  con- 
sent of  the  grantor  and  the  condition  is  not  broken,  the  grantor 
may  elect  to  take  the  proceeds  of  the  sale  less  the  debt,*  or  the 
value  of  the  land  less  the  debt  at  the  time  the  debt  is  due  and 
payable.^ 

The  grantee  is  not  allowed  to  show  that  he  received  a  price 
larger  than  the  value  of  the  land.'' 

A  claim  for  excess  by  the  grantor  is  barred  by  the  statute 
of  limitations  applicable  in  actions  of  assumpsit.^ 

The  grantee  can  also  have  relief  in  proper  cases.  Accordingly 
where  an  absolute  conveyance  was  made  by  an  agent,  and  the 
principal  claimed  that  the  conveyance  was  taken  as  a  security 
for  a  loan,  the  court  held  that  the  burden  of  establishing  an 
absolute  sale  was  on  the  agent,  and  decreed  that  the  sale 
should  be  rescinded.^ 

Article  8. 

Assignment  of  Contracts  to  Purchase. 

■  §  106.  An  Assignment  of  a  Contract  to  Purchase  may  be  a  Mortgage. 

§  106.  An  Assignment  of  a  Contract  to  Purchase  may 
be  a  Mortgage. — An  assignment  of  a  contract  to  purchase 

1  Gilbert  v.  Deshon,  107  N.  Y.  324. 

2  Van  Dusen  v.  Worrell,  4  Abb.  App.  Dec.  (N.  Y.)  473. 
^  Adkins  v.  Lewis,  5  Ore.  292. 

*Meehan  v.  Forrester,  52  N.  Y.  277. 

*  Booth  V.  Feist  (Tex.),  19  S.  W.  Rep.  398;  15  S.  W.  Eep.  799;  Enos  o. 
Sutherland,  11  Mich.  538 ;  Hart  v.  Ten  Eyck,  2  Johns.  Ch.  (N.  Y.)  62. 

6Budd  V.  Van  Orden,  33  N.  J.  Eq.  143. 

'  Hancock  v.  Harper,  86  111.  445 ;  Wyman  v.  Babcock,  2  Curtis  C.  C.  386 ; 
s.  c,  19  How.  (U.  S.)  289 ;  Amory  v.  Lawrence,  3  Cliff.  C.  C.  523. 

^Tappan  v.  Aylsworth,  13  R.  I.  582. 


ABSOLUTE   SALES    DISTINGUISHED.  113 

may  be,  in  effect,  only  a  mortgage.  Thus,  a  party  assigned  a 
contract  of  purchase,  with  defeasance  that  if  the  assignee 
should  be  obliged  to  pay  any  part  of  a  specified  sum  for  which 
he  had  become  security,  and  the  assignor  should  not  repay  the 
same  by  a  given  date,  the  assignee  was  to  have  absolute  owner- 
ship in  the  contract;  but  if  the  assignor  repaid,  then  the 
assignee  was  to  surrender  all  claim  thereto.  This  was  held  to 
be  a  mortgage  of  the  land  and  no  more.^ 

So  where  a  purchaser  of  land  assigns  his  contract  of  pur- 
chase to  another  in  trust,  and  the  trustee  advances  the  pur- 
chase-money when  due,  at  the  request  of  the  cestui  que  trust,  to 
save  a  forfeiture,  and  the  vendor  conveys  the  title  to  such 
trustee  and  transfers  to  him  the  notes  given  for  the  price,  by 
consent  of  the  cestui  que  trust,  as  a  security  for  the  repayment 
of  the  sum  so  advanced,  the  transaction  will,  in  equity,  be 
treated  as  a  mortgage,  and  it  will  not  concern  the  cestui  que 
trust  to  whom  the  money  is  decreed  to  be  paid,  whether  to  the 
trustee  or  his  devisee.^ 

Where  the  deed  absolute  in  form  is  once  shown  to  be  a 
mortgage,  it  will  retain  that  character  until  the  equities  of  the 
mortgagor  have  been  in  some  way  foreclosed.  This  character 
continues  through  whatever  changes  it  may  undergo  in  the 
hands  of  an  assignee.  An  assignment  of  a  contract  of  purchase 
as  security  is  a  mortgage,  and  where  the  assignee  has  com- 
pleted the  payment  and  taken  a  conveyance  to  himself,  the 
relation  of  the  parties  remain  the  same.^ 

The  assignment  of  several  mortgages  by  deed  absolute  in 
form  made  as  collateral  security  for  a  loan,  is  a  mortgage.* 

^  Meigs  V.  McFarlan,  72  Mich.  194. 

'^  Stewart  v.  Fellows,  128  111.  480. 

'Smith  V.  Cremer,  71  111.  185. 

*Pond  V.  Eddy,  113  Mass.  149.    See,  also,  Briggs  v.  Rice,  130  Mass.  50. 


VOL.  I. — 8 


CHAPTER  IV. 

EVIDENCE   TO    ESTABLISH    THE    CHARACTER   OP   THE   CONVEY- 
ANCE. 

Article  1. 

To  Establish  a  Conditional  Sale. 

§  107.  In  Equity.  §  109.  A  Formal  Mortgage  Cannot 

§  108.  The  Intention  Governs.  be  Shown  to  be  a  Condi- 

tional Sale. 

§  107,  In  Equity. — Parol  evidence  is  inadmissible  to  con- 
tradict or  substantially  vary  the  legal  import  of  a  written 
agreement.^  But  parol  evidence  is  admissible  when  there  is 
an  allegation  oi"  fraud,  mistake,  or  surprise  in  making  or  exe- 
cuting a  conveyance,  which  comes  under  the  jurisdiction  of 
courts  of  equity  and  not  of  law.^  But  parol  evidence  is  not 
admissible  in  a  court  of  law  to  change  the  face  of  a  convey- 
ance.^    Chancellor  Kent  says : 

"  The  general  rule  is  certainly  not  to  be  questioned  or  dis- 
turbed. It  ought  not  to  be  a  subject  of  discussion.  It  is  as 
well  grounded  in  reason  and  policy  as  it  is  in  authority.  Nor 
does  this  case  come  within  any  exception  admitted  here  to  the 
operation  of  the  rule  ;  for  there  is  no  allegation  of  fraud,  mis- 
take, or  surprise  in  making  or  executing  the  mortgage ;  and 
those,  I  believe,  are  the  only  cases  in  which  parol  evidence  is 
admissible  in  this  court  against  a  contract  in  writing."  *  And 
Senator  Putnam  says  :  "  I  have  therefore  come  to  the  conclu- 
sion that,  upon  principles  of  policy  and  from  a  regard  to  what 
is  due  to  the  rights  of  property,  the  rule  on  this  subject,  as 

» Stevens  v.  Cooper,  1  Johns.  Ch.  (N.  Y.)  429. 

2  Chaplin  v.  Butler,  18  Johns.  (N.  Y.)  169  ;  Ring  v.  Franklin,  2  Hall  (N.  Y.), 
1 ;  Swart  v.  Service,  21  Wend.  (N.  Y.)  36. 
"Webb  V.  Rice,  6  Hill  (N.  Y.),  219. 
*  Stevens  v.  Cooper,  1  Johns.  Ch.  (N.  Y.)  419. 
114 


EVIDENCE  TO  ESTABLISH  CHAKACTER  OF  CONVEYANCE.    115 

heretofore  understood  and  acted  upon  by  our  courts,  should 
remain  the  law  of  the  land.  And  it  is  difficult  for  me  to  dis- 
cover any  good  reason  why  the  application  of  the  rule  may 
not  as  properly  be  entrusted  to  our  courts  of  law  as  to  the  court 
of  chancery."  ^ 

In  cases  of  fraud,  or  mistake  of  material  facts,  where  it 
would  be  unconscionable  to  enforce  the  agreement  according 
to  its  written  terms,  or  where  the  parties  mistook  the  meaning 
of  any  particular  words,  or  to  decipher  words,  or  explain  their 
technical  or  local  meaning,  or  where  extraneous  facts  are 
necessary  to  a  proper  understanding  of  the  contract,  or  where 
there  is  a  latent  ambiguity,  and  perhaps  in  some  other  cases, 
parol  evidence  is  admissible. 

Thus,  where  a  grantee  fraudulently  attempts  to  convert  into 
an  absolute  sale  that  which  was  intended  to  be  only  a  security 
for  a  debt,  parol  evidence  may  be  introduced  to  determine  the 
character  of  the  conveyance.^ 

Parol  evidence  is  offered  and  received  to  show  what  the 
transaction  really  is  from  first  to  last.  It  is  introduced  not  to 
contradict  or  vary  the  writing,  but  to  show  the  facts.^ 

§  108.  The  Intention  Governs. — To  determine  whether  a 
conveyance  is  a  conditional  sale  or  a  mortgage,  parol  evidence 
may  be  admitted  to  show  the  intention  of  the  parties  at  the 
time  of  the  transaction.  This  intention  is  to  be  ascertained  by 
looking  at  the  written  memorials  of  the  transaction,  and  its 
attendant  facts  and  circumstances.* 

Thus,  where  the  plaintiff  introduces  parol  evidence  for  the 
purpose  of  showing  that  an  instrument  which  prima  facie 
evidences  a  conditional  sale,  is  a  mortgage,  the  defendant  may 
introduce  parol  evidence  to  rebut  that  which  has  been  intro- 
duced by  the  plaintiff.^ 

1  Webb  V.  Rice,  6  Hill  (N.  Y.),  219. 
^Morris  V.  Nixon,  1  How.  (U.  S.)  126. 
^Rankin  v.  Mortimere,  7  Watts  (Pa.),  372. 

*  Cornell  v.  Hall,  22  Mich.  377  ;  Smith  v.  Crosby,  47  Wis.  160  ;  Henley  v. 
Hotaling,  41  Cal.  22. 
*Buse  V.  Page,  32  Minn.  111. 


116  NATUKE    AND    REQUISITES   OF   THE    CONTRACT. 

In  determining  whether  a  deed  absolute  on  its  face,  or  an 
instrument  in  the  form  of  a  conditional  sale,  is  a  mortgage, 
great  weight  is  attached  to  the  fact  that  the  alleged  price  was 
greatly  inadequate ;  that  the  vendor  remained  in  possession  of 
the  property,  and  that  there  had  been  pending  negotiations 
for  a  loan.  These  facts  may  be  proved  by  parol,  as  also  the 
relation  of  debtor  and  creditor.^ 

In  determining  whether  a  conditional  sale  is  intended,  when 
it  is  not  otherwise  clear,  the  circumstances  attending  may  be 
given  in  evidence,  and  such  facts  as  the  inadequacy  of  the  price 
paid,^  and  the  continued  possession  of  the  grantor.^  But  where 
a  deed  and  a  written  contract  were  simultaneously  executed,  and 
the  evidence  showed  a  pre-existing  debt,  it  was  held  that  if 
there  was  a  continuing  obligation  for  the  debt,  the  transaction 
was  a  mortgage,  although  the  deed  expressly  stated  that  the 
debt  was  fully  satisfied  and  that  the  contract  was  intended  as 
a  conditional  sale,  and  not  as  a  mortgage.* 

The  want  of  a  covenant  to  repay  the  money  is  not  complete 
evidence  that  a  conditional  sale  was  intended,  but  is  a  circum- 
stance of  no  inconsiderable  importance.* 

But  this  rule  of  the  admission  of  parol  evidence  does  not 
extend  to  an  official  conveyance,  because  the  parol  evidence 
contemplated  is  always  upon  the  question  of  intention  of  the 
parties  to  the  conveyance.  Thus,  a  sheriff,  master  in  chancery, 
or  other  officer  in  selling  property  under  process,  decree  of  judg- 
ment of  the  court,  cannot  make  a  valid  agreement  with  a  pur- 
chaser to  convey  any  other  estate  than  such  as  the  judgment  or 
decree  will  warrant.^ 

§  109.  A  Formal  Mortgage  Cannot  be  Shown  to  be  a 
Conditional  Sale. — A  formal  conveyance  may  certainly  be 

»Da\as  V.  Demming,  12  W.  Va.  246. 

*  Campbell  v.  Dearborn,  109  Mass.  130;  Freeman  v.  Wilson,  51  Miss.  329  ; 
Rnssell  v.  Southard,  12  How.  (U.  S.)  139  ;  Brown  v.  Dewey,  2  Barb.  (N.  Y.) 
28. 

» Gibson  V.  Eller,  13  Ind.  124. 
*Ruffier  ('.  Womack,  30  Tex.  332. 

*  Conway  v.  Alexander,  6  Cranch  (U.  S.),  2W, 
'Ryan  v.  Dox,  25  Barb.  (N.  Y.)  440v 


EVIDENCE  TO  ESTABLISH  CHARACTER  OF  CONVEYANCE.    117 

shown  to  be  a  mortgage  by  extrinsic  proof,  but  a  formal 
mortgage  may  not  be  shown  to  be  a  conditional  sale  by  the 
same  means.  In  the  one  case  the  proof  raises  an  equity 
consistent  with  the  writing,  and  in  the  other  it  contradicts 
it.^ 

This  rule,  that  a  written  mortgage  cannot  be  converted  by 
parol  into  a  conditional  sale,  is  applicable  to  both  parties  of 
the  instrument;  this  rule  rests  upon  a  sound  principle  of 
policy.^  In  this  case  Judge  Lewis  says :  "  In  the  one  case 
there  is  an  equity  to  be  protected  which  is  perfectly  consistent 
with  a  legal  conveyance.  The  equity  of  redemption,  so  far 
from  being  in  contradiction  of  a  conveyance,  presupposes  its 
existence.  Parol  evidence  to  establish  this  equity,  therefore, 
does  not  contradict  the  written  conveyance.  Besides,  an 
equitable  defense  of  this  character  commends  itself  to  the  con- 
sideration of  the  chancellor,  and  fixes  itself  upon  the  con- 
science of  the  grantee  as  a  trust,  which  it  would  be  a  fraud  to 
violate.  In  the  other  case,  where  the  instrument  is  a  mort- 
gage, the  parol  evidence  to  prove  it  a  conditional  sale  would 
directly  contradict  the  WTiting." 

Parol  evidence  is  admissible  to  show  that  a  formal  convey- 
ance, with  a  defeasance  executed  some  time  afterw^ard,  consti- 
tutes, in  fact,  a  mortgage,  and  not  a  conditional  sale. 

Thus,  where  a  mortgagor  by  deed  and  defeasance,  under  a 
mistaken  idea  of  the  effect  of  the  defeasance  upon  the  rights 
of  third  parties,  executed  a  release  of  his  equity  of  redemption, 
parol  evidence  is  admissible  to  show  that  the  parties  did  not 
intend  thereby  to  affect  their  relation  of  mortgagor  and  mort- 
gagee. But  such  evidence  is  admissible,  not  to  contradict  the 
release,  but  to  give  to  it  the  effect  and  operation  intended  by 
the  parties,  and  to  prevent  its  being  set  up  with  a  different 
effect  and  for  a  different  purpose.^ 

Parol  proof  is    not  introduced   to    contradict   or  vary  the 

^  Kunkle  v.  Wolfe rsberger,  6  Watts  (Pa.),  126.    See,  also,  Cohvell  v.  Woods, 
3  Watts  (Pa.),  ISS. 
nVoods  V.  Wallace,  22  Pa.  St.  171. 
'Reitenbaugh  v.  Ludwick,  31  Pa.  St.  131. 


118 


NATURE    AND    REQUISITES    OF   THE    CONTRACT. 


written  instrument,  but  to  show  that  tlie  transaction  was  a 
mortgage,  and  not  a  conditional  sale/ 

But  parol  evidence  is  inadmissible  to  show  that  an  absolute 
conveyance  was  intended  to  operate  as  a  conditional  sale.^ 


Article  2. 
To  Prove  an  Absolute  Deed  a  Mortgage. 


110.  The  Admission  of   Parol    Evi- 

dence Does  Not  Conflict  with 
the  Statute  of  Frauds. 

111.  This  Evidence  Must  be  Clear, 

Unequivocal,  and  Convincing. 

112.  The  Statute  of  Frauds  Does  Not 

Permit  the  Introduction  of 
Parol  Evidence  to  Create  a 
Trust. 

113.  Parol    Evidence    May  be   Ad- 

mitted to  Show  the  Intention 
of  the  Parties. 

114.  Inadequacy  of  Price  as  an  Ele- 

ment Showing  that  the  Trans- 
action was  Intended  as  a 
Mortgage. 

115.  If  the  Transaction  Shows  that 

the  Relation  of  Debtor  and 
Creditor  is .  Created,  it  will 
be  Considered  a  Mortgage. 

116.  A  Pre-existing  Indebtedness  as 

a  Consideration. 


ni7. 


118. 


im. 


?120. 


Possession  Eemaining  with 
Grantor  is  a  Circumstance 
Indicating  a  Mortgage. 

Laches  of  the  Grantor  have 
Great  Significance. 

When  the  Evidence  is  Not 
Satisfactory,  the  Transaction 
"Will  be  Declared  a  Sale. 

The     Grantor     Who     Seeks 
Equity  Must  Do  Equity. 
I  121.  The  Rights  of   Creditors   of 

the  Grantor. 
I  122.  In  General,  the  Legal  Effect  of 
the  Instrument  is  a  Ques- 
tion for  the  Court. 
I  123.  A  Question  for  the  Jury  Un- 
der Proper  Instructions 
from  the  Court. 

Instructions  which  Enunciate 
the  Law. 

Instructions  which  are  Er- 
roneous. 


U24. 
?125. 


§  110.  The  Admission  of  Parol  Evidence  Does  Not  Con- 
flict WITH  THE  Statute  of  Frauds. — It  is  well  settled  that 
parol  evidence  may  be  admitted  to  prove  an  absolute  deed  a 
mortgage,  and  the  admission  of  such  evidence  does  not  contra- 
vene the  statute  of  frauds. 

To  allow  the  statute  of  frauds  to  exclude  parol  evidence 
would  be  to  make  it  a  guard  and  protection  of  fraud,  instead 
of  a  security  against  it;  as  is  the  design  and  intention  of  it.* 

>  Colwell  V.  Woods,  3  Watts  (Pa.),  188  ;  Jaques  r.  Weeks,  7  Watts  (Pa.),  261. 
"Peagler  v.  Stabler  (Ala.),  9  South.  Rep.  157;  Egerton  v.  Jones,  107  N. 
Car.  284. 
^Swegle  V.  Belle,  20  Oreg.  323 ;  Walker  v.  Walker,  2  Atk.  98. 


EVIDENCE  TO  ESTABLISH  CHARACTER  OF  CONVEYANCE.    119 

The  principle  of  the  court  is  that  the  statute  of  frauds  is  not 
made  to  cover  fraud.  If  the  real  transaction  between  the  par- 
ties is  that  it  shall  be  a  mortgage,  it  is  in  the  eye  of  the  court 
a  fraud  to  insist  on  the  conveyance  as  being  absolute,  and 
parol  evidence  must  be  admissible  to  prove  a  fraud/  And  it 
was  early  said,  "  They  who  take  a  conveyance  of  an  estate  as 
a  mortgage  without  any  defeasance  are  guilty  of  a  fraud."  ^ 

It  has  been  held,  and  justly,  that  a  failure  to  insert  the  de- 
feasance in  the  deed  is  an  imposition.^ 

The  conversion  of  a  deed  without  a  defeasance,  into  a  mort- 
gage at  first  met  with  great  opposition.  The  principal  ob- 
stacle was  that  the  admission  of  parol  evidence  was  in  contra- 
vention of  the  statute  of  frauds  ;  another  was  that  parol  testi- 
mony cannot  contradict  or  vary  written  contracts.  At  an  early 
date  of  the  chancery  court  these  difficulties  were  surmounted 
by  placing  the  right  upon  the  ground  of  fraud,  one  of  the 
primary  sources  of  equity  jurisdiction.  The  same  view 
adopted  in  England  has  been  received  in  the  United  States. 
Both  on  principle  and  authority,  it  is  clear  that  extrinsic  evi- 
dence is  admissible,  and  to  insist  on  what  was  really  a  mort- 
gage as  a  sale  is  in  equity  a  fraud.* 

Whenever  the  statute  of  frauds  has  been  interposed  as  a  bar 
to  the  admission  of  extrinsic  evidence,  the  answer  is  that  this 
statute  does  not  apply.  While  the  reasoning  of  the  courts 
has  not  always  been  harmonious,  and  in  some  instances  not 
satisfactory,  yet  the  doctrine  is  firmly  established  and  uni- 
formly acquiesced  in.^  So  parol  evidence  is  admissible  in 
equity  to  show  that  an  absolute  deed  is  intended  as  a  mort- 
gage, and  that  the  defeasance  was  omitted  or  destroyed  by 
fraud,  surprise,  or  mistake.^ 

1  Lincoln  v.  Wright,  4  DeG.  &  J.  22 ;  Reigard  v.  McNeil,  38  111.  400. 

''Cotterell  v.  Purchase,  Cas.  Temp.  Talb.  61,  63. 

3  Baker  v.  Wind,  1  Ves.  Sr.  160. 

*  Russell  V.  Southard,  12  How.  (U.  S.)  139,  151 ;  Conway  v.  Alexander,  7 
Cranch  (U.  S.),  218,  238. 

"  Campbell  t;.  Dearborn,  109  Mass.  130;  Carr  t-.  Carr,  52  N.  Y.  251,  258; 
Horn  V.  Keteltas,  46  N.  Y.  605,  610 ;  Moore  v.  Wade,  8  Kan.  380,  387  ;  Sewell 
V.  Price,  32  Ala.  97  ;  Klein  v.  McNamara,  54  Miss.  90. 

«4  Kent's  Com.  143. 


120  NATURE    AND    REQUISITES   OP   THE    CONTRACT. 

"  It  is  determined  on  the  statute  of  frauds,  that,  if  a  mortgage 
is  intended  by  an  absolute  conveyance  in  one  deed,  and  a  de- 
feasance making  it  redeemable  in  another,  the  first  is  executed 
and  the  party  goes  away  with  the  defeasance,  that  is  not  within 
the  statute  of  frauds."  ^ 

And  it  is  a  general  rule  that  one  who  has  induced  another 
to  act  upon  the  supposition  that  a  writing  had  been  or  would 
be  given,  shall  not  take  advantage  of  that  act  and  escape  re- 
sponsibility himself  by  pleading  the  statute  of  frauds  on 
account  of  the  absence  of  such  writing,  which  has  been  caused 
by  his  own  fault.^ 

This  doctrine  was  established  after  a  struggle,  but  it  is  now 
established,  and  the  courts  refuse  to  permit  the  statute  designed 
to  prevent  frauds  and  perjuries  to  be  used  as  an  instrument  of 
fraud,  injustice,  or  oppression.^ 

Chief  Justice  Rice  says  : 

"  The  ground  on  which  a  court  of  equity  permits  parol  evi- 
dence to  show  a  conveyance  absolute  on  its  face  to  be  a  mort- 
gage, or  that  it  was  executed  upon  certain  parol  conditions  or 
trusts,  is  that  it  would  be  a  fraud  to  allow  the  grantee  to  hold 
the  property  discharged  of  the  conditions  or  trusts  which  by 
his  consent  were  attached  to  the  conveyance,  and  which  he 
agreed  to  fulfill."  * 

Justice  Field  states  the  doctrine  and  says : 

"  It  is  an  established  doctrine  that  a  court  of  equity  will 
treat  a  deed,  absolute  in  form,  as  a  mortgage  when  it  is  exe- 
cuted as  a  security  for  a  loan ;  that  courts  look  beyond  the 
terms  of  the  instrument  to  the  real  transaction,  and  where  that 
is  shown  to  be  one  of  security  and  not  of  sale,  they  will  give 
effect  to  the  actual  contract  of  the  parties.    As  the  equity  upon 

'  Dixon  V.  Parker,  2  Ves.  Sr.  219,  225.  See,  also,  Joynea  v.  Statham,  3  Atk. 
388 ;  Maxwell  v.  Mountacute,  Prec.  Ch.  626 ;  Washburn  v.  Merrills,  1  Day 
(Conn.),  139 ;  Daniels  v.  Alvord,  2  Root  (Conn.),  196 ;  Brainerd  v.  Brainerd,  15 
Conn.  575  ;  Story's  Eq.,  sect.  768. 

2  Glass  V.  Hulbert,  102  Mass.  24 ;  Bartlett  v.  Peckersgill,  1  Eden,  515  ;  1  Cox 
Ch.  15  ;  Browne  on  Statute  of  Frauds,  sect.  94. 

.  ^Carr  v.  Carr,  52  N.  Y.  251,  260 ;  Wyman  v.  Babcock,  2  Curtis  C.  C.  3S6, 
399  ;  Reed  v.  Reed,  75  Me.  264  ;  Bonham  v.  Newcomb,  2  Vent.  364. 

*Sewell  V.  Price,  32  Ala.  97. 


EVIDENCE  TO  ESTABLISH  CHARACTER  OF  CONVEYANCE,    121 

which  the  court  acts  in  such  case  arises  from  the  real  character 
of  the  transaction,  any  evidence,  written  or  oral,  tending  to 
show  this,  is  admissible.  The  rule  which  excludes  parol  testi- 
mony to  contradict  or  vary  a  written  instrument,  has  reference 
to  the  language  used  by  the  parties.  That  cannot  be  qualified 
or  varied  from  its  natural  import,  but  must  speak  for  itself. 
The  rule  does  not  forbid  an  inquiry  into  the  object  of  the  par- 
ties in  executing  and  receiving  the  instrument.  Thus  it  may 
be  shown  that  a  deed  was  made  to  defraud  creditors,  or  to  give 
preferences,  or  to  secure  a  loan,  or  for  any  other  object  not  ap- 
parent on  its  face.  The  object  of  the  parties  in  such  cases 
will  be  considered  by  a  court  of  equity.  It  constitutes  a  ground 
for  the  exercise  of  its  jurisdiction,  which  will  always  be  as- 
serted to  prevent  fraud  or  oppression,  and  to  promote  justice."  ^ 

But  when  no  fraud  or  breach  of  good  faith  can  be  imputed 
to  the  grantee  in  relation  to  the  transaction,  he  is  entitled  in  a 
court  of  equity,  as  well  as  in  a  court  of  law,  to  the  full  protec- 
tion and  stringent  application  of  the  general  rule,  that  parol 
evidence  shall  not  be  received  to  vary  the  terms  of  a  written 
contract.^ 

When  a  mortgagee  liolding  a  formal  legal  mortgage  under- 
takes to  enforce  his  rights  there-under,  he  is  proceeding  to  en- 
force rights  resting  in  contract,  and  hence  he  is  confined  to  the 
terms  of  the  contract  as  agreed  upon  by  the  parties  at  the  time 
the  contract  was  entered  into  in  the  solemn  form  of  mortgage. 
He  cannot,  therefore,  be  permitted  to  show  that  his  mortgage, 
which  was  originally  intended  to  secure  one  debt,  has  by  a 
subsequent  parol  agreement  been  so  extended  as  to  cover 
another  debt  not  contemplated  by  the  parties  at  the  time  the 
contract  which  he  is  seeking  to  enforce  was  entered  into.  But 
where  one  holding  the  legal  title  to  a  tract  of  land  under  an 
absolute  conveyance,  seeking  to  enforce  his  legal  rights  there- 
under, is  met  by  a  showing  on  the  part  of  the  grantor  that, 
although  he  holds  the  legal  title,  equity  will   not  permit  him 

iPeugh  r.  Davis,  96  U.  S.  332.  See,  also,  Hughes  v.  Edwards,  9  Wheat.  (U. 
S.)  489 ;  Taylor  v.  Luther,  2  Sumn.  C.  C.  228  ;  Pierce  v.  Robinson,  13  Cal.  116. 
*Sewell  V.  Price,  32  Ala.  97 ;  Holmes  v.  Fresh,  9  Mo.  201. 


122  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

to  enforce  it,  because  at  the  time  it  was  executed  sucli  paper 
was  not  intended  to  operate  as  an  absolute  conveyance,  but  was 
intended  merely  as  a  security  for  the  jjayment  of  a  debt,  and 
hence,  if  the  paper  were  allowed  the  effect  of  an  absolute  con- 
veyance it  would  operate  as  a  fraud,  it  is  not  a  question  of 
contract  but  one  of  pure  equity/ 

§  111.  This  Evidence  Must  Be  Clear,  Unequivocal,  and 
Convincing. — The  general  rule  is,  if  the  conveyance  is  in  fee, 
with  a  covenant  of  warranty,  and  there  is  no  defeasance,  either 
in  the  conveyance  or  a  collateral  paper,  j)arol  evidence  to  show 
that  is  was  intended  to  secure  a  debt,  and  to  operate  only  as  a 
mortgage,  must  be  clear,  unequivocal,  and  convincing,  or  the 
presumption  that  the  instrument  is  what  it  purports  to  be  must 
prevail.^ 

Barker,  P.  J.,  says  that  the  burden  of  proof  rests  upon  the 
grantor  to  overcome  the  strong  presumption  arising  from  the 
terms  of  a  written  contract ;  that  the  rule  is  that  if  the  proofs 
are  doubtful  and  unsatisfactory,  if  there  is  a  failure  to  over- 
come this  presumption  by  testimony  entirely  plain  and  con- 
vincing beyond  reasonable  controversy,  the  writing  will  be  held 
to  express  correctly  the  intention  of  the  parties.  "  A  delib- 
erate deed  or  writing  is  of  too  much  solemnity  to  be  brushed 
away  by  loose  or  inconclusive  proofs."  ^ 

Justice  Bailey  has  truly  said  that  the  burden  is  on  the  com- 
plainant to  prove  by  clear  and  satisfactory  evidence,  that  the 
instrument  was  in  fact  a  mortgage,  and  to  show  that  such  was 
the  intent  of  the  parties.* 

^Levi  V.  Blackwell  (S.  Car.),  15  S.E.  Rep.  243.  See,  also,  Lindsay  v.  Garvin, 
31  S.  Car.  259 ;  O'Neill  v.  Bennett,  33  S.  Car.  243. 

*Cadman  v.  Peter,  118  U.  S.  73 ;  Rowland  v.  Blake,  97  U.  S.  624 ;  Coyle  v. 
Davis,  116  U.  S.  108 ;  Case  v.  Peters,  20  Mich.  298 ;  Tilden  v.  Streeter,  45 
Mich.  533. 

^Shattuck  V.  Bascom.  55  Hnn  (N.  Y.),  14 ;  Mclean  v.  Ellis,  79  Tex.  398. 

*  Strong  V.  Strong,  126  111.  .301 ;  s.  c,  27  111.  App.  148.  See,  also,  Bailey  v. 
Bailey,  115  111.  551 ;  Darst  v.  Murphy,  119  111.  345  ;  Cobb  v.  Day,  106  Mo.  278 ; 
Workman  v.  Greening,  115  111.  447  ;  Clark  v.  Finlon,  90  111.  246 ;  Hartnett 
V.  Ball,  22  111.  43 ;  Bartling  v.  Brasuhn,  102  111.  441 ;  Knowles  v.  Knowles,  86 
111.  1 ;  Hinton  v.  Pritchard,  107  N.  Car.  128. 


EVIDENCE  TO  ESTABLISH  CHARACTER  OF  CONVEYANCE.    123 

Thus,  where  the  complainant  testifies  to  facts  tending  to 
show  a  loan,  and  is  confirmed  in  the  testimony  by  two  other 
parties,  but  none  of  them  testifies  to  any  distinct  agreement  to 
reconvey,  or  any  actual  payment,  or  offer  to  pay,  the  whole  of 
the  loan,  but  the  defendant  denies  most  emphatically  that 
there  was  any  loan  or  any  agreement  to  reconvey,  such  evi- 
dence is  not  clear,  precise,  and  indubitable  that  such  transac- 
tion was  intended  as  a  mortgage,  and  the  complainant  must  fail.^ 

The  rule  that,  in  order  that  an  absolute  deed  may  be  estab- 
lished by  parol  testimony  as  a  mortgage,  the  evidence  must  be 
clear  and  certain,^  applies  also  to  an  instrument  which  clearly 
shows  upon  its  face  to  be  a  conditional  sale.  Thus,  property 
may  be  conveyed  by  deed  which  will  be  construed  as  evidenc- 
ing a  conditional  sale,  and  not  a  mortgage,  though  the  con- 
sideration is  the  payment  of  a  debt  due  from  the  vendor,  with 
a  condition  for  repurchase  by  paying  the  amount  of  the  origi- 
nal debt  and  interest  wdthin  a  designated  time.  This  occurs 
when  it  is  intended  and  stipulated  that  the  debt  is  paid  by  the 
conveyance.  If  the  deed  was  intended  merely  as  a  security 
for  the  debt,  it  would  be  regarded  as  evidencing  a  mortgage. 
If  the  deed  recites  in  terms  that  the  sale  is  conditional,  the 
burden  of  proof  is  uj^on  one  who  seeks  to  have  it  construed  as 
a  mortgage,  and,  to  recover,  he  must  so  establish  it  wdth  clear- 
ness and  certainty.^ 

The  rule  is  general  that  a  deed  of  land,  absolute  on  its  face, 
with  no  defeasance  in  the  instrument  or  in  a  collateral  paper, 
may  be  shown  to  be  a  mortgage  by  parol  evidence,  if  the  evi- 
dence is  clear,  unequivocal,  and  convincing ;  otherwise,  the 
presumption  is  that  the  instrument  is  what  it  purports  to  be  on 
its  face.* 

1  Pancake  v.  Cauffman,  114  Pa.  St.  113. 

'Morton  ?-.  Woodford  (Ky.),  16  S.  W.  Rep.  528;  Hunter  v.  Maanum,  78 
Wi?.  656;  Downing  v.  AVoodstock  Iron  Co.  (Ala.),  9  South.  Eep.  177 ;  More- 
land  V.  Barnhart,  44  Tex.  275 ;  Pierce  v.  Fort,  60  Tex.  464 ;  Dean  v.  Lyona, 
47  Tex.  18 ;  McNeel  r.  Auldridge,  34  W.  Va.  748.  See  Wallace  v.  Berry 
(Tex.),  IS  S.  W.  Rep.  595. 

*  Miller  v.  Yturria,  69  Tex.  549. 

*Peagler  v.  Stabler,  91  Ala.  308;  Arnold  v.  Mattison,  3  Rich.  Eq.  (S.  Car.) 


124  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

Both  parties  must  understand  that  the  instrument  was 
intended  as  a  mortgage,  or  the  evidence  must  clearly  show 
this ;  that  the  grantor  alone  understood  it  to  be  a  mortgage, 
is  not  sufficient,^  and  contradictory  evidence  on  the  part  of  the 
vendor  will  not  make  an  absolute  deed  a  mortgage.^  How- 
ever, when  the  transaction  indicates  a  security,  it  will  be  de- 
clared a  mortgage.^ 

§112.  The  Statute  of  Frauds  Does  Not  Permit  the  In- 
troduction OP  Parol  Evidence  to  Create  a  Trust. — The 
rule  permitting  parol  evidence  to  convert  an  absolute  deed 
into  a  mortgage  might,  by  analogy,  sustain  the  introduction  of 
parol  evidence  to  take  a  case  of  express  trust  out  of  the  statute 
of  frauds.  But  the  statute  of  frauds  does  not  permit  the  in- 
troduction of  parol  evidence  to  create  a  trust.  The  general 
rule,  however,  recognizes  that  there  is  fraud  in  permitting  the 
grantee  to  hold  the  deed  as  an  absolute  conveyance,  and  also 

153 ;  Lance's  Appeal,  112  Pa.  St.  456 ;  Albany  &  S.  W.D.  Co.  v.  Crawford,  11  Ore. 
243 ;  Erwin  v.  Curtis,  43  Hun  (N.  Y.),  292 ;  Holmes  v.  Grant,  8  Paige  (N.  Y.), 
243  ;  Bingham  v.  Thompson,  4  Nev.  224 ;  Quick  v.  Turner,  26  Mo.  App.  29 ; 
Williams  v.  Stratton,  10  Sm.  &  M.  (Miss.)  418 ;  Faringer  v.  Eamsay,  2  Md. 
365  ;  Knight  v.  McCord,  63  Iowa,  429 ;  Conwell  v.  Evill,  4  Blackf.  (Ind.)  67 ; 
Walker  v.  Bank  (N.  J.),  14  Atl.  Rep.  819 ;  Goree  v.  Clements  (Ala.),  10  Rep. 
906 ;  Mitchell  v.  Wellman,  80  Ala.  16 ;  Williams  v.  Cheatham,  19  Ark.  278 ; 
Adams  v.  Adams,  51  Conn.  544;  Matthews  v.  Porter,  16  Fla.  466;  Town- 
send  V.  Petersen,  12  Colo.  491 ;  Marsh  v.  Marsh,  74  Ala.  418 ;  Satterfield  v. 
Malone,  35  Fed.  Rep.  445 ;  Turner  v.  Wilkinson,  72  Ala.  361 ;  HoAvland  v. 
Blake,  7  Biss.  C.  C.  40 ;  s.  c,  97  U.  S.  624 ;  Moore  v.  Ivey,  8  Ired.  Eq.  (N.  Car.) 
192. 

1  Holmes  v.  Fresh,  9  Mo.  201 ;  Andrews  r.  Hyde,  3  ClifT.  C.  C.  516 ;  Phoenix 
V.  Gardner,  13  Minn.  430.  See,  also,  Todd  v.  Campbell,  32  Pa.  St.  250 ;  Ross  v. 
Brusie,  64  Cal.  245  ;  Matheney  v.  Sandford,  26  W.  Va.  386  ;  Snavely  v.  Pickle, 
29  Gratt.  (Va.)  29  ;  Phelps  v.  Seely,  22  Gratt.  (Ya.)  573 ;  Edwards  r.  Wall,  79 
Va.  321. 

*  Kahn  v.  Weill,  14  Saw.  C.  C.  502 ;  42  Fed.  Rep.  704 ;  Adams  r.  Pilcher, 
92  Ala.  474 ;  Edwards  v.  Rogers,  81  Ala.  568 ;  Blazy  v.  McLean,  129  N.  Y. 
44  ;  Etheridge  v.  Wisner,  86  Mich.  166 ;  Miller  r.  Green,  138  111.  565. 

^Trimble  v.  McCormick  (Ky.),  15  S.  ^Y.  Rep.  358;  Blazy  v.  McLean,  59 
Hun  (N.  Y.),  616;  Kraemer  r.  Adelsberger,  122N.  Y.467,  reversing  55  N.  Y. 
Super.  Ct.  245 ;  Lewis  v.  Bayhss,  90  Tenn.  280 ;  Conant  v.  Riseborough,  139 
111.  383 ;  Wilson  v.  Parshall,  129  N.  Y.  223.  See,  also,  Worley  v.  Dryden,  57 
Mo.  226 ;  Cobb  v.  Dav,  106  Mo.  278. 


EVIDENCE  TO  ESTABLISH  CHARACTER  OF  CONVEYANCE.    125 

fraud  in  procuring  the  deed,  accident,  or  mistake  in  the  execu- 
tion of  the  deed.  Thus  when  a  deed  is  made  absolute  upon 
its  face  without  any  mistake  or  fraud  on  the  grantee's  part,  his 
mere  refusal  to  perform  the  trust,  is  not  such  a  fraud  as  will 
justify  the  admission  of  parol  evidence  and  the  enforcement  of 
the  trust.  ^ 

So  tliis  principle  is  illustrated  in  the  following  case :  A  tes- 
tator was  about  to  change  his  will  so  as  to  give  one  of  the 
legatees  a  much  larger  amount  than  he  had  designated  in  the 
will.  It  was  suggested  to  him  by  his  attorney  that  if  the 
other  legatees  would  give  a  bond  to  pay  the  amount  it  would 
be  sufficient,  and  one  of  the  others  being  present,  promised 
that  they  would  do  it,  and  the  alteration  of  the  will  was 
abandoned.  The  bill  was  filed  to  enforce  the  promise,  but  the 
chancellor  held  it  to  be  against  the  statute  of  frauds;  that 
there  was  no  ground  for  relief  on  the  head  of  accident  or 
fraud ;  that  every  breach  of  promise  is  not  a  fraud,  nor  does  it 
appear  that  the  testator  was  drawn  in  by  this  promise  not  to 
add  the  legacy  to  the  codicil.  This  was  then  a  refusal  by  one 
having  the  legal  title  without  fraud  to  execute  a  trust,  which 
the  testator  had  by  parol  declared,  and  which  the  devisee  had 
promised  to  execute.^ 

So,  again,  the  question  arose  as  to  the  admissibility  of  parol 
evidence  to  show  that  a  devise  of  lands  was  in  trust,  and  it 
was  conceded  that  it  could  not  be  admitted,  except  on  the 
ground  of  fraud,  and  the  question  then  occurred  whether  the 
mere  refusal  to  perform  the  trust  was  such  fraud  as  would 
justify  its  admission.     The  court  says : 

"  The  question  has  been  as  to  the  circumstances  which  con- 
stitute such  a  fraud  as  will  be  made  the  foundation  of  a  de- 
cree. A  mere  refusal  to  perform  the  trust  is  undoubtedly  not 
enough,  else  the  statute  which  requires  a  will  of  land  to  be  in 
writing  would  be  altogether  inoperative,  and  it  seems  to  be 
requisite  that  there  should  appear  to  have  been  an  agency 

*  Easdall  r.  Rasdall,  9  Wis.  379 ;   McCormick  v.  Herndon,  67  Wis.  648 ; 
Butler  V.  Butler,  46  Wis.  430 ;  Rockwell  v.  Humphrey,  57  Wis.  410. 
^Whitton  V.  Russell,  1  Atk.  448. 


126  NATURE   AND    REQUISITES    OF    THE    CONTRACT. 

active  or  passive,  on  the  part  of  the  devisee  in  procuring  the 
devise."  ^ 

So  a  grantor  in  an  absohite  conveyance  of  land  not  alleging 
fraud  or  mistake,  cannot  prove  by  parol  that  the  grant  was  in 
trust  for  himself,  because  no  parol  trusts  of  land  can  be 
allowed  without  overthrowing  the  provisions  of  the  statute  of 
frauds.^ 

The  fact  that,  though  the  grantor  was  to  retain  posses- 
sion, there  was  no  time  appointed  to  pay  the  principal, 
nor  any  stipulation  to  pay  interest,  nor  an}^  note  or  security 
taken  for  the  debt  connected  with  the  absolute  form  of  the 
deed,  may  suffice  to  show  that  no  mortgage  was  intended.^ 

The  mere  refusal  of  the  grantee  to  execute  a  parol  trust,  is 
not  such  a  fraud  as  will  take  the  case  out  of  the  provisions  of 
the  statute  of  frauds.*  The  fraud  which  justifies  the  admissi- 
bility of  parol  evidence,  must  be  such  as  affects  the  transfer  or 
disposition  of  the  property.^  Because  a  trust  is  created  by 
parol  contract  it  does  not  necessarily  follow  that  it  may  not  be 
enforced  in  equity.  On  the  contrary,  if  it  be  afterward  ad- 
mitted and  the  party  does  not  insist  upon  the  defense  of  the 
statute  of  frauds,  a  court  of  equity  will  decree  a  specific  per- 
formance.^ 

§113.  Parol  Evidence  May  be  Admitted  to  Show  the 
Intention  op  the  Parties. — The  admission  of  oral  testimony 
to  show  a  deed  absolute  on  its  face  to  be  a  mortgage,  is  not  a 
violation  of  the  rule  which  precludes  such  admission  for  the 
purpose  of  varying  or  contradicting  the  terms  of  a  written 
agreement ;  that  rule  has  reference  to  the  language  of  which 

1  Hoge  r.  Hoge,  1  Watts  (Pa.),  163.  See,  also,  Pinnock  v.  Clough,  16  Vt. 
500;  Thomas  v.  McCormack,  9  Dana  (Ky.),  109. 

'  Sturtevant  v.  Sturtevant,  20  N.  Y.  39. 

^Edwards  v.  Wall,  79  Va.  321. 

*  Dean  V.  Dean,  6  Conn.  28-4 ;  Bander  v.  Snyder,  5  Barb.  (N.  Y.)  63 ;  La- 
throp  V.  Hoyt,  7  Barb.  (N.  Y.)  59. 

^Streator  v.  Jones,  1  Murph.  (N.  Car.)  449;  Thompson  v.  Patton,  5  Litt. 
(Ky.)  74. 

«  Barren  v.  Joy,  16  Mass.  221 ;  Cottington  v.  Fletcher,  2  Atk.  155 ;  Forster  v. 
Hale,  3  Ves.  696 ;  5  Ves.  308 ;  Hampton  v.  Spencer,  2  Vem.  288. 


EVIDENCE  TO  ESTABLISH  CHARACTER  OF  CONVEYANCE.    127 

the  instrument  is  the  repository ;  but  this  permits  an  inquiry  as 
to  the  intention  of  the  parties  in  executing  and  receiving  the 
instrument,  and  equity  exercises  jurisdiction  to  carry  out  such 
intention,  and  to  prevent  fraud  and  imposition  and  to  promote 
justice/ 

It  is  a  question  of  intention  which  may  be  proved  by  parol 
evidence.^  To  insist  on  what  was  really  a  mortgage  as  a  sale, 
is  to  equity  a  fraud  which  cannot  be  successfully  practiced 
under  the  shelter  of  any  written  contract,  however  precise  and 
complete  it  may  be,  and  the  court  will  admit  oral  evidence  to 
find  out  the  intention  of  the  parties  at  the  time  of  the  trans- 
action.^ 

To  attempt  to  convert  a  mortgage  into  an  absolute  sale  is  a 
fraud.  It  is  in  this  view  of  the  case  that  parol  evidence  is 
admitted  to  ascertain  the  truth  of  the  transaction  and  the 
intent  of  the  parties.* 

The  intention  of  the  parties  may  be  shown  by  extrinsic  and 
parol  evidence,  and  convert  a  conveyance  of  land,  absolute  on 
its  face,  into  a  mortgage  as  between  the  original  parties.^ 

In  connection  with  parol  evidence,  the  following  circum- 
stances have  great  weight  in  determining  that  a  deed  absolute 
on  its  face  is  merely  a  mortgage : 

1.  That  the  grantor  was  hard  pressed  for  money  and  that 
the  grantee  was  a  known  money-lender.  2.  That  the  actual 
execution  of  the  deed  was  preceded  by  a  negotiation  for  a 
loan  of  money  by  the  grantor  to  the  grantee.  3.  That  the 
parties  did  not  apparently  consider  or  contemplate  the  quantity 
or  value  of  the  land  when  the  deed  was  made.  4.  That  the 
price  professedly  given  for  the  land  was  grossly  inadequate. 

1  Nat.  Bank  v.  Ashmead,  23  Fla.  379.  See,  also,  Peugh  v.  Davis,  96  U.  S. 
336 ;  Franklin  v.  Aver,  22  Fla.  654 ;  Shear  r.  Robinson,  18  Fla.  379 ;  Pierce  v. 
Robinson,  13  Cal.  116;  Lindsay  v.  Matthews,  17  Fla.  585. 

^  Crane  v.  Bonnell,  1  Green,  Ch.  (N.  J.)  264 ;  Youle  v.  Richards,  Sax.  (N.J.) 
537. 

'ConAvay  v.  Alexander,  7  Cranch  (U.  S.),  238. 

♦Prince  v.  Bearden,  1  A.  K.  Marsh.  (Ky.)  170;  Oldham  v.  Halley,  2  J.  J. 
Marsh.  (Ky.)  114 ;  Overton  v.  Bigelow,  3  Yerg.  (Tenn.)  513. 

*  Edwards  v.  Wall,  79  Va.  321 ;  Snavely  v.  Pickle,  29  Gratt.  (Va.)  27. 


128  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

5.  Thcat  the  possession  of  the  land  had  remained  with  the 
grantor  whether  rent  be  nominally  reserved  or  not,  and  if  no 
rent  is  ever  professedly  reserved,  this  last  circumstance  is  en- 
titled to  very  great  weight  if  unexplained/ 

Courts  of  equity  will  give  the  instruments  the  effect  con- 
templated by  the  parties.  If  they  are  dealing  with  reference 
to  a  loan  and  the  deed  intended  as  security  for  money  loaned, 
parol  evidence  is  admissible  to  explain  the  true  character  of 
the  transaction,  and  it  may  be  construed  to  be  a  mere  security 
for  the  money  loaned.^ 

But  the  intention  may  show  that  the  instrument  is  a  sale. 
Thus,  prior  to  the  execution  of  a  deed,  the  grantor  was  in- 
debted to  the  grantee  in  the  sum  of  $1,800,  and  a  deed  was 
given  in  satisfaction  of  this  indebtedness.  At  the  time  of  the 
execution  the  grantor  gave  the  grantee  his  note  for  $500,  under 
an  agreement  that  if  the  proceeds  of  the  land  conveyed  did 
not  amount  to  $1,800  and  interest,  then  the  note  would  be 
paid,  but  not  otherwise,  and  if  the  proceeds  amounted  to  more 
than  that  sum,  or  if  after  that  sum  was  realized  any  remained, 
the  surplus  of  land  or  money  should  belong  to  the  grantor. 
It  was  held  that  there  was  no  intention  to  mortgage.^ 

Declarations  made  after  the  execution  of  the  deed  by  the 
grantee  of  his  intention  to  hold  the  propert}^  under  the  deed, 
or  any  facts  tending  to  show  after  intention,  are  only  admissi- 
ble in  evidence  so  far  as  they  tend  to  prove  the  original  inten- 
tion at  the  time  the  instrument  was  made.^ 

And  in  an  action  to  recover  land  where  defendant  claims 
that  his  absolute  deed  to  plaintiff  was  a  mortgage,  he  will, 
under  the  rule  that  one  asking  equity  must  do  equity,  be 
required  to  pay  not  only  the  amount  intended  to  be  secured 

1  Kerr  v.  Hill,  27  W.  Va.  576.  See,  also,  Matheney  v.  Sandford,  26  W.  Va. 
386 ;  Vangilder  r.  Hoffman,  22  W.  Va.  2. 

2  Freeman  v.  Wilson,  51  Miss.  329  ;  Kenton  v.  Yandergrift,  42  Pa.  St.  339 ; 
Littlewort  v.  Davis,  50  Miss.  407. 

'Manasse  v.  Dinkelspiel,  68  Cal.  404. 

*  McMillan  v.  Bissell,  63  Mich.  66.  See,  also,  Jackson  v.  Mumford,  74  Tex. 
104 ;  Buffum  v.  Porter,  70  Mich.  623 ;  Gilchrist  v.  Beswick,  33  W.  Va.  168 ; 
Hoflfman  v.  Ryan,  21  W.  Va.  415 ;  Vangilder  v.  Hoffman,  22  Va.  1. 


EVIDENCE  TO  ESTABLISH  CHARACTER  OF  CONVEYANCE.    129 

thereby,  but  also  whatever  else  he  may  owe  the  holder  of  such 
title.' 

§  114.  Inadequacy  of  Price  as  an  Element  Showing  that 
THE  Transaction  was  Intended  as  a  Mortgage. — Inade- 
quacy of  price  ma}^  be  an  element  of  considerable  importance 
in  showing  the  intention  of  the  parties.  But  the  mere  fact 
that  the  property  was  conveyed  for  a  less  sum  than  its  real 
value,  is  not,  of  itself,  sufficient  to  authorize  a  court  to  declare 
a  deed  absolute  upon  its  face  to  be  a  mortgage ;  because  a  man 
in  embarrassed  circumstances  may  often  be  compelled  by  the 
lawful  desire  to  pay  his  debts,  to  dispose  of  his  property,  hon- 
estly, for  much  less  than  its  true  value.^ 

Still  great  inadequacy  between  the  value  of  the  property 
covered  and  the  price  alleged  to  have  been  paid  for  it,  is  a 
circumstance  tending  strongly  to  show  that  a  deed  absolute  in 
form  is  only  a  mortgage.'^  One  of  the  circumstances  tending 
strongly  to  show  that  a  deed  absolute  in  form  is  only  a  mort- 
gage, is  the  fact  that  there  is  great  inequality  between  the 
value  of  the  property  conveyed  and  the  price  alleged  to  have 
been  paid  for  it.  And  it  is  generally  held  that,  in  examining 
this  question,  it  is  of  great  importance  to  inquire  whether 
the  consideration  is  adequate  to  induce  a  sale.  When  no  fraud 
is  practiced,  and  no  inequitable  advantages  taken  of  pressing 
wants,  owners  of  property  do  not  sell  it  for  a  consideration 
manifestly  inadequate,  and  therefore,  in  cases  on  this  subject, 
great  stress  is  justly  laid  upon  the  fact  that  what  is  alleged  to 
have  been  the  j)rice,  bore  no  proportion  to  the  value  of  the 
thing  said  to  have  been  sold.^ 

'Levi  V.  Blackwell  (S.  Car.),  15  S.  E.  Rep.  243. 

nValkor  v.  Bank  (Del.),  14  Atl.  Rep.  819;  Pierce  v.  Traver,  13  Nev. 
526. 

^  Husheon  v.  Husheon,  71  Cal.  407. 

*  Russell  V.  Southard,  12  How.  (U.  S.)  139 ;  Morris  v.  Nixon,  1  How.  (U.  S.) 
126;  Vernon  v.  Bethell,  2  Eden,  110;  Oldham  v.  Halley,  2  J.  J.  Marsh.  (Ky.) 
114 ;  Edrington  v.  Harper,  3  J.  J.  Marsh.  (Ky.)  354  ;  Conway  v.  Alexander,  7 
Cranch  (U.  S.),  241 ;  Husheon  v.  Husheon,  71  Cal.  407  ;  Gilchrist  v.  Beswick, 
33  W.  Va.  168 ;  Pearson  v.  Seay,  35  Ala.  612 ;  Freeman  v.  Wilson,  51  Miss. 
329. 

VOL.  I. — 9 


130  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

§115.  If  THE  Transaction  Shows  that  the  Relation  of 
Debtor  and  Creditor  is  Created,  it  will  be  Considered  a 
Mortgage. — In  determining  the  question  whether  a  deed  ab- 
sohite  on  its  face  is  what  it  purports  to  be,  or  a  mortgage,  the 
fact  that  the  parties,  after  the  execution  of  the  deed,  still  under- 
stood that  the  relation  of  creditor  and  debtor  continues,  in 
respect  to  the  debt  on  which  the  deed  is  founded,  must  gener- 
ally be  regarded  as  designed  to  show  that  the  instrument  was 
intended  to  be  a  mortgage.^ 

Still  it  is  not  enough  that  the  relation  of  borrower  and  lender, 
or  debtor  and  creditor,  existed  at  the  time  the  transaction  was 
entered  upon.  Negotiations  begun  with  a  view  to  a  loan  or 
security  for  a  debt,  may  fairly  terminate  in  a  sale  of  the  property 
originally  proposed  for  security.  And  if,  without  fraud,  or  unfair 
advantage  taken,  a  sale  is  the  real  result,  and  not  a  form  adopted 
as  a  cover  or  pretext,  it  should  be  sustained  by  the  court. 

The  chief  inquiry  is,  generally,  whether  a  debt  was  created 
by  the  transaction,  or  an  existing  debt,  which  formed  or  entered 
into  the  consideration,  continued  and  kept  alive  afterward.  If 
the  purchaser,  instead  of  taking  the  risk  of  the  subject  of  the 
contract  on  himself,  take  a  security  for  repayment  of  the  prin- 
cipal, that  will  vitiate  the  transaction,  and  render  it  a  mort- 
gage security.  Any  recognition  of  the  debt  as  still  subsisting, 
if  cleary  established,  is  equally  efficacious  ;  as  the  receipt  or 
demand  of  interest.^ 

Proof  of  the  existence  and  continuance  of  the  debt,  for 
which  the  conveyance  was  made,  if  not  decisive  of  the  char- 
acter of  the  transaction  as  a  mortgage,  is  most  influential  to 
that  effect;  j'^et  the  absence  of  such  proof  is  far  from  being 
conclusive  to  the  contrary.^ 

The  burden  of  proof  is  upon  the  grantor  in  an  action  to 

redeem,  to  show  that  the  relation  of  debtor  and  creditor  existed 

between  the  grantee  and  grantor  after  the  delivery  of  the  deed.* 

iBudd  V.  Van  Orden,  33  N.  J.  Eq.  143. 
^  Eaton  V.  Green,  22  Pick.  (Mass.)  526,  530. 

» Campbell  v.  Dearborn,  109  Mass.  130 ;  Brown  v.  Dewey,  1  Sandf.  Ch.  (N.Y.) 
56 ;  Rice  v.  Rice,  4  Pick.  (Mass.)  349  ;  Flagg  v.  Mann,  14  Pick.  (Mass.)  467, 478. 
*  Helms.  V.  Chadbourne,  45  Wis.  60;  McCormick  v.  Herndon,  67  Wis.  648. 


EVIDENCE  TO  ESTABLISH  CHARACTER  OF  CONVEYANCE.    131 

§116.  A  Pre-existing  Indebtedness  as  a  Consideration. 
— It  is  essential  to  a  mortgage  that  there  shall  be  a  debt  to  be 
secured.  It  may  be  antecedent  to  or  created  contemporane- 
ously with  the  mortgage.^  Then  the  only  inquiry  necessary 
to  be  made  is  whether  the  relation  of  debtor  and  creditor  re- 
mains and  a  debt  still  subsists  between  the  parties.  If  it  does, 
then  the  conveyance  must  be  regarded  as  a  security  for  the 
payment  and  be  treated  in  all  respects  as  a  mortgage.^ 

In  such  cases  the  central  fact  to  be  found,  is  the  existence  of 
an  indebtedness  at  the  time  of  the  transaction,  or  one  that 
pre-existed,  and  a  continuation  of  the  relation  of  debtor  and 
creditor.  If  these  facts  be  found,  the  inference  deducible  from 
them,  is  that  the  deed  was  not  made  to  transfer  the  title  to  the 
land  described  in  it,  but  w^as  made  for  the  purpose  of  securing 
the  debt  which  the  grantor  owed  to  the  grantee.^ 

If  there  is  a  debt  due  from  the  grantor  to  the  grantee,  or  a 
loan  made,  which  the  instrument  secures,  the  transaction  wall 
be  deemed  a  mortgage,  let  it  be  disguised  as  it  may.  Xo  evi- 
dence of  indebtedness  may  be  taken  or  preserved,  and  yet  the 
debt  may  remain.'*  For  the  sake  of  giving  the  transaction  the 
appearance  of  a  sale,  all  such  evidence  is  usually  avoided  or 
concealed.^ 

If  the  transaction  is  based  upon  a  pre-existing  debt  or  loan 
of  money,  it  must  clearly  appear  that  such  debt  was  extin- 
guished, or  it  will  be  held  that  the  new  arrangement  is  a  mere 
change  of  security."  The  question  in  such  cases  is.  Is  the  old 
debt  surrendered  or  cancelled  at  the  time  of  the  conveyance  ?  ^ 

If  the  deed  or  conveyance  be  accompanied  by  a  condition 
or  matter  of  defeasance  expressed  in  the  deed,  or  is  contained 
in  a  separate  instrument,  or  let  the  consideration  for  it  be 

^  Snavely  v.  Pickle,  29  Gratt.  (Va.)  35. 

^  Robinson  v.  Cropsey,  2  Edw.  Ch.  (N.  Y.)  138  ;  Slee  v.  IVIanhattan  Co.,  1 
Paige  (N.  Y.),  56. 
^Montgomery  v.  Spect,  55  Cal.  352. 

*  Loving  r.  Milliken,  59  Tex.  423. 
*Gibbs  V.  Penny,  43  Tex.  560. 

*  Puffier  V.  Womack,  30  Tex.  332. 
^Holmes  v.  Grant,  8  Paige  (N.  Y.),  243. 


132  NATURE   AND    REQUISITES    OF    THE    CONTRACT. 

a  pre-existing  debt  or  a  present  advance  of  money,  the  only 
inquiry  necessary  to  be  made  is  whether  the  relation  of  debtor 
and  creditor  remains,  and  a  debt  still  subsists  between  the 
parties.  For  if  it  does,  then  the  conveyance  must  be  regarded 
as  a  security  for  the  payment  and  be  treated  in  all  respects  as 
a  mortgage.' 

So  when  the  transaction  grows  out  of  a  pre-existing  debt  or 
loan  of  money,  it  must  clearly  appear  that  such  debt  is  extin- 
guished, or  it  will  be  held  that  the  new  arrangement  is  a  mere 
change  in  the  security.^ 

But  if  the  debt  forming  the  consideration  for  the  convey- 
ance is  extinguished  at  the  time  by  express  agreement  of  the 
parties,  or  the  money  advanced  is  not  paid  by  way  of  loan,  so 
as  to  constitute  a  debt  and  liability  to  repay  it,  but  by  the 
terms  of  the  agreement  the  grantor  has  the  privilege  of  refund- 
ing or  not  at  his  election,  then  it  must  be  deemed  purchase- 
money,  and  the  transaction  will  be  a  sale  on  condition,  which 
the  grantor  can  defeat  only  by  a  re-purchase  or  performance 
of  the  condition  on  his  part  within  the  time  limited  for  the 
purchase,  and  this  may  entitle  himself  to  a  re-conveyance  of 
the  property.^ 

The  burden  is  upon  the  grantor  to  show  that  the  convey- 
ance is  not  what  it  purports  to  be.*  If  a  debt  has  been  ex- 
tinguished the  conveyance  is  not  a  mortgage.^ 

§117.  Possession  Remaining  with  Grantor  is  a  Circum- 
stance Indicating  a  Mortgage. — It  is  generally  conceded 
that  the  possession  remaining  with  the  grantor  after  the  con- 

iSlee  V.  Manhattan  Co.,  1  Paige  (N.  Y.),  56. 

=>  Dougherty  v.  McColgan,  6  Gill  &  J.  (Md.)  275. 

^  Robinson  v.  Cropsey,  2  Edw.  Ch.  (N.  Y.)  138.  See,  also,  Poindexter  v. 
McCannon,  1  Dev.  Eq.  (N.  Car.)  377  ;  McGee  v.  Catching,  33  Miss.  673. 

*Rice  V.  Dale,  107  111.  275  ;  Baisch  v.  Oakeley,  68  Pa.  St.  92;  Matheney  v. 
Sanford,  26  W.  Va.  386. 

5  Todd  ?;.  Campbell,  32  Pa.  St.  250;  Bigelow  v.  TopHff,  25  Vt.  273.  See, 
also,  McDonald  v.  Kellogg,  30  Kan.  170 ;  Hoopes  v.  Bailey,  28  Miss.  328 ;  Car- 
ter V.  Williams,  23  La.  Ann.  281 ;  West  v.  Hendrix,  28  Ala.  226 ;  Ennor  v. 
Thompson,  46  111.  214 ;  O'Neill  v.  Capelle,  62  Mo.  202 ;  Matson  v.  Capelle, 
62  Mo.  235. 


EVIDENCE  TO  ESTABLISH  CHARACTER  OF  CONVEYANCE.    133 

veyance  is  a  circumstance  indicating  a  mortgage.^  Neither  will 
the  transaction  be  held  fraudulent,  because  the  vendor  remains 
in  possession  after  the  sale,  when  it  is  shown  that  this  was  under 
an  agreement  to  pay  rent.^  The  possession  remaining  with  the 
grantor  is  merely  a  circumstance  indicating  a  mortgage.^ 

On  the  other  hand,  if  the  grantee  takes  possession  and  makes 
permanent  improvements,  it  indicates  an  absolute  sale/ 

§  118.  Laches  of  the  Grantor  have  Great  Significance. — 
While  an  absolute  conveyance  may  be  proved  by  oral  evidence 
as  only  a  mortgage,  yet  the  grantor  must  not  sleep  on  his  rights 
if  he  desires  to  redeem.  The  activity  of  equity  powers  cannot 
be  successfully  invoked  when  a  party  has  slept  on  his  rights, 
and  influenced  others  to  act  on  the  confident  belief  that  he  has 
abandoned  them.^ 

Thus,  the  grantor  standing  by  and  seeing  parties  buying  the 
property  and  buildings  on  it,  and  waiting  a  number  of  years 
before  asserting  his  rights  to  redeem  under  a  deed  absolute  in 
form,  which  w^as  in  reality  a  mortgage,  is  guilty  of  such  laches 
as  to  bar  his  recover3\*' 

A  party  who  has  negligently  slept  upon  his  rights,  and 
induced  others  to  act  upon  the  belief  that  he  had  surrendered 
them,  cannot  invoke  the  powders  of  equit3^^ 

The  law  favors  the  vigilant.  It  does  not  permit  one,  after 
having  a  supposed  injury,  to  lie  by  for  years  until  the  circum- 
stances connected  with  it  have  faded  from  the  memory  of  the 
witnesses,  or  who  have  died  or  removed  from  the  country.^ 

But,  as  to  the  legal  effect  of  the  delay  in  claiming  that  a 

1  Skinner  v.  Miller,  5  Litt.  (Ky.)  84;  Hudson  v.  Isbell,  5  St.  &  P.  (Ala.) 
67 ;  Cohvell  v.  Woods,  3  Watts  (Pa.),  188  ;  Wheeland  v.  Swartz,  1  Yeates  (Pa.), 
583 ;  Cotterell  r.  Purchase,  Cas.  Temp.  Talbot,  61  ;  Lincoln  v.  Wright,  4  De 
Gex  &  J.  16 ;  Strong  v.  Shea,  83  111.  575  ;  Wright  r.  Bates,  13  Vt.  .341. 

^Danner  Land  and  Lum.  Co.  v.  Stonewall  Ins.  Co.,  77  Ala.  184. 

*  Huffier  V.  Womack,  30  Tex.  332. 

*  Woodworth  v.  Carman,  43  Iowa,  504. 
*Schradski  v.  Albright,  93  Mo.  42. 

®  Anderson  r.  Frye,  18  111.  94;  Rogers  v.  Saunders,  16  Me.  92;  Patterson  v. 
Martz,  8  Watts  (Pa.),  374  ;  Young  v.  Daniels,  2  Iowa,  126. 
'  Landrum  r.  Union  Bank,  63  Mo.  48. 
^Maher  v.  Farwell,  97  111.  56. 


134  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

deed  absolute  on  its  face  to  be  a  mortgage,  there  is  a  difference 
from  an  executory  contract  of  purchase,  which  requires  the 
vendee  to  be  ever  prompt,  eager,  and  ready  to  perform,  in 
order  to  obtain  the  aid  of  a  court  of  equity  to  enforce  specific 
performance.  If  a  mortgage  was  intended,  it  stamps  the  deed 
wdth  a  legal  effect  that  cannot  be  changed  except  by  payment 
or  release.  The  character  of  the  deed  being  fixed  by  evidence 
as  that  of  a  mortgage,  the  mortgagor  has  the  same  time  to  make 
payment  that  any  other  debtor  has.^ 

So  where,  by  the  terms  of  a  mortgage,  the  mortgagee  is  to 
take  and  keep  possession  of  the  mortgaged  i^roperty  and  apply 
the  rents,  issues,  and  profits  to  his  debt,  until  it  is  fully  paid 
from  that  source,,  his  possession  will  not  become  adverse,  nor 
will  the  statute  of  limitations  commence  running  against  the 
mortgagor,  until  the  debt  secured  by  the  mortgage  is  paid  as 
specified." 

Where  the  bill  to  redeem  was  brought  thirteen  years  after  the 
conveyance,  and  seven  years  after  the  grantee  disclaimed  any 
right  in  the  grantor  to  the  property,  no  excuse  appearing  for 
such  delay,  the  grantor  is  barred  from  redeeming  the  property.^ 

§  119.  When  tpie  Evidence  is  not  Satisfactory,  the 
Transaction  Will  be  Declared  a  Sale. — If  the  evidence  is 
not  clear  and  satisfactory,  the  presumption  is  that  the  instru- 
ment is  what  it  purports  to  be.* 

Thus  when  the  grantor  presents  no  direct  evidence  of  an 
alleged  agreement  by  the  grantee  to  loan  money  and  take  a 
deed  for  security,  the  evidence  is  not  sufficiently  clear  and 
satisfactory,  and  the  presumption  is  that  the  transaction  was, 
in  fact,  an  absolute  conveyance  just  as  it  appears  from  the  face 
of  the  deed  to  be,  and  is  of  considerable  weight.^ 

So  where  a  deed  of  trust  is  executed  with  the  understanding 

1  Odenl  )augh  v.  Bradford,  67  Pa.  St.  96 ;  De  France  v.  Be  France,  34  Pa.  St.  385. 

*  Anding  v.  Davis,  38  Miss.  574. 

^Maher  v.  Farwell,  97  111.  56.  See,  also,  Badger  r.  Badger,  2  Wall.  (U.  S.) 
87 ;  Marsh  r.  Whitmore,  21  Wall.  (U.  S.)  178. 

*  Wilson  V.  Parshall,  129  N.  Y.  223 ;  2  Whar.  Ev.  1032. 
5  Albany  &  S.  W.  D.  Co.  v.  Crawford,  11  Ore.  243. 


EVIDENCE  TO  ESTABLISH  CHARACTER  OF  CONVEYANCE.     135 

between  the  parties  that  the  title  is  to  be  transferred  forever 
from  the  grantor  to  the  grantee  and  his  heirs  or  grantees,  such 
deed  is  not  a  mortgage/ 

In  the  case  that  the  grantee  did  not  intend  to  make  a  loan, 
and  refused  to  deal  except  as  a  purchaser,  and  made  no  agree- 
ment to  reconvey  in  case  of  repayment  of  the  purchase-money, 
the  conveyance  is  a  sale,  especially  when  the  transaction  took 
place  fourteen  years  before  action  by  grantor  for  redemption.^ 

§  120.  The  Grantor  Who  Seeks  Equity  Must  Do  Equity. 
— When  the  transaction  has  been  established  as  a  mortgage, 
it  is  not  competent  for  the  grantor  to  insist  upon  a  foreclosure 
thereof  until  he  pays  the  amount  due.  Equity  requires,  be- 
fore the  grantor  can  have  an  absolute  conveyance  transformed 
into  a  mortgage  and  redemption,  that  he  should  be  willing  to 
pay  the  amount  due.^ 

It  is  very  clear  that  when  the  grantor  brings  his  action, 
offering  to  redeem  and  praying  that  the  premises  may  be  re- 
conveyed  to  him,  the  court  is  authorized  to  declare  that  the 
deed,  absolute  in  its  terms,  was  intended  as  a  mortgage,  and  to 
prescribe  the  terms  of  redemption  and  reconveyance.  Such 
judgment  is  as  binding  upon  the  grantor  in  respect  to  the  re- 
demption as  upon  the  grantee  in  respect  to  the  character  of 
the  instrument  and  reconveyance.  It  is  one  of  the  incidents 
of  a  mortgage  that  where  the  mortgagor  seeks  the  aid  of 
equity  in  effecting  a  redemption  the  court  may  prescribe  the 
terms  of  the  redemption.* 

To  set  aside  a  conveyance  for  which  the  grantor  has  received 
money,  or  to  compel  a  reconveyance  to  himself,  he  must  first 
pay  back  all  the  money  he  has  received,  with  interest  thereon, 
and  do  whatever  else  may  be  necessary  to  put  the  grantee  in 
as  good  condition  as  he  would  be  if  the  transaction  had  never 
been  completed.^ 

'McDonald  v.  Kellogg,  30  Kan.  170. 

^De  France  v.  De  France,  34  Pa.  St.  385,  393. 

'White  V.  Lucas,  46  Iowa,  319. 

*  Cowing  V.  Rogers,  .34  Cal.  648. 

'Lee  V.  Stone,  5  Gill  &  J.  (Md.)  21. 


136  NATURE   AND    REQUISITES    OP    THE    CONTRACT. 

And  it  is  generally  held  that  the  relief  afforded  by  equity 
in  declaring  a  conveyance  of  real  estate,  absolute  in  form,  to 
be  a  mortgage,  where  it  is  shown  by  oral  evidence  that  it  was 
given  as  security  for  the  payment  of  a  debt,  is  given  on  purely 
equitable  grounds,  and  in  the  absence  of  such  equitable  con- 
sideration the  relief  will  be  refused.     Judge  Wells  says : 

"  One  who  comes  for  relief  into  a  court  whose  proceedings 
are  intended  to  reach  the  conscience  of  the  parties,  must  first 
have  that  standard  applied  to  his  own  conduct  in  the  trans- 
action out  of  which  his  grievance  arises.  If  that  condemns 
himself,  he  cannot  insist  upon  applying  it  to  the  other  party."  ^ 
And  when  a  party  has  made  an  absolute  deed  in  order  to  pro- 
tect his  property  from  his  creditors,  equity  will  not  relieve  him 
on  his  own  application.^ 

So,  too,  when  a  party  has  resorted  to  an  absolute  deed  with 
a  separate  defeasance  for  the  purpose  of  covering  up  a  con- 
tract of  usurious  interest,  he  is  not  entitled  to  the  statutory 
penalties  or  forfeiture  for  usury,  but  must  refund  the  whole 
amount  of  money  borrowed,  with  legal  interest.  Upon  the  pay- 
ment of  the  principal,  interest,  and  taxes,  the  grantor  will  be  en- 
titled to  a  conveyance,  but  a  court  of  equity  will  impose  terms 
on  him  to  do  equity,^  and  a  subsequent  purchaser  must  have 
notice  of  the  nature  of  the  transaction  between  the  original 
parties  to  it,  or  the  right  of  redemption  will  not  be  allowed.'' 

The  grantor  must  do  equity  before  he  can  redeem.  Thus, 
a  party  took  an  assignment  of  a  land  contract  as  security,  and 
without  a  demand  of  the  assignor,  who  had  succeeded  to  the 
rights  of  the  vendee  for  the  amount  due  him,  demanded  and 
received  a  deed  of  the  land  from  the  vendor,  and  then  took 
possession  of  the  premises  and  refused  his  assignor's  offer  to 
pay  the  amount  secured  by  the  assignment,  claiming  to  be  ab- 
solute owner  of  the  property.  The  court  allowed  the  assignor 
to  redeem  from  the  assignee  on  payment  of  amount  of  the 

^  Hassam  v.  Barrett,  115  Mass.  256. 

2  Arnold  v.  Mattison,  3  Rich.  Eq.  (S.  Car.)  153. 

^Heacock  !-.  Swartwout,  28  111.  291. 

*  Maxfield  v.  Patchen,  29  111.  39. 


EVIDENCE  TO  ESTABLISH  CHARACTER  OF  CONVEYANCE,     137 

assignee's  claim,  including  taxes  paid  on  the  property,  less  the 
rental  value  of  the  same  during  assignee's  unlawful  occupancy, 
and  costs  of  the  court/ 

On  the  other  hand  when  the  mortgagee  in  a  suit  to  redeem 
sets  up  an  unwarranted  or  unconscientious  defense,  and  thereby 
makes  costs  and  delay,  he  is  chargeable  with  the  costs  of  the 
suit.^ 

Each  party  must  do  equity. 

Thus  a  party  borrowed  an  amount  of  money  and  transferred 
a  note  and  mortgage.  The  assignment  of  the  mortgage  was 
absolute  in  form  and  recited  a  valuable  consideration.  The 
assignee  transferred  the  note  before  it  came  due  and  assigned 
the  mortgage  to  a  third  party  as  collateral  security.  It  was 
held  that  on  a  bill  in  equity  brought  by  the  first  assignor 
against  his  assignee  and  the  third  party  to  redeem  the  note 
and  mortgage,  that  the  recital  of  the  consideration  in  the  as- 
signment of  the  mortgage  to  the  first  assignee,  was  not  alone 
sufficient  to  put  the  third  party  on  inquiry,  or  to  prove  fraud 
on  his  part,  and  that  the  first  assignor  could  redeem  only  on 
payment  of  the  amount  for  which  the  third  party  held  the 
note  and  mortgage  as  collateral  security.^ 

And  when  the  account  has  been  stated  by  the  court  which 
is  due  the  grantee,  the  grantor  must  pay  this  amount  in  order 
to  have  the  grantee's  interest  reconveyed  to  him.* 

§  121.  The  Rights  of  Creditors  op  the  Grantor. — The 
creditors  can  go  into  equity  and  show  the  nature  of  the  gran- 
tor's sale.  Thus,  judgment  creditors  of  the  grantor  will  be 
permitted  to  redeem  the  premises  in  the  hands  of  the  heirs  or 
personal  representatives  of  the  grantee,  upon  the  payment  of 
the  amount  justly  due.'^  A  judgment  creditor  having  pur- 
chased the  land  conveyed  by  his  debtor  to  another,  may  show 

1  Meigfl  )'.  McFarlan,  72  Mich.  194. 

^Turner  r.  Johnson,  95  Mo.  4.31 ;  Fleming  v.  Harrison,  2  Bibb  (Ky.),  172; 
Slee  V.  Manhattan  Co.,  1  Paige  (N.  Y.),  81. 
^Brigga  r.  Rice,  130  Mass.  .50. 
*Pond  ;'.  Eddy,  113  Mass.  149. 
*Van  Buren  v.  Olmstead,  5  Paige  (N.  Y.),  9. 


138  NATURE    AND    REQUISITES    OF   THE    CONTRACT. 

that  the  absokite  conveyance  of  the  land  made  by  the  debtor 
was  in  fact  a  mortgage,  and  he  is  entitled  to  a  conveyance  of 
it  upon  paying  any  balance  due  upon  the  mortgage.^ 

So  a  creditor,  having  a  deed,  absolute  in  terms,  to  secure  a 
debt,  with  the  intention  of  putting  it  in  the  form  of  a  mort- 
gage, conveyed  it  back  to  his  grantor,  and  simultaneously  took 
a  mortgage.  It  was  held  that  he  did  not  lose  his  lien  as  against 
a  junior  judgment  creditor  of  the  grantor.^ 

A  creditor  of  a  grantor  may  show  that  his  debtor's  deed  is, 
in  fact,  a  mortgage,  and  may  enforce  a  judgment  against  the 
property  to  the  extent  of  any  surplus,  after  the  mortgage  debt 
is  paid.^ 

A  creditor,  at  execution  sale,  can  obtain  no  higher  title  than 
his  debtor  had  to  the  property.  So  when  the  property  is  levied 
on  b}''  a  creditor  of  the  grantee,  the  grantor  can  redeem  by 
paying  the  mortgage  debt.* 

§  122.  In  General,  the  Legal  Effect  of  the  Instrument 
IS  A  Question  for  the  Court. — At  law,  in  most  jurisdictions, 
parol  evidence  is  not  admissible  to  show  that  an  absolute  deed 
on  its  face  is  only  a  mortgage.^  But  in  many  States  parol  evi- 
dence is  admissible  at  law.*^  It  is  the  duty  of  the  court  to 
construe  the  legal  effect  of  a  written  instrument  offered  in 
evidence  which  is  ambiguous.  As  a  general  rule  this  construc- 
tion should  be  based  upon  the  terms  of  the  instrument  itself.'^ 

To  convert  a  deed  absolute  on  its  face  into  a  mortgage  by 
parol  evidence,  the  evidence  must  be  clear,  precise,  indubitable, 

1  Jud.se  V.  Reese,  24  N.  J.  Eq.  387. 

2  Christie  v.  Hale,  46  111.  117 ;  Curtis  v.  Root,  20  111.521. 
^  Allen  V.  Kemp,  29  Iowa,  452. 

*  Leech  v.  Hillsman,  8  Lea  (Tenn.),  747. 

5  McLean  v.  Ellis,  79  Tex.  398  ;  Stinehfield  v.  Milliken,  71  Me.  567  ;  Reading 
V.  Weston,  8  Conn.  117 ;  Hogel  v.  Lindell,  10  Mo.  483 ;  Farley  v.  Goocher, 
11  Iowa,  570 ;  but  in  Iowa  parol  evidence  is  admissible  at  law.  See  McAn- 
nulty  V.  Seick,  59  Iowa,  586 ;  Webb  v.  Rice,  6  Hill  (N.  Y.),  219 ;  Bragg  v. 
Massie,  38  Ala.  89 ;  Jones  v.  Blake,  33  Minn.  362 ;  Moore  v.  Wade,  8  Kan.  380. 

«Tillson  V.  Moulton,  23  111.  648;  Jackson  v.  Lodge,  36  Cal.  28;  Kent  v. 
Agard,  24  Wis.  378 ;  Pancake  v.  Cauffinan,  114  Pa.  St.  113  ;  Ruffier  v.Womack, 
30  Tex.  332. 

'Alstin  V.  Cundiflf,  52  Tex.  453,  461. 


EVIDENCE  TO  ESTABLISH  CHARACTER  OF  CONVEYANCE.     139 

and  sufficient  to  satisfy  the  mind  of  the  chancellor,  otherwise 
it  is  error  to  submit  it  to  the  jury.  Judge  Green  says,  speaking 
for  the  court :  "  Sitting  as  judges  in  chancery,  we  are  not 
satisfied  with  the  testimony  in  support  of  this  claim.  To  our 
minds  it  is  shocking,  both  to  the  moral  and  the  judicial  sense, 
to  permit  a  recovery  upon  such  a  state  of  facts.  We  think  the 
learned  court  below  should  have  given  a  binding  instruction  to 
the  jury  to  find  a  verdict  for  the  defendant."  ^ 

And  it  may  be  laid  down  as  a  general  rule  in  law  that  the 
court  must  construe  the  instruments  in  the  first  place,  and  Iut 
struct  the  jury  as  to  their  effect,  and  then  to  charge  them  what 
is  necessary  to  be  proved  in  order  to  show  the  conveyance  to 
be  a  mortgage.  The  charge,  or  instructions,  as  a  whole,  should 
be  full,  clear,  and  concise,  and  distinctly  present  the  issues 
made  by  the  pleadings  and  evidence.^ 

If  the  relation  of  debtor  and  creditor  exists,  with  its  recip- 
rocal rights,  and  continues  between  the  contracting  parties,  or 
if  such  relation  is  created,  by  a  loan  or  advance,  and  if  the 
agreement,  whether  in  the  deed  or  in  a  separate  instrument 
concurrently  executed,  is  such  that  the  debtor,  by  merely  pay- 
ing his  debt,  becomes  entitled  to  insist  upon  a  reconveyance, 
or  otherwise  to  defeat  the  estate  conveyed,  the  conveyance  will 
be  regarded  as  a  security  for  such  continuing  or  newly-incurred 
debt,  and  hence  a  mortgage ;  ^  and  a  deed  and  an  agreement 
in  writing,  executed  contemporaneously  therewith,  having 
these  characteristics,  constitute  a  mortgage  by  construction  of 
law.^  And  parol  evidence  cannot  be  received  for  the  purpose 
of  showing  that  the  parties  intended  that  a  transaction  evi- 
denced by  writings  of  that  description,  should  constitute  a 
sale.'^ 

In  a  late  case,  the  question  came  up  in  regard  to  impeach- 
ment of  some  of  the  witnesses  for  the  grantor.     Several  wit- 

'  Pancake  v.  Cauffman,  114  Pa.  St.  113  ;  Null  v.  Fries,  110  Pa.  St.  521. 
"^  Miller  v.  Yturria,  69  Tex.  549. 

'Cox  V.  Ratcliffe,  105  Ind.  374;  Cornell  v.  Hall,  22  Mich.  377;  Peugh  v. 
Davis,  96  U.  S.  332. 
*Voss  V.  Eller,  109  Ind.  260. 
*  Proctor  V.  Cole,  66  Ind.  576. 


140  NATURE    AND    REQUISITES   OF    THE   CONTRACT. 

nesses  for  the  grantee  were  permitted,  over  grantor's  objection, 
to  testify  as  to  the  reputation  of  two  of  the  grantor's  witnesses 
for  truth  and  veracity,  from  their  knowledge  of  what  that  repu- 
tation was  some  four  years  before  tlie  trial.  The  court  held 
that  the  weight  of  authority  is  that  there  is  no  inflexible  rule 
confining  the  reputation  for  truth  and  veracity,  which  may 
properly  be  given  in  evidence  to  impeach  a  witness  as  to  his 
re]3utation  at  or  very  near  the  time  of  the  trial  at  which  he 
testifies ;  but  that,  as  respects  this  matter  of  time,  it  is  for  the 
court  to  receive  or  reject  the  proposed  impeaching  testimony, 
in  the  exercise  of  sound  discretion.^ 

It  is  the  duty  of  the  court  to  pass  upon  the  admissibility  of 
evidence,  and  it  is  none  the  less  so  where,  in  order  to  make 
such  determination,  the  court  is  obliged  to  examine  and  pass 
upon  questions  of  fact.^  It  is  the  general  rule  that  it  is  error 
to  submit  these  preliminary  questions  of  fact  to  the  jury.^ 

In  a  suit  in  equity,  the  intention  of  the  parties  to  the  instru- 
ment, outside  of  the  instrument  itself,  becomes  a  question  of 
fact  to  be  decided  by  the  chancellor  upon  extrinsic  evidence.* 
If  the  defeasance  be  executed  simultaneously  with  the  deed,  it 
is  a  conclusion  of  law  that  they  constitute  together  a  mortgage.^ 

§  123.  A  Question  for  the  Jury  Under  Proper  Instruc- 
tions FROM  the  Court. — In  those  jurisdictions  where  parol 
evidence  is  admitted  at  law  as  well  as  in  equity,  if  parol  evi- 

^  Buse  V.  Page,  32  Minn.  111.  See,  also,  Teese  r.  Huntingdon,  23  How. 
(U.  S.)  2 ;  Snow  v.  Grace,  29  Ark.  131 ;  Rathbun  v.  Ross,  46  Barb.  (N.  Y.)  127  ; 
Kelly  V.  State,  Gl  Ala.  19 ;  Sleeper  v.  Van  Middlesworth,  4  Den.  (N.  Y.)  431. 
But  see  Chance  v.  Indianapolis,  etc.,  Co.,  32  Ind.  472 ;  Rawles  v.  State,  56  Ind. 
433 ;  Mitchell  v.  Commonwealth,  78  Ky.  219. 

^Robinson  v.  Ferry,  11  Conn.  460;  Carrico  v.  McGee,  1  Dana  (Ky.),  6; 
Carter  v.  Bennett,  6  Fla.  214. 

^Bartlett  v.  Smith,  11  Mees.  &  W.  483;  RatlifF  v.  Huntly,  5  Ired.  L.  (N. 
Car.)  545  ;  Thomason  v.  Odum,  31  Ala.  108 ;  Stowe  v.  Querner,  L.  R.  5  Exch. 
155;  Hartv.  Heilner,  3  Rawle  (Pa.),  407.  But  see  1  Greenl.  Ev.,  sect.  49; 
Esan  V.  Larkin,  Arm.  M.  &  O.,  Irish  Exch.  403 ;  Bartlett  v.  Hoyt,  33  N.  H. 
151,  165 ;  Scott  r.  Coxe,  20  Ala.  294. 

*  Scott  V.  Henry,  13  Ark.  119;  Bishop  r.  Williams,  18  111.  101;  Parish  v. 
Gates,  29  Ala.  254 ;  West  v.  Hendrix,  28  Ala.  226. 

^  Wilson  V.  Shoenberger,  31  Pa.  St.  295. 


EVIDENCE  TO  ESTABLISH  CHARACTER  OF  CONVEYANCE.     141 

dence  must  be  resorted  to  in  order  to  explain  these  terms  or 
the  intention  of  the  parties,  then  the  question  of  construction 
ceases  to  be  one  of  law  simply,  and  becomes  one  of  mixed  law 
and  fact,  to  be  determined  by  the  jury  under  appropriate  in- 
structions from  the  court.^ 

Thus,  when  the  true  intention  of  the  parties  is  not  apparent 
upon  the  face  of  the  instrument  itself,  and  it  is  a  question 
whether  the  transaction  is  a  conditional  sale  or  a  mortgage,  it 
is  to  be  decided  by  the  jury,  under  the  charge  of  the  court, 
from  all  the  facts  and  circumstances  of  the  particular  case.^ 
And  when  the  parol  evidence  is  not  clear,  precise,  indubitable, 
and  sufficient  to  satisfy  the  mind  of  the  court,  it  must  not  be 
submitted  to  the  jury.^ 

Thus,  at  the  time  when  a  deed  was  given,  absolute  upon  its 
face,  conveying  property  as  a  homestead,  it  was  agreed  that  if 
the  vendee  was  afterward  released  from  a  replevy  bond  of  the 
vendor  on  which  he  was  security  he  would  convey  back  the 
land ;  it  was  held  that  the  sufficiency  of  such  parol  evidence  to 
establish  such  agreement  was  a  question  for  the  jury.  But  its 
legal  effect  as  constituting  an  attempted  mortgage  of  the  home- 
stead should  be  given  in  charge  by  the  court.* 

In  many  cases  the  question  will  arise  in  actions  at  law,  in 
which  cases  the  real  intent  of  the  parties  to  the  instrument  will 
be  a  question  of  fact  for  the  jury.^ 

In  those  jurisdictions  where  the  legal  and  equitable  remedies 
are  blended,  it  apj)ears  that  this  should  be  regarded  merely  as 
a  rule  of  evidence,  and  not  as  a  rule  of  procedure  upon  the 
form  of  the  action." 

This  question  of  the  intention  of  the  parties  whether  a  pre- 
existing debt  was  to  be  cancelled,  or  to  secure  its  payment,  is  a 

1  Alstin  V.  Cundiff,  52  Tex.  453,  461. 

"Ruffier  V.  Womack,  30  Tex.  340 ;  Hudson  v.  Wilkinson,  45  Tex.  444. 

^Pancake  v.  Cauffman,  114  Pa.  St.  113. 

*  Ullman  v.  Jasper,  70  Tex.  442. 

^Bemis  v.  Phelps,  41  Vt.  1 ;  Cook  v.  Fire  Ins.  Co.,  67  Cal.  369;  Wood  r. 
Matthews,  73  Mo.  477  ;  Wilson  v.  Shoenberger,  31  Pa.  St.  295  ;  McCoy  v.  Las- 
siter,  95  N.  Car.  88. 

^  Quick  V.  Turner,  26  Mo.  App.  29.  See,  also.  Home  v.  Puckett,  22  Tex.  201 ; 
Simpson  v.  McKay,  12  Ired.  L.  (N.  Car.)  143. 


142  NATURE   AND    REQUISITES   OF   THE    CONTRACT. 

question  of  fact  for  a  jury,  depending  upon  the  negotiations 
had  at  the  time  and  tlie  subsequent  acts  of  the  parties/ 

If  tlie  alleged  defeasance  be  executed  subsequently  to  the 
deed,  it  is  a  question  of  fact  for  the  jury,  where  the  action  is  in 
law  whether  the  transaction  was  intended  as  a  sale  or  merely 
as  a  security  for  money  loaned.^ 

§  124.  Instructions  which  Enunciate  the  Law. — When 
an  exception  is  taken  to  instructions,  the  assignment  must 
point  out  wherein  the  instruction  is  erroneous ;  if  the  assign- 
ment of  error  is  too  general,  the  Supreme  Court  will  not  con- 
sider it.  Thus,  uj)on  the  inspection  of  the  record  it  appeared 
that  the  special  instructions  asked  by  the  defendant  contained 
six  paragraphs,  relating,  at  least,  to  two  distinct  defenses,  and 
the  court  held  that  this  assignment  was  too  general  to  be  en- 
titled to  any  consideration.^ 

The  instruction  must  be  based  upon  the  evidence,  and  an 
abstract  proposition  of  law  to  characterize  such  instruction  is 
not  erroneous.  Thus,  the  court,  among  other  things,  instructed 
the  jury  that  a  mortgage  of  land  is  to  secure  the  payment  of 
money  owed  by  the  mortgagor  to  the  mortgagee  ;  that  if,  when 
the  grantor  made  the  deed  to  the  grantee,  it  was  understood 
between  the  parties  that  the  grantor  was  under  no  obligation 
or  promise,  either  verbal  or  written,  to  pay  the  grantee  any- 
thing, but  the  grantee  gave  him  the  option  to  repurchase  the 
land  if  he  chose,  then  the  transaction  was  not  a  mortgage,  and 
the  jury  must  regard  the  grantee  as  the  owner  of  the  land. 
The  first  part  of  this  instruction,  which  was  said  to  be  particu- 
larly misleading,  is  correct  as  an  abstract  proposition,  and  was 
manifestly  introduced  merely  to  characterize  the  last  part.  To 
charge  the  jury  that  to  show  by  parol  that  a  deed  absolute  in 
form  is  a  mortgage,  the  evidence  must  be  clear  and  convinc- 
ing, is  not  error.* 

» Cook  V.  Fire  Ins.  Co.,  67  Cal.  369. 
^Wilson  V. Shoenberger,  31  Pa.  St.  295. 

'Howard  v.  Kopperl  (Tex.),  5  S.  W.  Rep.  627.    See,  also,  Railroad  Co.  v. 
Leak,  64  Tex.  655. 
*  McCormick  v.  Herndon,  67  Wis.  648. 


EVIDENCE  TO  ESTABLISH  CHARACTER  OF  CONVEYANCE.     143 

Upon  the  question  of  notice,  the  court  charged  that  there 
are  two  kinds  of  notice,  and  if  a  party  has  either  he  is  not 
an  innocent  purchaser.  One  kind  of  notice  is  actual,  the  other 
constructive.  Notice  is  actual  when  a  party  knows  that  some 
person  has  an  adverse  title  to  the  land  he  is  purchasing. 
When  a  deed  is  recorded  in  the  proper  office  in  the  county  in 
which  the  land  is  situated,  the  record  is  constructive  notice  to 
all  persons  that  the  land  is  claimed  by  the  person  named  as 
vendee  in  the  record ;  but  the  record  of  the  deed  in  another 
county  than  that  in  which  the  land  is  situated  is  not  construc- 
tive notice  of  an  adverse  claim.  Then,  if  from  the  evidence 
you  believe  that  the  purchaser  from  the  grantee  bought  the 
land  in  good  faith,  and  paid  a  valuable  consideration  therefor, 
without  notice  of  the  claim  of  the  original  grantor,  and  could 
not  have  known  of  such  claim  by  the  use  of  ordinary  dili- 
gence, then  you  will  find  for  the  purchaser  from  the  grantee. 
But,  on  the  contrary,  if  you  believe  the  purchaser,  at  the  time 
of  his  purchase  from  the  grantee,  knew  of  the  original  grantor's 
claim,  or  by  the  use  of  ordinary  diligence  could  have  known 
of  it,  then  you  will  find  for  the  original  grantor ;  this  instruc- 
tion is  correct. 

The  court  says  if  there  is  error  in  the  charge  at  all,  it  is  in 
favor  of  the  purchaser  in  this :  that  the  court  did  not  inform 
the  jury  that  the  purchaser  from  the  grantee  might  be  charged 
with  constructive  notice  upon  information  of  such  facts  and 
circumstances  as  should  prompt  a  reasonable  man  to  make  in- 
quiry about  the  title  he  was  buying.  The  charge,  considered 
as  an  entirety,  as  it  should  be,  is  a  reasonably  fair  exposition 
of  the  law  applicable  to  the  facts  of  the  case.' 

In  general,  the  instruction  must  be  full,  clear,  and  concise, 
and  distinctly  present  the  issues  made  by  the  pleading  and 
the  evidence.^ 

§125.  Instructions  which  are  Erroneous. — An  instruc- 
tion that  there  was  no  evidence  that  the  grantee  or  his  heirs 

>  Howard  v.  Kopperl  (Tex.),  5  S.  W.  Rep.  627,  633. 
*  Miller  v.  Yturria,  69  Tex.  549. 


144  NATURE    AND    REQUISITES    OP   THE   CONTRACT. 

had  ever  claimed  that  the  deed  was  an  absolute  sale,  or  that  it 
was  anything  else  than  a  mortgage,  should  not  be  given,  be- 
cause it  would  imply  that  the  grantee  or  his  heirs  had  ad- 
mitted that  the  deed  was  in  fact  a  mortgage.^ 

And  the  following  instruction  is  erroneous  :  "  The  instrument 
executed  by  defendant  and  his  wife  to  plaintiff  being  a  deed 
of  conveyance  of  the  lot  described  in  the  plaintiff 's  petition,  it 
will  be  so  regarded  by  you  unless  the  preponderance  of  evidence 
clearly  shows  that  the  same  was  intended  by  the  parties,  at 
the  time  of  the  execution,  to  operate  as  a  mortgage,  and,  unless 
you  are  so  satisfied  from  the  evidence  that  it  was  intended  by 
the  parties  to  said  deed,  you  will  find  for  plaintiff."  If 
the  contract  which  was  executed  at  the  date  of  the  deed  did 
not  clearly  show  whether  it  was  a  mortgage  or  not,  it  was  suffi- 
cient for  defendant  to  show  that  it  was  intended  as  such  by 
a  preponderance  of  evidence.  The  court  says,  per  Judge 
Gaines,  the  use  of  the  word  "  clearly  "  was  calculated  to  induce 
the  jury  to  believe  that  more  than  that  was  requisite ;  that 
the  error  is  more  pronounced  in  the  latter  part  of  the  instruc- 
tion, which  in  effect  tells  them  to  find  for  plaintiff  unless  they 
are  clearly  satisfied  by  a  preponderance  of  evidence  that  a 
mortgage  was  intended.^ 

The  following  instruction  is  erroneous  which  charges  the 
jury  that  if  they  "  believe  from  the  evidence  that  there  was  a 
pre-existing  debt  due  by  Henry  Miller  and  this  defendant  to 
plaintiffs,  or  to  each  one  of  them  respectively,  and  that  the  in- 
strument in  writing  executed  by  defendant  and  her  husband 
and  the  plaintiffs,  on  the  9th  day  of  March,  1880,  was  for  the 
purpose  of  securing  said  indebtedness  to  plaintiffs,  and  that 
defendant  had  a  right  to  defeat  said  sale  by  payment  of  a  sum 
or  sums  of  money,  agreed  upon  between  plaintiffs  and  defend- 
ant and  her  husband,  then  said  instrument  constituted  but  a 
mortgage  and  you  will  find  for  the  defendant." 

This  charge  is  calculated  to  mislead  the  jury.  "  It  may  be, 
that  if  we  use  the  word  defeat  in  its  technical  sense,  a  convey- 

'  McCormick  v.  Herndon,  67  Wis.  648. 
^Prather  v.  Wilkina  (Tex.),  4  S.  W.  Rep.  252. 


EVIDENCE  TO  ESTABLISH  CHARACTER  OF  CONVEYANCE.     145 

ance  which  may  be  defeated  by  the  payment  of  a  sum  of 
money  is  but  a  mortgage."  But  if  so  without  some  further 
instruction,  the  jury  would  doubtless  have  understood  this  in- 
struction to  require  them  to  find  for  the  defendant,  if  they 
found  that  within  a  fixed  time,  the  defendant  had  the  right  to 
repay  the  consideration  and  hold  the  property,  or  to  use  other 
words,  if  they  found  the  transaction  a  conditional  sale.^ 

An  absolute  sale  may  be  shown  to  be  a  mortgage,  provided 
the  proof  is  clear  and  certain ;  ^  in  Miller  v.  Yturria,^  the  court 
says :  "  We  think  this  rule  applies  also  to  an  instrument  which 
clearly  shows  upon  its  face  a  conditional  sale.  But  the  pro- 
priety of  giving  this  rule  in  a  charge  to  the  jury  is  not  so  well 
established.  In  Prather  v.  Wilkins,^  the  court  was  held  to  have 
erred  in  instructing  the  jury  that  it  must  have  been  clearly 
shown  that  the  conveyance  in  question  in  that  case  was  in- 
tended as  a  mortgage  in  order  to  find  it  such ;  but  that  decis- 
ion is  placed  upon  the  ground  that  the  instrument  was  not  set 
forth  in  the  record,  and  hence  this  court  did  not  know  whether 
it  appeared  upon  its  face  an  absolute  deed  or  not.  The  ex- 
pression *  clear  and  convincing  proof '  is  a  very  strong  one ; 
and  if  the  evidence  had  left  a  proper  determination  of  the  case 
less  certain  we  might  hold  it  reversible  error."  ^  To  work  a 
reversal  on  account  of  an  improper  instruction,  the  evidence 
should  be  such  as  to  manifest  clearly  that  the  jury  may  have 
been  misled  by  it. 

1  Miller  v.  Yturria,  69  Tex.  549. 

^  Moreland  v.  Barnhart,  44  Tex.  275  ;  Pierce  v.  Fort,  60  Tex.  464. 

3  69  Tex.  549. 

HS.W.Rep.  252. 

5  Miller  v.  Yturria,  69  Tex,  549. 


VOL.  I, — 10 


CHAPTER  V. 

basis  for  the  introduction  of  parol  evidence. 

Article  1. 

Classification  of  the  Legal  Rules. 

§  126.  In  General.  g  128.  The  General  Rule  for  Obtain- 

§  127.  This  Subject  Properly  Belongs  ing  Eelief. 

to  Equity.  ^  129.  Classification  of  Views, 

§  126.  In  General. — The  basis  for  the  introduction  of  parol 
evidence  is  not  the  same  as  laid  down  by  the  decisions  of  the 
various  courts.  In  order  to  solve  the  question  statutory  pro- 
visions control  in  some  of  the  States.  In  many  of  the  jurisdic- 
tions parol  evidence  can  only  be  admitted  in  courts  of  equity, 
while  others  admit  parol  evidence  at  law.  In  the  early  prac- 
tice courts  of  equity  had  exclusive  jurisdiction,  and  based  the 
admission  of  parol  evidence  on  the  ground  of  fraud,  accident, 
or  mistake. 

§  127.  This  Subject  Properly  Belongs  to  Equity. — To 
show  that  a  deed  absolute  on  its  face  is  only  a  mortgage,  by  the 
introduction  of  parol  evidence  is  a  proper  exercise  of  the 
powers  of  courts  of  equity,  and  it  is  held  that  courts  of  law 
have  no  jurisdiction.^  But  this  rule  has  been  greatly  modified 
by  some  of  the  courts,  and  in  some  of  the  States  the  jurisdic- 
tions of  courts  of  law  and  of  equity  have  been  blended. 

§  128.  The  General  Rule  for  Obtaining  Relief. — 
Whether  courts  of  law  or  of  equity  have  jurisdiction  or  whether 
the  question  is  controlled  by  statute,  before  a  party  can  have 
parol  evidence  admitted,  he  must  have  equitable  grounds  for 
such  relief.  If  he  has  perpetrated  a  fraud,  he  has  no  equitable 
grounds  for  relief,  and  the  court  will  afford  him  no  remedy.^ 

1  Foley  V.  Kirk,  33  N.  J.  Eq.  170;  Stinchfield  v.  Milliken,  71  Me.  567. 
^  Arnold  v.  Mattison,  3  Rich.  Eq.  (S.  Car.)  153  ;  Baldwin  v.  Cawthome,  19 
Ves.  166. 

146 


BASIS    FOR    THE    INTRODUCTION   OF    PAROL    EVIDENCE.     147 

It  is  a  general  and  binding  rule  that  he  who  asks  equity  must 
do  equity  ;  for  "  one  who  comes  for  relief  into  a  court  whose 
proceedings  are  intended  to  reach  the  conscience  of  the  parties 
must  first  have  the  standard  applied  to  his  own  conduct  in  the 
transactions  out  of  which  his  grievance  arises.  If  that  condemns 
himself,  he  cannot  insist  upon  applying  it  to  the  other  party."  ^ 

§129.  Classification  op  Views. — In  order  to  settle  this 
question  of  the  admission  of  parol  evidence,  some  of  the  States 
have  enacted  law^s  which  control.  But  the  early  basis  for  the 
admission  of  parol  evidence,  and  so  held  now  by  many  courts, 
was  in  case  of  fraud,  accident,  or  mistake,  which  come  under 
equity  jurisdiction. 

Again,  others  hold  that  it  is  fraud  even  to  insist  that  a  deed 
absolute  on  its  face,  when  in  fact  it  was  intended  as  a  mortgage. 
Others  hold  that  equity  will  look  upon  the  parties  and  decree 
that  in  such  cases  that  a  trust  exists  in  favor  of  the  grantor 
which  can  be  enforced  on  equitable  grounds  in  favor  of  the 
grantee. 

A  large  number  of  the  decisions  hold  that  in  such  transac- 
tions fraud  is  inherent ;  that  the  instrument  is  one  of  oppres- 
sion and  wrong,  and  constitutes  a  quasi  fraud,  which  the  courts 
of  equity  will  settle. 

Again,  in   those  jurisdictions   where    legal   and   equitable 

remedies  are  blended,  some  of  the  courts  appear  to  hold  that 

this  question  should  be  regarded  merely  as  a  rule  of  evidence, 

and  not  as  a  rule  of  procedure  depending  upon  the  form  of 

the  action. 

Article  2. 

Statutory  Provisions  aval  Decisions. 

?  130.  In  General.  §  134.  New  Hampshire. 

§  131.  California.  §  135.  North  Dakota. 

gl32.  Colorado.  .  §136.  Pennsylvania. 

U33.  Georgia.  '  |137.  South  Dakota. 

§  130.  In  General. — In  order  to  settle  this  question  of  the 
introduction  of  parol  evidence,  some  of  the  States  have  enacted 
^  Hassam  v.  Barrett,  115  Mass.  266,  opinion  by  Judge  Wells. 


148  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

laws,  providing  for  the  admission  of  parol  evidence  to  prove  a 
deed,  absolute  on  its  face,  to  be  only  a  security  for  money 
loaned,  and,  hence,  only  a  mortgage. 

Under  these  statutory  provisions,  the  question  is  settled,  and 
the  basis  for  the  introduction  of  parol  evidence  does  not  need 
any  discussion. 

§  131.  California. — The  statute  declares  that  every  transfer 
of  an  interest  in  real  estate,  other  than  in  trust,  made  only  as 
a  security  for  the  performance  of  another  act,  is  to  be  deemed 
a  mortgage  deed ;  and  the  fact  that  the  transfer  was  made  sub- 
ject to  a  defeasance  may  be  proved,  though  it  does  not  appear 
by  the  terms  of  the  instrument.^ 

Whether  a  deed  absolute  in  form  be  a  mortgage  or  not  is  a 
mixed  question  of  law  and  fact,  to  be  determined  from  all  the 
evidence,  written  and  parol;  and  in  determining  it  all  the 
facts  and  circumstances  attending  the  transaction  should  be 
considered. 

If  it  were  given  as  a  security  for  a  loan  of  money,  a  court 
of  equity  will  treat  it  as  a  mortgage ;  and  w^hether  it  was  so 
given  or  not  is  the  test  by  which  its  character  must  be  judged.^ 

Such  parol  evidence  is  admissible  at  law  as  well  as  in  equity, 
and  such  evidence  is  not  restricted  to  cases  of  fraud,  accident, 
or  mistake.^  Fraud  in  the  use  of  such  deed  is  a  question  for 
the  equity  court,  as  much  so  as  fraud  in  the  execution  of  it.^ 

§  132.  Colorado. — It  has  been  enacted  in  Colorado  that  a 
deed  may  be  proved  by  oral  testimony  to  be  in  effect  a  mort- 
gage. The  statute  provides  that  a  mortgage  of  real  property 
shall  not  be  deemed  a  conveyance,  whatever  its  terms,  so  as  to 
enable  the  owner  of  the  mortgage  to  recover  possession  of  the 

'  Civil  Code,  sects.  2924,  2925. 

"  Farmer  v.  Grose,  42  Cal.  169 ;  Montgomery  v.  Spect,  55  Cal.  352 ;  Husheon 
V.  Husheon,  71  Cal.  407  ;  Locke  v.  Moultdn,  30  Pac.  Eep.  957 ;  Ross  v.  Brusie, 
30  Pac.  Rep.  811. 

^Jackson  v.  Lodge,  36  Cal.  28;  Cunningham  v.  Hawkins,  27  Cal.  603. 

*  Pierce  v.  Robinson,  13  Cal.  116,  overruling  Lee  v.  Evans,  8  Cal.  424,  and 
Low  V.  Henry,  9  Cal.  538,  which  declare  fraud,  accident,  or  mistake  the  only 
objects  of  equity  jurisdiction  in  this  matter. 


BASIS    FOR   THE    INTRODUCTION    OF    PAROL    EVIDENCE.     149 

real  property  without  foreclosure  and  sale,  and  the  fact  of  a 
deed  being  a  mortgage  in  effect  may  be  proved  by  oral  testi- 
mon}';  but  this  section  does  not  apply  to  trust  deeds  with 
power  of  sale.' 

But  while  oral  proof  may  be  admissible  to  prove  such  a 
deed  a  mortgage,  yet  the  proof  must  be  clear  and  certain  be- 
yond a  reasonable  doubt.^ 

Thus,  the  plaintiff,  in  January,  1883,  sold  a  half  interest  in 
certain  real  estate.  In  May,  1883,  he  became  embarrassed  and 
conveyed  by  deed  his  remaining  half  interest  in  the  real  estate, 
and,  by  bill  of  sale,  all  his  interest  in  a  partnership  business 
to  the  grantee,  and  received  therefrom  the  sum  of  $975.  The 
court,  by  Judge  Elliott,  says :  "  From  an  examination  of  the 
testimony  we  are  satisfied  that  the  deed  and  bill  of  sale  exe- 
cuted by  plaintiff  to  defendant  in  May,  1883,  were  subject  to 
another  writing  executed  by  defendant  contemporaneously 
therewith,  whereby  defendant  bound  himself  to  reconvey  to 
plaintiff  upon  certain  conditions ;  so  plaintiff's  deed  and  bill 
of  sale  cannot  be  said  to  have  been  absolute  conveyances  at  the 
time  of  their  execution.  .  .  .  The  writing  executed  by  defend- 
ant having  been  lost,  secondary  evidence  of  its  contents  was 
admitted  by  the  referee."  This  the  Supreme  Court  sustained, 
stating  that  parol  evidence  may  be  admitted,  but  the  proof 
must  be  clear,  certain,  and  unequivocal  beyond  a  reasonable 
doubt.^ 

In  regard  to  fraud,  the  rule  is  that  a  deed  absolute  on  its 
face,  but  intended  as  a  mortgage,  is  not  fraudulent  and  void 
as  to  creditors.  Such  conveyances  are  an  indication  of  fraud 
merely  as  against  creditors,  but  not  conclusive  fraud,  and  may 
be  removed  by  evidence  of  an  honest  intent.* 

If  the  grantor  succeeds  in  proving  liis  claim  in  such  a  case, 
it  would  be  much  easier  for  the  creditors  to  subject  the  prop- 
erty to  the  payment  of  their  debts,  because  then  they  would 

'  Civil  Code  Proc,  sect.  20.3. 
nVhitsett  V.  Kershow,  4  Colo.  419. 
'Townsend  v.  Petersen,  12  Colo.  491. 
*  Rosa  I'.  Duggan,  5  Colo.  85. 


150  NATURE    AND   REQUISITES   OF   THE   CONTRACT. 

not  be  compelled  to  prove  that  the  grantee  held  the  property 
in  trust  for  the  grantor/ 

And  where  there  is  a  substantial  conflict  in  the  evidence,  a 
mere  preponderance  is  not  sufficient  to  establish  an  absolute 
deed  as  a  mortgage,  but  it  must  be  shown  that  it  was  exe- 
cuted, delivered,  accepted,  and  intended  as  a  mortgage  by  clear, 
certain,  unequivocal,  and  trustworthy  evidence.^ 

§  133.  Georgia. — In  this  State  the  statute  provides  that  an 
absolute  deed,  accompanied  with  possession  of  the  property, 
shall  not  be  proved,  at  the  instance  of  the  parties,  by  parol 
evidence,  to  be  a  mortgage  only,  unless  fraud  in  its  procure- 
ment is  the  issue  to  be  tried.^ 

Under  this  statute  a  grantor  is  precluded  from  introducing 
parol  evidence  to  prove  a  deed  absolute  on  its  face  to  be  a 
mortgage,  unless  fraud  in  its  procurement  is  charged.  Thus 
grantors  sought  to  recover  land  in  possession  of  grantees  which 
the  grantors  alleged  had  been  set  apart  to  them  as  a  home- 
stead. They  offered  to  prove  that  the  deed  was  given  by  them 
as  security  for  a  debt  which  had  been  paid  before  suit  was 
brought.  The  declaration  or  complaint  did  not  allege  fraud 
in  procuring  the  deed.  It  was  held  that  the  grantors  as 
parties  to  the  deed  would  be  denied  the  right  to  offer  the 
proof  under  the  code,  and  were  therefore  defeated  in  their 
action.* 

But  tax-books  showing  the  return  of  other  lands  for  taxa- 
tion by  the  party  holding  an  absolute  deed  from  the  opposite 
party  to  the  premises  in  dispute,  such  return  not  including 
these  premises,  are  admissible  in  evidence  in  a  proper  case  to 
throw  light  upon  the  question  whether  the  deed  was  taken 
for  permanent  ownership  or  only  as  security  for  a  debt.  And 
a  written  contract  for  the  payment  of  money  by  a  given  day 
may  be  varied  by  a  subsequent  parol  contract  changing  the 
medium  of  payment,  in  whole  or  in  part,  and  if  payment  be 

1  Lathrop  v.  Pollard,  6  Colo.  432. 

2 Perot  V.  Cooper  (Colo.),  28  Pac.  Rep.  391. 

^CivilCode,  sect.  1969. 

<  Mitchell  V.  Fullington,  83  Ga.  301. 


BASIS   FOR    THE   INTRODUCTION    OF    PAROL    EVIDENCE.     151 

actually  made  and  accepted  accordingly,  the  written  contract 
will  be  treated  in  equity  as  fully  performed/ 

The  section  of  the  code  "  which  authorizes  deeds  to  be  made 
with  bond  for  titles  back  as  security  for  money,  declares  such 
conveyances  shall  be  held  by  the  courts  as  absolute  convey- 
ances and  not  mortgages.  This  is  for  the  benefit  of  the  cred- 
itor, to  make  his  security  better,  and  the  act  requires  the  courts 
to  so  hold.  But  if  the  deed  be  tainted  with  usury  it  fails  as  a 
conveyance  of  title.  The  illegal  and  wrongful  conduct  of  a 
creditor,  which  destroys  his  security,  will  not  authorize  a  court 
of  equity  to  change  the  security  into  a  mortgage  and  thus  to 
help  one  who  is  thus  guilty  of  fraud  to  make  deed  absolute  a 
mortgage.  Such  a  transaction  cannot  be  foreclosed  as  an  equit- 
able mortgage.^ 

A  deed  absolute  on  its  face  may  be  shown  by  parol  evidence 
to  be  a  mortgage  in  a  litigation  between  general  creditors  of 
the  grantor  and  his  widow  claiming  her  dower  rights.*  Under 
such  a  deed  the  grantee  can  recover  possession  by  ejectment, 
although  a  formal  mortgage  does  not  give  him  that  right.* 

When  the  deed  is  given  for  security  and  the  object  has  been 
obtained  and  the  obligation  paid,  these  facts  having  been 
established  by  competent  evidence,  then  the  grantee  will  be 
compelled  to  reconvey  the  property  to  the  grantor." 

When  the  question  at  issue  whether  a  deed  was  made  as  an 
absolute  conveyance  of  property  or  simply  as  a  security  for 
money  advanced  to  the  maker,  evidence  of  the  value  of  the 
property  at  the  time  the  deed  was  made  is  pertinent  and 
material.^ 

§  134.  New  Hampshire. — In  this  State  the  statute  declares 
that  no  conveyance  in  writing  of  any  lands  shall  be  defeated,  nor 

'  Jones  V.  Grantham,  80  Ga.  472  ;  opinion  by  Chief  Justice  Bleckley. 

''Sect.  1969. 

'Broach  v.  Smith,  75  Ga.  159 ;  overruling  Bullard  v.  Long,  68  Ga.  821. 

♦Carter  v.  Hallahan,  61  Ga.  314. 

*Thaxton  v.  Roberts,  66  Ga.  704. 

^Biggers  v.  Bird,  55  Ga.  650. 

'Rodgers  v.  Moore  (Ga.),  13  S.  E.  Rep.  962. 


152  NATURE    AND    REQUISITES   OF   THE   CONTRACT. 

any  estate  encumbered  by  any  agreement,  unless  it  is  inserted 
in  the  condition  of  the  conveyance,  and  made  part  thereof,  stating 
the  sum  of  money  secured,  or  other  thing  to  be  performed.^ 

If  the  condition  described  the  thing  to  be  done  with  reason- 
able certainly,  it  is  sufficient.  That  may  sometimes  be  the 
case,  when  the  precise  thing  to  be  done  cannot  be  known  but 
by  reference  to  private  papers  in  the  custody  of  the  parties. 
The  omission  of  the  sum  described  in  a  note,  the  date,  and  the 
name  of  one  of  the  signers,  is  not  fatal,  if  the  note  is  so  de- 
scribed as  to  be  identified.^ 

A  deed  containing  a  proviso  that  "  if  the  grantor  should 
comply  with  the  condition  of  a  certain  bond,  executed  by  him 
to  the  grantee  at  the  same  time,  then  the  deed  to  be  void,"  is  a 
valid  mortgage,  notwithstanding  that  the  sum  to  be  paid,  or 
the  matters  to  be  performed,  are  not  particularly  set  forth  in 
the  deed  itself.^ 

Under  this  statute  where  a  party  loaned  a  sum  of  money, 
taking  an  absolute  deed  of  real  estate  as  security,  and  giving 
at  the  same  time  a  bond  to  reconvey  on  the  payment  of  the 
amount,  with  interest,  within  a  certain  time,  it  was  held  that 
the  transaction  did  not  constitute  a  mortgage,  that  the  agree- 
ment operated  as  a  secret  trust  that  the  grantee  should  hold  the 
land,  subject  to  a  right  in  the  grantor  to  redeem  and  have  a 
reconveyance,  and  that  the  deed  therefore  was  void  as  against 
the  creditors  of  the  grantor.*  And  an  absolute  conveyance, 
made  for  the  purpose  of  securing  of  a  debt,  with  an  under- 
standing between  the  parties  that  the  land  should  be  recon- 
veyed  upon  payment  of  the  debt,  is  void  as  against  creditors.* 
If  the  conveyance  is  intended  only  to  secure  the  debt,  that 
intent  must  be  in  some  writing,  made  at  the  time,^  and  in  some 
writing  to  be  put  upon  the  record,  and  to  operate  as  a  notice/ 

1  Rev.  Stat.,  ch.  131,  sect.  2. 

2  Boody  V.  Davis,  20  N.  H.  140. 
'Bassett  v.  Bassett,  10  N.  H.  64. 
*  TiflPt  V.  Walker,  10  N.  H.  150. 

6  Smith  V.  Lowell,  6  N.  H.  67 ;  Winkley  v.  Hill,  9  N.  H.  31. 
e  Smith  v.  Lowell,  6  N.  H.  67. 
'Tifit  V.  Walker,  10  N.  H.  150. 


BASIS    FOR    THE    INTRODUCTION    OF    PAROL    EVIDENCE,     153 

It  is  held  that  a  condition  in  tlie  mortgage  to  indemnify  the 
mortgagee  against  loss  by  reason  of  his  having  indorsed  for  the 
mortgagor  certain  notes  "  now  payable  and  at  the  Bank  of 
Newburg,  Vermont,"  and  notes  "  now  payable  and  at  the 
Bank  of  St.  Johnsbury,  Vermont,"  was  sufficiently  certain  to 
warrant  the  admission  of  parol  evidence  to  show  what  notes 
indorsed  by  the  mortgagee  were  intended  to  be  secured  by  the 
mortgage.^ 

It  is  not  necessary,  where  a  note  or  obligation  is  offered  in 
evidence  in  connection  with  a  mortgage  that  all  the  particulars 
of  it  should  be  specified  in  the  condition  in  order  to  identify 
it  as  the  note  intended  to  be  and  actually  secured  by  the 
mortgage.  A  general  agreement  with  the  description  is 
sufficient ;  and  parol  evidence  may  be  introduced  to  further 
identify  it.^ 

One  of  the  indemnifying  clauses  in  the  condition  of  two  mort- 
gages given  by  a  party,  provided  that  the  grantee  should  be  held 
harmless  from  all  liabilities  where  he  was  bound  by  the 
grantor,  and  the  other  provided  that  the  grantee  should  be 
held  harmless  from  all  losses,  cost,  and  expense  from  all 
liabilities  he  might  be  under  by  reason  of  signing  notes,  bonds, 
receipts,  and  other  papers  with  the  grantor.  It  was  held  that 
these  conditions  were  sufficient  to  include  a  liability  incurred 
by  signing  as  surety  for  the  grantor  a  note,  and  loss  from  the 
payment  of  the  same  before  the  mortgages  were  made,  although 
the  particular  note  was  not  described  in  the  condition  of  the 
mortgages ;  and  that  the  note  might  be  identified,  by  extrin- 
sic evidence,  as  one  for  the  payment  of  which  the  mortgages 
were  intended  as  security.^ 

So,  again,  two  notes  were  described  in  a  mortgage  as  being 
for  $150  each.  One  note  produced  in  evidence  was  for  $150, 
and  the  other  for  $200  ;  but  in  all  other  respects  they  corre- 
sponded with  those  described   in  the  mortgage.     It  was  held 

^  Benton  I'.  Sumner,  57  N.  H.  117 ;  New  Hampshire  Bank  v.  Willard,  10 
N.  H.  210. 
''Melvin  v.  Fellows,  33  N.  H.  401, 
"Barker  v.  Barker,  62  N,  H.  366. 


154  NATURE   AND    REQUISITES   OF   THE    CONTRACT. 

that  parol  evidence  was  admissible  to  show  that  those  two 
notes  were  the  ones  which  the  parties  in  good  faith  intended 
to  secure  by  the  mortgage,  and  upon  its  so  appearing  such  a 
mortgage  would  be  a  valid  instrument  to  secure  both  notes/ 
The  Act  of  1829  was  not  changed  in  the  revision.^ 

§  135.  North  Dakota. — The  statute  declares  that  every 
conveyance  of  an  interest  in  land  not  in  trust,  made  as  secu- 
rity for  the  performance  of  another  act  shall  be  deemed  a 
mortgage ;  and  the  fact  that  the  transfer  was  made  subject  to  a 
defeasance  may  be  proved  by  parol  evidence,  except  as  against 
a  subsequent  purchaser  or  incumbrancer  for  value  and  without 
notice,  though  the  defeasance  does  not  appear  in  the  instru- 
ment.^ 

§  136.  Pennsylvania. — This  question  has  been  set  at  rest 
by  an  enactmeni  which  provides  that  no  defeasance  shall  have 
the  effect  of  reducing  an  absolute  deed  to  a  mortgage  unless 
it  be  made  in  writing,  signed,  sealed,  acknowledged,  and  de- 
livered by  the  grantee,  and  recorded  within  sixty  days  from 
the  execution  of  the  same.*  This  excludes  parol  evidence,  ex- 
cept to  prove  those  mortgages  made  before  this  statute  took 
effect.  Hence,  a  deed,  absolute  on  its  face,  executed  prior  to 
this  act  may  be  converted  into  a  mortgage  by  parol  testimony, 
yet  the  evidence  must  be  clear,  explicit,  and  unequivocal.  It 
must  show  an  agreement,  in  the  nature  of  a  defeasance,  con- 
temporaneous with  the  execution  of  the  deed:  evidence  of 
subsequent  admissions  alone  is  insufficient.^  If,  however,  the 
consideration  has  been  paid,  the  mere  fact  that  the  grantee 
executed  articles  of  agreement  giving  the  grantor  the  option 

1  Cushman  v.  Luther,  53  N.  H.  563. 

i^Kingsley  r.  Holbrook,  45  N.  H.  321 ;  Benton  v.  Sumner,  57  N.  H.  117. 

3  Civil  Code  of  1877,  sects.  1724,  1726. 

*Pub.  Laws  of  1881,  p.  84 ;  Act  of  June  8,  1881. 

5  Fisher  v.  Witham,  132  Pa.  St.  488 ;  Todd  v.  Campbell,  32  Pa.  St.  250 ; 
Plumer  v.  Guthrie,  76  Pa.  St.  441 ;  De  France  v.  De  France,  34  Pa.  St.  385 ; 
Rhines  v.  Baird,  41  Pa.  St.  256 ;  Nicolls  v.  McDonald,  101  Pa.  St.  514 ;  Oden- 
baugh  V.  Bradford,  67  Pa.  St.  96 ;  McClurkan  v.  Thompson,  69  Pa.  St.  305  ; 
Berger  v.  Dankel,  100  Pa.  St.  113  ;  Harper's  Appeal,  64  Pa.  St.  315. 


BASIS    FOR    THE    INTRODUCTION    OF    PAROL    EVIDENCE.     155 

to  repurchase  the  property  within  a  certain  time,  will  not  con- 
stitute the  transaction  a  mortgage.^ 

If  land  be  conveyed  in  consideration  of  a  pre-existing  debt 
due  from  the  grantor  to  the  grantee,  and  it  is  the  understand- 
ing of  the  parties  that  the  debt  shall  survive,  the  deed  is  but 
a  mortgage.  This  understanding  may  be  proved  by  parol,  but 
the  debt  must  survive.  That  the  written  evidence  of  it  remains 
in  the  grantee's  hands  is  not  enough  if  the  liability  be  gone.^ 

Before  the  Act  of  1881  to  convert  such  a  deed  into  a  mort- 
gage by  parol  evidence,  such  evidence  must  be  clear,  explicit, 
and  unequivocal,  and  the  j^arol  defeasance  must  be  shown  to 
be  contemporaneous  with  the  deed.  The  evidence  may  be 
direct,  or  it  may  be  made  up  of  facts  and  circumstances  clearly 
inconsistent  with  the  deed  being  an  absolute  conveyance.^ 

Since  the  Act  of  June  8,  1881,  a  written  defeasance  signed 
by  the  grantee  and  unacknowdedged  and  unrecorded,  though 
contemporaneous  with  the  execution  and  delivery  of  the  deed 
absolute  on  its  face,  will  not  be  admitted  to  convert  such  deed 
into  a  mortgage.* 

§  137.  South  Dakota. — The  statute  of  South  Dakota  is  the 
same  as  that  of  North  Dakota,  not  having  been  changed  since 
the  admission  of  the  Territory  as  two  States.  The  statute  de- 
clares that  every  transfer  of  an  interest  in  real  estate  not  in 
trust,  made  as  a  security  for  the  performance  of  another  act,  is 
to  be  deemed  a  mortgage ;  and  the  fact  that  the  transfer  was 
made  subject  to  defeasance  may  be  proved  by  parol  evidence, 
except  as  against  a  subsequent  purchaser  or  incumbrancer  for 
value  and  in  good  faith,  though  the  defeasance  does  not 
appear  by  the  terms  of  the  instrument.^ 

iNull  V.  Fries,  110  Pa.  St.  521. 
^Todd  V.  Campbell,  82  Pa.  St.  250. 
'Pearson  v.  Sharp,  115  Pa.  St.  254. 
*Sankey  v.  Hawley,  118  Pa.  St.  30. 
^  Civil  Code  of  1877,  sects.  1724,  1726. 


156 


NATURE   AND    REQUISITES   OF   THE    CONTRACT. 


Article  3. 

Equity  Arising  from  the  Real  Character  of  the  Trans 

U38. 

In  General. 

§154. 

Minnesota. 

039. 

English  View. 

§  155. 

Mississippi. 

U40. 

Doctrine  of  the 

United  States 

§  156. 

Montana. 

Supreme  Court. 

§  157. 

Nevada. 

n4i. 

United  States  Circuit  Court. 

§158. 

New  Jersey 

U42. 

Alabama. 

§159. 

New  Mexico  Terri 

U43. 

Arkansas. 

§160. 

New  York. 

?144. 

Florida. 

§161. 

Ohio. 

U45. 

Illinois. 

§162. 

Oregon 

n46. 

Indiana. 

§163. 

South  Carolina. 

§147. 

Iowa. 

§164. 

Tennessee. 

§148. 

Kansas. 

§  165. 

Utah  Territory. 

§149. 

Louisiana. 

§166. 

Vermont. 

§150. 

Maine. 

§167. 

Virginia. 

§151. 

Maryland. 

§168. 

Washington. 

§152. 

Massachusetts. 

§  169. 

West  Virginia. 

§153. 

Michigan. 

§170. 

Wisconsin. 

§  138.  In  General. — Many  of  the  decisions  at  the  present 
time  hold  that  the  introduction  of  parol  evidence  to  prove  a 
deed,  absolute  on  its  face,  to  be  a  mortgage,  is  a  proper  subject 
for  the  jurisdiction  of  equity ;  that  an  equity  arises  paramount 
to  the  instrument  itself,  which  allows  the  admission  of  parol 
evidence  to  prove  the  real  nature  of  the  transaction  and  the 
intention  of  the  parties,  when  fraud,  accident,  or  mistake  is 
not  alleged.  This  is  the  general  rule,  though  it  is  variously 
stated,  and  often  somewhat  modified. 

§  139.  English  View. — Collateral  evidence  is  admissible  to 
show  the  relationship  of  the  mortgagor  and  the  mortgagee ; 
yet  such  evidence  must  be  sufficient  to  overcome  the  presump- 
tion that  the  deed  of  conveyance  truly  states  the  transaction.^ 
Whenever  it  appears  that  the  conveyance  was  intended  to  be  a 
mortgage  by  the  payment  of  interest,  or  other  circumstances, 
it  will  be  so  decreed.^  And  when  a  mortgage  has  been  drawn 
in  two  deeds,  and  the  mortgagee  has  omitted  to  execute  one  of 

^  Barton  v.  Bank,  15  App.  Cas.  379. 

"^  Cripps  V.  Jee,  4  Bro.  C.  C.  472 ;  Sevier  v.  Greenway,  19  Ves.  413. 


BASIS    FOR   THE    IXTRODUCTION   OF    PAROL    EVIDENCE.     157 

them,  which  contained  the  defeasance,  the  mortgagor  will  be 
entitled  to  show  the  mistake  by  parol  evidence ;  so,  when  a 
covenant  for  redemption  has  been  omitted  by  fraud  or  mistake, 
the  mortgagor  will  be  allowed  in  equity  to  read  evidence  to 
show  the  omission/ 

In  equity  when  the  defeasance  has  been  omitted  by  fraud  or 
mistake,  the  deed  will  be  construed  as  a  mortgage.^  A  verbal 
defeasance  will  also  be  upheld.^ 

§  140.  Doctrine  of  the  United  States  Supreme  Court. — 
It  is  the  doctrine  of  this  court,  that  when  it  is  alleged  and 
proved  that  a  loan  on  security  was  really  intended,  and  the 
grantee  sets  up  the  loan  as  a  payment  of  purchase-money,  and 
the  conveyance  as  a  sale,  both  fraud  and  a  vice  in  the  consid- 
eration are  sufficiently  averred  and  proved  to  require  a  court 
of  equity  to  hold  the  transaction  to  be  a  mortgage.*  Such  suit 
being  in  equity,  oral  evidence  will  be  admitted  or  rejected  upon 
the  principles  of  general  equity  jurisprudence,  and  the  court 
will  be  governed  by  its  own  views  of  those  principles.^ 

The  general  rule  of  this  court  is  that  a  deed  of  lands,  abso- 
lute in  form,  when  executed  as  security  for  a  loan  of  money, 
will  in  equity  be  treated  as  a  mortgage ;  and  evidence,  written 
or  oral,  tending  to  show  the  real  character  of  the  transaction  is 
admissible.  The  court  looks  beyond  the  terms  of  the  instru- 
ment to  the  real  transaction.  As  the  equity  upon  which  the 
court  acts  in  such  cases  arises  from  the  real  character  of  the 
transaction,  any  evidence,  written  or  oral,  tending  to  show  this 
is  admissible.^ 

Thus,  it  may  be  shown  that  a  deed  was  made  to  defraud 
creditors,  or  to  give  a  preference,  or  to  secure  a  loan,  or  for  any 

'  Joynes  v.  Statham,  3  Atk.  389. 

'  Card  V.  Jaffray,  2  Sch.  &  Lef.  374 ;  England  v.  Codrington,  1  Eden,  169  ; 
Maxwell  v.  Mountacute,  Prec.  Ch.  526. 
^Manlove  v.  Ball,  2  Vern.  84. 

*  Russell  V.  Southard,  12  How.  (U.  S.)  139. 

*Robinsonv.  Campbell,  3  A\Tieat.  (U.  S.)  212;  United  States  r.  Rowland, 
4  Wheat.  (U.  S.)  108 ;  Boyle  v.  Zacharie,  6  Pet.  (U.  S.)  658 ;  Swift  r.Tj-son,  16 
Pet.  (U.  S.)  1 ;  Foxcroft  r.  Mallett,  4  How.  (U.  S.)  379. 

*  Peugh  V.  Davis,  96  U.  S.  332. 


158  NATURE    AND    REQUISITES   OF    THE    CONTllACT. 

other  object  not  apparent  on  its  face.  The  object  of  parties  in 
such  cases  will  be  considered  by  a  court  of  equity,  as  it  consti- 
tutes a  ground  for  the  exercise  of  its  jurisdiction,  which  will 
always  be  asserted  to  prevent  fraud  or  oppression,  and  to  pro- 
mote justice.*  And  so  long  as  an  instrument  is  one  of  security, 
the  borrower  has  in  a  court  of  equity  a  right  to  redeem  the 
property  upon  payment  of  the  loan.^ 

Whether  an  absolute  deed  with  agreement  to  reconvey 
is,  in  fact,  a  mortgage  is  to  be  determined  by  the  accom- 
panying circumstances  which  explain  the  object  of  the  agree-, 
ment.^ 

§  141.  United  States  Circuit  Courts. — The  views  of  these 
courts  accord  with  those  of  the  United  States  Supreme  Court, 
that  equity,  to  determine  whether  a  written  instrument  is  in 
effect  a  mortgage,  hears  parol  evidence,  not  to  contradict  or 
vary  the  terms  of  the  instrument,  but  to  raise  an  equity  supe- 
rior to  it  and  give  effect  according  to  the  true  intention  of  the 
parties.^  But  to  convert  a  deed  absolute  on  its  face  into  a 
mortgage  by  parol  testimony,  such  testimony  must  be  clear 
and  specific,  of  a  character  such  as  will  leave  in  the  mind  of 
the  chancellor  no  hesitation  or  doubt.^ 

It  is  the  settled  rule  in  the  Federal  courts  that  oral  evidence 
is  admissible  to  show  that  a  deed  absolute  on  its  face  was  in- 
tended for  a  mortgage.^  Thus  a  bill  was  filed  to  have  a  deed 
absolute  on  its  face  declared  to  be  a  mortgage  by  force  of  a 
defeasance  which  the  bill  alleged  was  by  parol.  The  grantee 
denied  tliat  the  conveyance  was  intended  as  a  mortgage,  and 
set  up  the  statute  of  frauds.  The  grantor  relied  by  the  bill 
solely  on  parol  agreement  for  his  right  of  redemption.  It  was 
held  that  parol  evidence  is  admissible  to  show  that  an  absolute 

1  Hughes  V.  Edwards,  9  Wheat.  (U.  S.)  489 ;  Eussell  v.  Southard,  12  How. 
(U.  S.)  139. 
"^  Peugh  V.  Davis,  96  U.  S.  332. 
^Horbach  v.  Hill,  112  U.  S.  144. 

*  Pioneer  Gold  Min.  Co.  v.  Baker,  23  Fed.  Rep.  258,  Cir.  Ct.  Dist.  Cal. 
^Satterfleld  v.  Malone,  35  Fed.  Rep.  445,  Cir.  Ct.  W.  Dist.  Pa. 
«Amory  v.  Lawrence,  3  Cliff.  C.  C.  523. 


BASIS  FOR  THE  INTRODUCTION  OF  PAROL  EVIDENCE.  159 

deed  was  intended  as  a  mortgage,  and  that  the  defeasance  had 
been  omitted  or  destroyed  by  fraud  or  mistake.^ 

So  a  memorandum  in  writing  was  given  in  such  a  transac- 
tion, but  the  memorandum  disproved  the  allegation  that  the 
conveyance  was  a  mortgage.  Parol  evidence  was  admitted  to 
control  that  memorandum  and  to  prove  that  it  did  not  show 
the  actual  transaction,  and  a  decree  was  made  declaring  the 
conveyance  to  be  a  mortgage  by  force  of  the  parol  evidence 
only.     This  is  the  general  doctrine  of  the  Federal  courts.^ 

§  142.  Alabama. — In  this  State  parol  evidence  is  admissible 
not  only  upon  the  ground  of  fraud,  mistake,  or  accident,  but 
upon  the  ground  of  oppression  and  undue  advantage  or  influ- 
ence.^ So  in  ascertaining  whetlier  an  absolute  deed  is  intended 
as  a  mortgage  or  conditional  sale,  parol  evidence  of  the  inten- 
tion of  the  parties  at  the  time  of  the  execution  of  the  deed  is 
received ;  *  but  for  the  court  of  equity  to  declare  a  deed  to  be  a 
mortgage,  the  proof  must  be  clear  and  convincing.  Loose  decla- 
rations of  trust,  especially  after  great  lapse  of  time,  will  not  be 
allowed  to  overturn,  or  affect  the  written  contract  of  the  parties.^ 

It  is  a  settled  doctrine  that  the  debtor  has,  so  long  as  the 
conveyance  is  intended  for  security,  the  equity  of  redemption, 
which  cannot  be  waived  or  released  by  a  contemporaneous 
agreement,  expressed  in  the  mortgage  or  otherwise,  yet  the 
mortgagor  may,  by  subsequent  agreement,  release  and  transfer 
the  equity  of  redemption  to  the  mortgagee.  Such  release  will 
be  sustained  in  equity,  if  supported  by  a  sufficient  considera- 
tion, and  there  is  an  absence  of  fraud,  oppression,  and  undue 
advantage.® 

1  Taylor  v.  Luther,  2  Sumner,  C.  C.  228  ;  Wyman  v.  Babcock,  2  Curtis,  C.  C. 
386 ;  ienkins  v.  Eldredge,  3  Story,  C.  C.  293. 

nVynian  v.  Babcock,  2  Curtis,  C.  C.  386. 

3  McMillan  v.  Jewett,  85  Ala.  476;  English  v.  Lane,  1  Port.  328;  Bishop  v. 
Bishop,  13  Ala.  475  ;  Locke  v.  Palmer,  26  Ala.  312 ;  Parish  v.  Gates,  29  Ala.  254 ; 
Crews  V.  Threadgill,  35  Ala.  3.34. 

*  Hudson  V.  Isbell,  5  St.  &  P.  67  ;  English  v.  Lane,  1  Port.  328 ;  Turnipseed 
V.  Cunningham,  16  Ala.  501. 

*  Freeman  v.  Baldwin,  13  Ala.  246;  Bryan  v.  Cowart,  21  Ala.  92. 
«Stoutz  V.  Rouse,  84  Ala.  309. 


160  NATURE   AND   REQUISITES   OF   THE   CONTRACT. 

Thus  a  deed  absolute  in  form,  which  neither  expressly  nor 
impliedly  reserves  any  interest  in  the  grantor,  does  not  convey 
an  absolute  title  to  the  grantee,  when  the  grantor's  right  to 
redeem  was  created  by  parol  agreement,  when  the  deed  was 
first  made.  A  parol  agreement  concerning  land  may  be  dis- 
charged by  parol,  and  such  discharge  will  constitute  a  valid 
defense  to  a  bill  to  redeem.  When  the  evidence  fails  to  show 
any  fraud,  undue  influence,  or  oppression,  and  the  weight  of 
evidence  is  that  the  property  was  estimated  at  a  fair  value,  and 
an  indebtedness  satisfied  and  extinguished  by  the  transfer  of  the 
real  estate,  the  transaction  will  be  considered  an  absolute  sale.^ 

§  143.  Arkansas, — In  this  State,  wherever  at  the  time  of  the 
sale  a  vendor  is  indebted  to  the  grantee  and  continues  to  be 
indebted  after  the  sale,  with  a  right  to  call  for  a  reconveyance 
upon  payment  of  the  debt,  a  deed  absolute  on  its  face  will  be 
construed  by  a  court  of  equity  as  a  mortgage.^  And  written 
or  oral  evidence  is  admissible  to  show  the  real  character  of  the 
transaction.^ 

But  in  the  absence  of  express  fraud  and  imposition  the  proof 
must  be  clear  and  decisive.^ 

Judge  Smith  says  that  wherever  at  the  time  of  the  sale  the 
vendor  is  indebted  to  the  purchaser  and  so  continues  after  the 
sale,  with  a  right  to  call  for  a  reconveyance  upon  payment  of 
the  debt,  a  deed  absolute  upon  its  face  will  be  construed  in  a 
court  of  equity  as  a  mortgage,  and  evidence,  written  or  oral,  is 
admissible  to  show  the  real  character  of  the  transaction,  but 
in  the  absence  of  fraud  and  imposition  the  proof  must  be  clear 
and  decisive.® 

Parol  evidence  is  admissible  to  show  the  intention  of  the 
parties,  and  the  fact  that  the  transaction  was  in  effect  a  mort- 

1  McMillan  v.  Jewett,  85  Ala.  476. 

'^  Scott  z'.  Henry,  13  Ark.  112;  Farris  v.  King,  27  Ark.  404;  Eogerg  v. 
Vaughan,  31  Ark.  62. 

'  Porter  v.  Clements,  3  Ark.  364  ;  Johnson  v.  Clark,  5  Ark.  321 ;  Blakemore 
V.  Byrnside,  7  Ark.  505. 

nvilliams  ?;.  Cheatham,  19  Ark.  278;  Trieber  v.  Andrews,  31  Ark.  163; 
Jones  V.  Jones,  23  Ark.  212. 

^  Harman  v.  May,  40  Ark.  146. 


i 


BASIS    FOR   THE    INTRODUCTION    OF    PAROL    EVIDENCE.     161 

gage}     However,  there  are  decisions  which  hold  that  the  basis 
of  the  admission  of  parol  evidence  is  fraud  or  mistake.^ 

§  144.  Florida. — Parol  evidence  is  admissible  in  equity  to 
show  that  an  absolute  deed  was  intended  as  a  mortgage.  The 
court  looks  beyond  the  terms  of  the  instrument  to  the  real 
transaction,  and  any  evidence  tending  to  show  this  is  admissi- 
ble. Equity  will  inquire  into  and  carry  out  this  object,  and 
to  prevent  fraud  and  imposition,  and  to  promote  justice  will 
permit  the  introduction  of  either  written  or  oral  evidence.^  Parol 
evidence  is  admissible  to  connect  papers  which  together  con- 
stitute a  deed  and  defeasance  or  mortgage,  and  to  show  that  an 
instrument  bearing  a  subsequent  date  to  the  deed  was  either 
executed  at  the  same  time,  or  that  its  terms  and  substance  were 
in  fact  agreed  upon  at  the  same  time,  and  though  subsequently 
reduced  to  writing,  constituted  a  part  of  the  same  transaction 
with  the  deed.* 

Parol  evidence  is  admissible  in  equity  to  show  that  a  deed 
absolute  upon  its  face,  was  intended  as  a  mortgage,  and  the 
restriction  of  the  evidence  to  cases  of  fraud,  accident,  or  mis- 
take in  the  creation  of  the  instrument  is  unsound  in  principle 
and  unsupported  by  authority.  The  equity  upon  which  the 
courts  act  arises  from  the  real  character  of  the  transaction,  so 
it  is  of  no  consequence  in  wdiat  manner  this  character  is 
established,  whether  by  deed  or  other  writing,  or  by  parol. 
Whether  the  instrument,  it  not  being  apparent  on  its  face,  is 
to  be  regarded  as  a  mortgage  depends  upon  the  circumstances 
under  which  it  was  made  and  the  relations  subsisting  between 
the  parties.  Evidence  of  these  circumstances  and  relations  is 
admitted,  not  for  the  purpose  of  contradicting  or  varying  the 
deed  but  to  establish  an  equity  superior  to  its  terms.'^ 

'  Anthony  v.  Anthony,  23  Ark.  479. 

"  Blakemore  v.  Byrnside,  7  Ark.  505  ;  Jordan  v.  Fenno,  13  Ark.  593.  But 
the  later  cases  do  not  accord  with  this  doctrine  of  fraud  or  mistake,  but  de- 
clare parol  evidence  is  admissible  to  show  the  real  character  of  the  trans- 
action :  Harman  v.  May,  40  Ark.  146. 

'National  Bank  v.  Ashmead,  23  Fla.  379  ;  opinion  by  Justice  Raney. 

*  Franklin  v.  Ayer,  22  Fla.  654. 

*  Lindsay  v.  Matthews,  17  Fla.  575. 

VOL.  I. — 11 


162  NATURE   AND    REQUISITES    OF    THE    CONTRACT. 

§  145.  Illinois. — The  statute  of  this  State  declares  that  every 
deed  conveying  real  estate,  which  shall  appear  to  have  been 
intended  only  as  a  security  in  the  nature  of  a  mortgage, 
though  it  be  an  absolute  conveyance  in  terms,  shall  be  consid- 
ered as  a  mortgage.^ 

Oral  evidence  is  admissible  in  equity  to  show  that  a  deed 
absolute  in  form  was  intended  as  a  mortgage ;  ^  but  the  evi- 
dence must  be  strong  and  convincing.^ 

Justice  Magruder  says  that  a  deed,  absolute  on  its  face,  may 
be  shown  by  parol  to  be  a  mortgage.  The  law  will,  however, 
presume,  in  the  absence  of  proof  to  the  contrary,  that  such  a 
deed  is  what  it  purports  to  be — an  absolute  conveyance.  The 
party  who  claims  an  absolute  deed  to  be  a  mortgage  must 
sustain  his  claim  by  proof  sufficient  to  overcome  this  presump- 
tion of  the  law.  But  before  a  deed,  absolute  in  form,  will  be 
held  to  be  a  mortgage,  the  evidence  must  be  clear,  satisfactory, 
and  convincing.  It  must  be  made  to  appear  clearly  that  such 
a  conveyance  was  intended  to  be  a  mortgage  at  the  time  of  its 
execution.  The  question  is  one  of  intention  to  be  ascertained 
from  all  the  circumstances.*  The  evidence  must  be  clear 
that  the  deed  was  intended,  at  the  time  of  its  execution,  to  be 
a  mortgage.^  The  evidence  must  be  strong  and  convinc- 
ing.*^ 

The  proof  must  be  clear  that  the  contract  and  intent  of 
the  parties  were  that  the  instrument  should  be  a  mortgage.^ 

Evidence  of  fraud,  or  of  undue  advantage  or  oppression  tends 

1  Eev.  Stat.,  ch.  95,  sect.  12. 

2  Wright  V.  Gay,  101  111.  233. 

^Hartnettr.  Ball,  22  111.  43;  Hancock  v.  Harper,  86  111.  445;  Bartling  v. 
Brasuhn,  102  111.  441. 

*Helm  V.  Boyd,  124  111.  370  ;  Sharp  v.  Smitherman,  85  111.  153 ;  Bartling  v. 
Brasuhn,  102  111.  441 ;  Bentley  v.  O'Bryan,  111  111.  53 ;  Workman  v.  Greening, 
115  111.  477. 

5  Sharp  r.  Smitherman,  85  111.  153. 

6  Hartnett  v.  Ball,  22  111.  43 ;  Hancock  v.  Harper,  86  111.  445 ;  Bartling  v. 
Brasuhn,  102  111.  441. 

^  Clark  V.  Finlon,  90  111.  245  ;  Dwen  v.  Blake,  44  111.  136  ;  Price  r.  Karnes,  59 
ni.  277  ;  Remington  v.  Campbell,  60  111.  516 ;  Magnusson  v.  Johnson,  73  111. 
156 ;  Bailey  v.  Bailey,  115  111.  551. 


BASIS    FOE,    THE    INTRODUCTION    OF    PAROL    EVIDENCE.     163 

to  show  that  an  absolute  conveyance  should  be  regard  as  a 
mortgage.^ 

The  cases  do  not  recognize  that  equity  will  only  take  juris- 
diction under  the  head  of  fraud,  accident,  or  mistake.  The 
rule  seems  to  be  an  independent  head  of  equity.  "  Still  it 
must  have  its  foundation  in  this,  that  where  the  transaction  is 
shown  to  have  been  meant  as  a  security  for  a  loan,  the  deed 
will  have  the  character  of  a  mortgage,  without  other  2:)roof  of 
fraud  than  is  implied  in  showing  that  a  conveyance,  taken  for 
the  mutual  benefit  of  both  parties,  has  been  appropriated  solely 
to  the  use  of  the  grantor."  ^ 

All  circumstances  which  illustrate  the  purpose  and  intent 
of  the  parties,  including  their  declarations  at  the  time  of  the 
execution  of  the  instrument,  may  be  given  in  evidence.^ 

If  the  proof  is  not  clear,  satisfactory,  and  unequivocal,  the 
deed  will  not  be  construed  as  a  mortgage.  Thus,  the  testi- 
mony of  the  grantee  was  positive  and  unequivocal  that  the 
deed  was  intended  to  be  an  absolute  conveyance  and  not  a 
mortgage,  and  that  the  transaction  between  him  and  the 
grantor  was  a  purchase  and  sale  of  the  lots  and  not  a  loan  of 
money.  The  grantor  did  not  claim  and  never  did  claim  an 
equity  of  redemption  in  the  land  since  the  execution  of  the 
deed.  Much  of  the  evidence  adduced  by  the  grantor  was 
equivocal  in  its  character,  and  led  to  no  certain  or  satisfactory 
conclusion.  The  court  declared  that  all  the  evidence  taken 
together,  viewing  it  in  the  light  most  favorable  to  the  grantor, 
left  the  mind  in  serious  doubt  as  to  what  the  real  transaction 
was.  "  It  thus  falls  entirely  short  of  the  measure  of  proof  re- 
quired by  the  decisions  of  this  court  in  order  to  hold  a  deed 
which  on  its  face  is  an  absolute  conveyance,  to  be  a  mortgage," 
hence,  the  deed  was  declared  to  be  an  absolute  conveyance  ac- 
cording to  its  terms.* 

1  Brown  v.  Gaffney,  28  111.  149. 
^liuckman  v.  Alwood,  71  111.  155. 

'Darst  V.  Murphy,  119   111.  343;    Workman   v.  Greening,   115  111.  477; 
Bailey  v.  Bailey,  115  111.  5G1 ;  Clark  v.  Finlon,  90  111.  246. 
*  Strong  V.  Strong,  126  111.  301. 


164  NATURE   AND    REQUISITES   OF    THE   CONTRACT. 

§  146.  Indiana. — A  deed  absolute  on  its  face  may  be  shown 
to  be  a  mortgage  by  parol  evidence.  The  real  nature  of  the 
transaction  may  be  inquired  into,  and  what  purports  to  be  an 
absolute  deed  may  be  shown  to  be  in  legal  effect  a  mortgage. 

A  court  of  equity  will  have  regard  to  the  real  nature  of  the 
transaction,  and  although  a  deed  absolute  in  form,  if  in  fact  it 
was  received  as  a  security  for  the  repayment  of  money,  it  will 
be  treated  as  a  mortgage,  and  evidence,  written  or  oral,  will  be 
received  to  show  the  facts.^ 

Parol  evidence  can  be  received  without  showing  fraud,  acci- 
dent, or  mistake.^ 

The  proof  that  a  deed  is  a  mortgage  in  fact  must  be  clear 
and  decisive.^ 

That  parol  evidence  is  admissible  to  show  that  a  deed,  abso- 
lute on  its  face,  was  intended  to  be  a  mortgage  only,  and  was 
executed  as  a  security  for  the  payment  of  money,  or  the  per- 
formance of  some  act,  is  no  longer  an  open  question  in  Indiana."* 

§  147.  Iowa. — A  deed  absolute  on  its  face  may  be  con- 
verted into  a  mortgage  by  parol  testimony,  where  there  was  a 
contemporaneous  verbal  agreement  that  it  was  a  mortgage,  but 
the  evidence  should  be  clear,  satisfactory,  and  conclusive  and 
not  made  up  of  loose  and  random  conversation.^  The  settled 
rule  is  that  evidence  to  establish  a  deed,  absolute  on  its  face,  to 
be  a  mortgage,  or  that  the  real  estate  described  therein  belongs 
in  fact  to  some  other  person  than  the  grantee,  must  be  clear, 
satisfactory,  and  conclusive.^ 

*  Cox  V.  Ratcliffe,  105  Ind.  374.  And  see  Beatty  v.  Brummett,  94  Ind.  76 ; 
Heath  v.  Williams,  30  Ind.  495  ;  Parker  v.  Hubble,  75  Ind.  580 ;  Creighton  v. 
Hoppis,  99  Ind.  369;  Smith  v.  Parks,  22  Ind.  59;  Crane  v.  Buchanan,  29 
Ind.  570. 

^  Beatty  v.  Brummett,  94  Ind.  76. 

'  Voss  V.  Eller,  109  Ind.  260 ;  Lucas  v.  Hendrix,  92  Ind.  54 ;  Fox  v.  Fraser, 
92  Ind.  265 ;  Herron  v.  Herron,  91  Ind.  278. 

*  Davis  V.  Stonestreet,  4  Ind.  101 ;  Butcher  v.  Stultz,  60  Ind.  170 ;  Wheeler 
V.  Ruston,  19  Ind.  334 ;  Hanlon  v.  Doherty,  109  Ind.  37 ;  Turpie  v.  Lowe, 
114  Ind.  37. 

^Corbit  V.  Smith,  7  Iowa,  60. 

^  Ensminger  v.  Ensminger,  75  Iowa,  89 ;  Kibby  v.  Harsh,  61  Iowa,  196 ; 


BASIS    FOR    THE    INTRODUCTION    OF    PAROL    EVIDENCE.     165 

111  an  early  case  the  court  decided  that  the  determination  of 
the  grantee  to  convert  a  mortgage  into  an  absolute  sale,  which 
was  intended  by  the  parties  as  a  security  for  a  loan,  was  a 
fraud  which  came  under  the  jurisdiction  of  equity,  and  there- 
fore parol  evidence  was  admissible  to  show  the  intention  of  the 
parties  and  the  nature  of  the  transaction/  But  the  present 
time  the  doctrine  is  in  accord  with  the  great  majority  of  de- 
cisions, allowing  the  admission  of  parol  evidence  to  convert  an 
absolute  sale  into  a  mortgage,  providing  the  evidence  is  clear, 
satisfactory,  and  conclusive.^ 

§  148.  Kansas. — Parol  evidence  is  admissible  in  equity  to  de- 
clare a  deed  absolute  on  its  face  to  be  a  mortgage.  The  intention 
of  the  parties  may  be  shown  to  create  a  parol  defeasance.  The 
evidence  is  admitted  to  show  the  facts  in  the  case.  If  given  for  the 
purpose  of  securing  a  debt,  a  deed  will  be  declared  a  mortgage.^ 

But  where  a  deed  of  trust  is  executed  with  the  understanding 
between  the  parties  that  the  title  is  to  be  transferred  from  the 
grantor  to  the  grantee  and  his  heirs,  then  it  is  not  a  mortgage. 
When  the  deed  is  executed  with  the  understanding  between  the 
parties  that  it  is  a  mere  security  for  a  debt,  and  that  when  the 
debt  is  paid  the  title  shall  be  again  placed  in  the  grantor,  such 
deed  of  trust  is  a  mere  mortgage,  and  such  understanding  may 
be  shown  by  parol  evidence.* 

The  court  will  treat  such  a  deed  a  mortgage  when  given  as 
security,  not  only  upon  the  grantor's  application,  but  also  upon 
the  application  of  his  creditors.^  A  court  of  equity,  looking 
back  of  the  form  to  the  substance  of  the  transaction,  will  con- 
strue the  instrument  as  a  mortgage  when  it  is  given  as  a  secu- 
rity, and  decree  a  reconveyance  upon  equitable  grounds.^ 

Knight  V.  McCord,  33  Iowa,  429  ;  Monroe  v.  Graves,  23  Iowa,  597  ;  Nelson  v. 
Worrall,  20  Iowa,  469. 

^Roberts  v.  McMahan,  4  Greene  (Iowa),  34. 

^  Ensminger  ^».  Ensminger,  75  Iowa,  89. 

^  Moore  v.  Wade,  8  Kan.  381 ;  Glynn  v.  Building  Association,  22  Kan.  746; 
Bennett  v.  Wolverton,  24  Kan.  284. 

*  McDonald  v.  Kellogg,  30  Kan.  170. 

» Bennett  v.  Wolverton,  24  Kan.  284. 

8  Bennett  v.  Wolverton,  24  Kan.  284. 


166  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

To  establish  this  fact  by  the  clear  preponderance  of  the 
evidence,  the  proof  must  be  clear  of  all  reasonable  doubt,  and 
such  proof  may  be  by  parol  evidence.^ 

§  149.  Louisiana. — A  debtor  may  convey  his  land  to  his 
creditor  in  the  form  of  a  sale,  in  order  to  secure  the  creditor, 
where  the  value  of  the  property  is  not  in  excess  of  the  debt 
due,  reserving  to  himself  the  right  to  redeem  within  a  certain 
period.  In  one  sense  a  writing  or  contract  which  is  not,  in 
reality  what  it  purports  to  be  is  a  simulation ;  but  if  the  pur- 
pose of  the  contract  be  lawful,  and  the  consideration  be  suffi- 
cient to  support  it,  though  the  design  be  not  actually  that 
which  its  terms  import,  it  is  not  a  fraudulent  simulation,  nor  is 
it  necessarily  without  legal  effect.  The  real  ownership  of  the 
property  sold  may  be  proved.^ 

The  conveyance  of  property  in  the  form  of  a  sale  does  not 
vest  the  ownership  in  the  apparent  buyer  if  the  deed  w^as  really 
intended  by  both  parties  to  be  a  mortgage.  The  answers  of 
one  of  the  parties  to  interrogatories  on  facts  and  articles  pro- 
pounded by  the  other,  are  equivalent  to  counter-letter  and  have 
the  same  force  and  effect,  and  are  unquestionably  admissible 
in  evidence.^ 

Parties  have  the  right  to  contradict  recitals  by  an  appeal  to 
the  conscience  of  the  opposing  party  by  means  of  interrogatories 
on  facts  and  articles.  And  answers  to  such  interrogatories  con- 
fessing the  falsity  of  such  recitals  are  not  parol  evidence,  and 
have  all  the  effect  of  a  counter-letter.* 

The  grantor  to  convert  a  sale  into  a  mortgage  by  evidence, 
propounds  interrogatories  on  facts  and  articles  to  the  grantee, 
the  answers  to  which  are  equivalent  to  a  counter-letter.  Judge 
Manning  says : 

"  Strenuous  opposition  was  made  to  the  reception  of  any  tes- 
timony other  than  a  counter-letter  to  contradict  or  vary  the  act 
of  sale.     There  was  no  counter-letter,  but  the  answers  of  the 

1  Winston  v.  Burnell,  44  Kan.  367. 

*  Parmer  v.  Mangham,  31  La.  Ann.  348. 
^Crozier  v.  Ragan,  38  La.  Ann.  154. 

*  Newman  v.  Shelly,  36  La.  Ann.  100. 


BASIS    FOE,    THE    INTRODUCTION    OF    PAROL    EVIDENCE.     167 

defendant  to  the  interrogatories  on  facts  and  articles  have  all 
the  effect  of  a  counter-letter.  They  are  the  contradiction  of  one 
of  the  parties  to  the  act  of  sale  of  the  recitals  therein  made, 
and  the  confirmation  by  him  of  tlie  truth  of  the  allegations  of 
the  other  party  as  to  the  real  nature  and  character  of  the  act, 
and  are  as  much  admissible  in  evidence  as  a  counter-letter."  ^ 

"When  the  instrument  is  free  from  any  patent  or  latent  am- 
biguity, parol  evidence  cannot  be  received  to  vary  or  contra- 
dict it. 

Courts  of  equity,  however,  have  established  a  special  branch 
of  jurisdiction  under  which,  when  it  is  made  clearly  to  appear 
that,  through  fraud  or  error,  the  written  instrument  has  been 
made  to  express  a  different  purpose  from  that  which  the  parties 
had  agreed  on  and  intended  to  embody  therein,  such  mistake 
may  be  corrected,  and  the  writing  may  be  made  to  express  the 
real  intention  of  the  parties.^ 

§  150.  Maine. — The  general  rule  is  that  the  effect  of  a  deed 
cannot  be  controlled  by  oral  evidence,  but  there  is  this  exception, 
recently  established,  in  equity :  where  the  oral  proof  is  clear 
and  convincing,  a  deed  absolute  on  its  face  may  be  construed  a 
mortgage.^ 

The  court  holds  it  to  be  a  sound  policy  as  well  as  principle 
to  declare  that,  to  take  an  absolute  conveyance  as  a  mortgage 
without  any  defeasance,  is  in  equity  a  fraud  ;  that  experience 
shows  that  endless  frauds  and  oppressions  would  be  perpetrated 
under  such  modes,  if  equity  could  not  grant  relief.  It  is  tak- 
ing an  agreement,  in  one  sense,  exceeding  and  differing  from 
the  true  agreement.  Instead  of  setting  it  wholly  aside,  equity 
is   worked  out   by  adapting  it   to  the  purpose  originally  in- 

*  Crozier  v.  Ragan,  38  La.  Ann.  154,  155. 

A  ".counter-letter  "  is  equivalent  to  a  common-law  "  defeasance."  It  must 
also  be  noticed  the  answers  of  one  of  the  parties  to  interrogatories  on  facta 
and  articles  propounded  by  the  other,  are  equivalent  to  a  counter-letter  and 
have  the  same  effect  and  force  ;  and  are  unquestionably  admissible  in  evi- 
dence, and  are  not  parol  evidence. 

^  Ker  V.  Evershed,  41  La.  Ann.  15. 

'Knapp  r.  Bailey,  79  Me.  195  ;  Jameson  v.  Emerson,  82  Me.  359. 


168  NATURE    AND    REQUISITES   OF   THE    CONTRACT. 

tended.     Equity  allows  reparation  to  be  made  by  admitting  a 
verbal  defeasance  to  be  proved.' 

In  Rowell  v.  Jewett/  this  exceptional  doctrine  was  first 
allowed  to  have  operation  in  this  State.  Hence,  the  efifect  of 
many  of  the  older  cases  in  this  State  has  been  swept  away  by  the 
new  principle  in  the  legal  system,  and  now  the  intention  of  the 
parties  at  the  time  of  the  execution  of  the  deed  may  be  shown 
by  parol  evidence  in  the  courts  of  equity.^ 

The  mere  contemporaneous  oral  agreement  or  understand- 
ing alone  of  the  parties  to  a  deed,  is  not  admissible  to  vary  the 
express  terms  of  the  instrument  which  in  equity  as  well  as  in 
law  is  the  exponent  of  their  meaning,  unless  some  overruling 
equity,  in  addition  to  such  understanding  is  shown,  from  which 
it  can  be  implied  that  a  defeasance  was  contemplated.* 

Judge  Virgin,  in  Reed  v.  Reed,^  says :  "  While  at  law,  to  con- 
stitute a  mortgage,  the  deed  must  contain  the  condition,  or,  in 
case  of  an  absolute  deed,  there  must  be  a  separate  instrument 
of  defeasance,  of  as  high  a  nature  as  the  deed  given  by  the 
grantee  to  the  grantor,  as  a  part  of  the  transaction,  it  is  the 
uniform  doctrine  of  the  English  court  of  chancery,  as  well  as 
of  the  Federal  courts  and  of  the  highest  court  of  well-nigh  all 
of  the  States  having  full  equity  jurisdiction,  that  where  a  con- 
veyance is  made  by  a  deed  absolute  in  form,  the  transaction 
may,  in  equity,  be  shown  by  a  written  instrument  not  under 
seal,  or  by  oral  evidence  alone,  to  have  been  intended  as  a 
security  for  a  pre-existing  debt,  or  for  a  contemporaneous  loan. 
.  .  .  This  principle  was  recognized  by  this  court  long  before 
the  legislation  conferred  upon  it  sufficient  jurisdiction  to  so 
declare  it."  ^ 

^Stinchfield  v.  Milliken,  71  Me.  567  ;  Stat.  1874,  ch.  175. 

2  69  Me.  293. 

'  Lewis  r.  Small,  71  Me.  552 ;  Reed  v.  Reed,  75  Me.  264  ;  Knapp  v.  Bailey, 
79  Me.  195. 

*  Reed  v.  Reed,  75  Me.  264. 

6  75  Me.  264. 

8  Woodman  v.  Woodman,  3  Me.  350  ;  Fales  v.  Reynolds,  14  Me.  89 ;  Thom- 
aston  Bank  v.  Stimpson,  21  Me.  195  ;  Whitney  v.  Batchelder,  32  Me.  313,  315  ; 
Howe  V.  Russell,  36  Me.  115 ;  Richardson  r.  Woodbury,  43  Me.  206. 

Judge  Virgin  says  in  Reed  v.  Reed,  75  Me.  264,  the  dictum  of  a  majority  of 


BASIS    FOR   THE   INTRODUCTION    OF    PAROL   EVIDENCE.     169 

§  151.  Maryland. — No  matter  how  absolute  the  conveyance 
may  be  on  its  face,  the  transaction  will  be  regarded  as  a  mort- 
gage and  will  be  treated  as  such  when  the  bill  of  sale,  though 
absolute  in  form,  is  really  intended  as  a  security  for  money 
loaned.^ 

It  is  the  established  doctrine  that  the  Maryland  courts  of 
equity  will  look  beyond  the  mere  form  and  terms  of  the  in- 
strument to  the  real  transaction.  Whenever  the  real  transac- 
tion is  shown  to  be  one  of  security  and  not  of  sale,  the  court 
will  treat  the  matter  accordingly.  In  all  such  cases  the  equity 
arises  from  the  real  character  of  the  transaction  and,  therefore, 
any  evidence,  whether  written  or  oral,  tending  to  show  that  the 
transaction  was  really  one  of  security,  is  held  to-be  admissible. 
This  is  allowed  not  for  the  purpose  of  contradicting  the  terms  of 
the  deed  or  instrument,  but  for  raising  an  equit}^  paramount  to 
the  mere  form  of  the  instrument.  "  Such  proof,"  says  Judge 
Alvey,  "  is  allowed  upon  the  same  principle  that  extrinsic 
proof  is  admitted  to  establish  a  resulting  trust  as  against  an 
absolute  deed,  or  to  show  that  the  deed  was  made  to  give  an 
undue  preference,  or  that  the  consideration  upon  which  it  was 
made  was  in  its  nature  illegal.  The  jurisdiction  of  the  court 
attaches  to  prevent  fraud  or  oppression  and  to  promote  sub- 
stantial justice  as  between  the  parties."  ^ 

But  the  testimony  to  convert  a  deed  'into  a  mortgage  must 
be  so  clear  and  explicit  as  to  leave  scarcely  a  doubt  on  the  sub- 
ject.^ 

An  absolute  deed  of  conveyance,  executed  with  all  the  for- 
malities required  by  law,  and  placed  upon  the  public  records, 
is  a  declaration  and  notice  to  all  the  world  of  its  verity,  and 

the  court  in  the  case  of  Richardson  v.  Woodbury,  43  Me.  206,  holding  that 
when  a  deed  absolute  in  tenns  is  jriven  to  secure  a  debt  due  to  the  grantee,  a 
resulting  trust  arises  by  implication  of  law,  is  not  supported  by  any  reliable 
authority  or  well-grounded  reason  and  it  has  never  been  followed. 

» Artz  V.  Grove,  21  Md.  456,  474. 

'^  Booth  V.  Robinson,  55  INId.  419, 451.  The  learned  judge  cites  Thomborough 
V.  Baker,  and  Howard  v.  Harris,  3  L.  Cas.  Eq.  (third  edition),  pp.  625,  626  ; 
Russell  V.  Southard,  12  How.  (U.  S.)  139 ;  Peugh  v.  Davis,  96  U.  S.  332, 
336. 

^Faringer  v.  Ramsay,  2  Md.  365. 


170  NATURE   AND    REQUISITES    OP   THE    CONTRACT. 

before  a  court  undertakes  to  change  its  character  and  declare 
it  a  mortgage,  it  should  be  entirely  satisfied  that  the  deed  was 
really  intended  as  a  security  and  nothing  more/ 

§152.  Massachusetts. — Although  a  deed  is  given  which  is 
absolute  in  form,  yet  the  grantor  may  prove  by  parol  testimony 
that  it  was  understood  and  agreed  by  both  parties  to  be  given 
as  security  for  a  debt,  and  upon  such  proof  a  court  of  equity 
will  treat  the  deed  a  mortgage.  A  court  of  equity  will  treat 
the  transaction  according  to  its  real  nature.^ 

Before  the  enactment^  of  the  statute  conferring  upon  the 
court  jurisdiction  in  equity  "  in  all  cases  of  fraud  and  of  con- 
veyances or  transfers  of  real  estate  in  the  nature  of  mortgages," 
the  jurisdiction  of  the  court  was  confined  in  this  regard,  to 
cases  of  a  defeasance  contained  in  the  deed  or  in  some  other 
instrument  under  seal.* 

Before  the  statute  was  enacted  parol  evidence  was  admitted 
where  there  was  a  deed  and  a  provision  for  a  reconveyance  to 
show  the  real  nature  of  the  transaction.^ 

The  courts  held  before  the  statute,  that  their  jurisdiction  of 
foreclosure  and  redemption  of  mortgages  to  be  limited  to  cases 
of  a  defeasance  contained  in  the  deed  or  some  other  instrument 
under  seal.*^ 

Judge  Wells  says  that  upon  the  whole,  parol  evidence  may 
be  admitted  without  violation  of  the  statute  of  frauds  or  of 
any  principle  of  law  or  evidence,  "  and  if  properly  guarded  in 
administration  may  prove  a  sound  and  salutary  principle  of 

1  Cochrane  v.  Price  (Md.),  8  All.  Rep.  361.  See,  also,  Gaither  v.  Clarke,  67 
Md.  18  ;  Farrell  v.  Bean,  10  Md.  217  ;  Thompson  v.  Banks,  2  Md.  Ch.  430  ; 
Watkins  v.  Stockett,  6  H.  &  J.  435  ;  Baugher  v.  Merryman,  32  Md.  185 ; 
Dousherty  v.  McColgan,  6  Gill  &  J.  275. 

2  CuUen  V.  Carey,  146  Mags.  50. 
3Gen.  Stat.,  ch.  113,  sect.  2. 

*  Eaton  V.  Green,  22  Pick.  526 ;  Coffin  v.  Loring,  9  Allen,  154. 

^  Flagg  V.  Mann,  14  Pick.  467 ;  Carey  v.  Rawson,  8  Mass.  159 ;  Erskine  v. 
Townsend,  2  Mass.  493. 

« Erskine  v.  Townsend,  2  Mass.  493 ;  Killeran  v.  Brown,  4  Mass.  443  ; 
Taylor  v.  Weld,  5  Mass.  109  ;  Carey  v.  Rawson,  8  Mass.  159 ;  Parks  v.  Hall,  2 
Pick.  206,  211 ;  Rice  v.  Rice,  4  Pick.  349 ;  Flagg  v.  Mann,  14  Pick.  467,  478 ; 
Eaton  V.  Green,  22  Pick.  526. 


BASIS    FOR    THE    INTRODUCTION    OF    PAROL    EVIDENCE.     171 

equit}'  jurisprudence."  It  is  admitted  to  establish  the  fact  of 
an  inherent  fault  in  the  transaction  or  its  consideration,  which 
affords  ground  for  avoiding  the  effect  of  the  wTitings  by  re- 
stricting their  operations  or  defeating  them  altogether.  "  This 
is  a  general  principle  of  evidence  well  established  and  recog- 
nized at  law  and  in  equity."  ^ 

§  153.  INIiCHiGAN. — The  doctrine  that  a  deed  absolute  on  its 
face  may  be  shown  to  be  a  mortgage  is  well  established.^ 
Wherever  the  controversy  allows  a  party  to  control  by  parol 
evidence  the  operation  of  an  instrument  which  is  made  and 
held  out  as  an  absolute  conveyance,  and  to  show  the  transac- 
tion to  be  only  a  mortgage,  the  proof  must  be  clear  and  con- 
vincing, and  will  not  be  satisfactory  where  the  evidence  is  a 
mere  general  declaration  of  a  party  setting  up  the  claim.^ 

That  a  conveyance  was  intended  as  a  security  may  be  shown 
to  be  a  mortgage.* 

The  doctrine  of  the  Michigan  courts  is  that  parol  evidence 
may  be  admitted  to  prove  a  deed  absolute  on  its  face  a  mort- 
gage when  the  error  occurred  by  accident,  mistake,  or  through 
such  misconduct  of  the  creditor  as  will  amount  to  a  fraud. 
For  the  grantee  to  claim  a  deed  absolute  on  its  face  as  an  ab- 
solute conveyance  when  it  was  intended  for  a  mortgage,  is  a 
species  of  fraud,  as  it  is  an  oppression  of  the  debtor  or  gran- 
tor. "  The  agreement  for  the  defeasance,  whether  written  or 
unwritten,  is  no  more  than  one  of  the  conditions  upon  which 
the  deed  was  given,  and  therefore  constitutes  a  part  of  the  con- 
sideration for  the  conveyance,  and  I  have  never  been  able  to 
discover  why  it  was  not  competent  to  show  it  by  parol  in  any 
case,  either  at  law  or  in  equity,  where  it  was  competent  to  show 
the  actual  consideration  for  the  conveyance." 

It  is  true  where  the  deed  does  not  contain  the  defeasance 

'Campbell  v.  Dearborn,  109  Mass.  130. 

"Swetland  v.  Swetland,  3  Mich.  482 ;  Fuller  r.  Parrish,  3  Mich.  214  ;  Emer- 
son V.  Atwater,  7  Mich.  22 ;  Barber  v.  Milner,  43  ^lich.  248  ;  Johnson  v.  Van 
Velsor,  43  Mich.  208 ;  McMillan  v.  Bissell,  03  Mich.  66. 

'Johnson  v.  Van  Velsor,  43  Mich.  208,  214. 

*  Barber  v.  Milner,  43  Mich.  248. 


172  NATURE   AND    REQUISITES   OF    THE    CONTRACT. 

the  presumption  arises  that  the  conveyance  is  absolute,  and  in 
making  proof  that  a  defeasance  was  intended  by  the  parties, 
and  was  in  fact  a  part  of  the  consideration  upon  which  the 
conveyance  was  made,  this  presumption  must  be  removed 
by  testimony  before  tlie  debtor  can  use  the  evidence  showing 
his  right  to  defeat  the  absokite  character  of  the  conveyance, 
and  no  more  than  this,  I  apprehend,  is  meant  by  the  courts 
when  they  say  clear,  irrefragable,  and  most  convincing  proofs 
are  required  to  show  a  deed  absolute  upon  its  face  was  in- 
tended as  a  mortgage. 

It  comes  finally  to  a  question  of  what  was  the  under- 
standing and  the  intention  of  the  parties  at  the  time  the  in- 
strument was  made,  and  this,  like  any  other  fact,  depends 
for  its  support  upon  what  was  said  and  done  by  the  parties  at 
the  time,  together  with  all  the  other  circumstances  bearing 
upon  the  question. 

Positive  evidence  is  not  required  to  be  made  of  the  inten- 
tion and  agreement  of  the  parties  if  it  does  not  exist,  but  the 
proof  must  be  made  by  the  best  testimony  attainable,  and  if 
such  testimony  is  not  sufficient  to  satisfy  the  conscience  of  the 
court  that  the  defeasance  was  made  or  intended  to  be  made,  or 
if  the  court,  after  canvassing  the  testimony  carefully,  has 
serious  doubts  as  to  what  it  does  show  upon  the  subject,  the 
deed  itself  must  control.' 

§  154.  Minnesota. — A  deed  absolute  on  its  face,  given  as 
security  for  a  debt,  is  a  mortgage,  and  the  character  of  the  tran- 
saction in  equity  may  be'  shown  by  parol  evidence  of  the  cir- 
cumstances under  which  the  deed  was  made,  and  the  relation 
subsisting  between  the  parties.^  And  when  it  is  sought  to 
have  an  actual  conveyance  decreed  to  be  a  mortgage,  it  is  only 
necessary  to  show  that  the  deed  was  given  to  secure  the  pay- 
ment of  money.* 

If  the  purpose  is  an  honest  one,  and  the  instrument  is  really 

1  McMillan  v.  Bissell,  63  Mich.  66 ;  opinion  by  Judge  Sherwood. 
'^  Phffinix  V.   Gardner,  13  Minn.  430  ;  Halton  v.   Meighen,  15  Minn.  69 ; 
Weide  v.  Gehl,  21  Minn.  440 ;  Marshall  v.  Thompson,  39  Minn.  137. 
'  Belote  V.  Morrison,  8  Minn,  94. 


BASIS    FOR   THE    IXTRODUCTION   OF   PAROL   EVIDENCE.     173 

intended  for  security,  whether  for  present  or  future,  actual  or 
contingent  Uability,  the  real  nature  of  the  transaction  may  be 
shown  in  equity,  because  its  real  character  must  be  determined 
by  the  actual  facts,  and  not  by  words  merely.  Parol  evidence 
is  therefore  admitted,  not  to  contradict  the  terms  of  the  writing, 
but  to  show  the  grantor's  equities  in  the  case,  or,  as  it  is  some- 
times said,  to  establish  an  equity  superior  to  the  terms  of  the 
deed,  and  because  it  would  be  a  fraudulent  act,  which  a  court  of 
equity  would  not  permit,  for  the  holder  of  the  deed  to  use  it  con- 
trary to  the  terms  and  understanding  upon  which  he  received  it. 
As  the  equity  upon  which  the  court  acts  arises  from  the  real 
character  of  the  transaction,  parol  evidence  may  be  admitted.^ 

§  155.  Mississippi. — It  was  settled  in  this  State  that  an  abso- 
lute deed  will  be  held  valid  in  equity  and  effectual  as  a  mortgage, 
if  it  clearly  appears  that  it  was  designed  as  a  security  for 
money,  and  such  may  be  shown  to  be  the  intention  and  effect 
of  a  deed,  by  a  contemporaneous  or  subsequent  writing,  or  by 
agreement  resting  in  parol.^  And  parol  evidence  is  admissible 
to  show  that  a  deed,  absolute  on  its  face,  is  in  reality  a  mort- 
gage ;  and  this  rule  is  not  altered  by  the  code  ^  providing  that 
declaration  of  trust  shall  be  made  and  manifested  in  writing 
or  will.  The  courts  proceed  on  the  principle  that,  if  the  real 
agreement  was  that  the  transaction  should  be  a  mortgage,  it  is 
a  fraud  to  insist  on  the  conveyance  as  absolute.  However, 
if  the  deed  is  absolute  on  its  face,  a  mere  parol  agreement  to 
repurchase  cannot  be  enforced,  under  the  statute  of  frauds.^ 

In  order  to  give  effect  to  the  absolute  deed  as  a  mortgage, 
extrinsic  evidence  may  be  resorted  to  in  order  to  show  the  real 
nature  of  the  transaction  and  the  intention  of  the  parties.* 

1  Madigan  v.  Mead,  31  Minn.  94,  97. 

In  courts  of  law,  parol  evidence  in  such  cases,  is  not  admitted  on  any 
grounds :  McClane  v.  AVhite,  5  Minn.  178 ;  Belato  v.  Morrison,  8  Minn.  87,  94. 

*  Prewett  v.  Dobbs,  13  Sm.  &  M.  440 ;  Anding  v.  Davis,  38  Miss.  594 ;  Yasser 
V.  Yasser,  23  Miss.  378  ;  Littlewort  v.  Davis,  50  Miss.  403. 

'Code  of  1871,  sect.  2896  ;  Code  of  1857,  p.  359,  art.  5. 

*  Klein  v.  McNamara,  54  Miss.  90. 

5  Freeman  v.  Wilson,  51  Miss.  333  ;  Littlewort  r.  Davis,  50  Miss.  403  ;  Klein 
V.  McNamara,  54  Miss.  90. 


174  NATURE    AND    REQUISITES   OF    THE    CONTRACT. 

In  1880  the  legislature  enacted  a  law  prohibiting  parol 
evidence  to  prove  an  absolute  conveyance  to  be  a  mortgage ;  ^ 
but  this  section  of  the  code  is  applicable  only  where  the  vendor 
parts  with  the  possession  of  the  property  conveyed.  Whether 
this  statute  could  be  invoked  to  protect  and  cover  up  a  fraud, 
was  not  passed  on  by  the  court.^ 

Parol  evidence  is  received  to  explain  the  true  character  of 
the  transaction.  The  conduct  of ,  the  parties  at  the  time  and 
subsequently,  and  all  the  attending  circumstances,  may  be 
considered,  and  when  it  is  shown  that  the  transaction  was  in 
the  nature  of  a  security,  it  will  be  decreed  a  mortgage.^ 

§156.  Montana. — Parol  evidence  will  be  received  to  show 
that  a  deed  absolute  on  its  face  is  a  mortgage.  Where  there  is 
a  deed  and  contract  to  recovery,  and  oral  evidence  has  been 
introduced  tending  to  show  that  the  transaction  was  one  of 
security,  and  leaving  upon  the  mind  a  well-founded  doubt  as 
to  the  nature  of  the  transaction,  then  courts  of  equity  incline 
to  construe  the  transaction  as  a  mortgage.  But  where  there  is 
a  deed  alone,  and  it  is  sought  to  show  a  parol  defeasance,  then 
the  evidence  must  be  clear  and  convincing. 

If  the  writings  themselves  are  silent,  parol  evidence  may  be 
resorted  to  in  order  that  the  court  may  arrive  at  the  intent  of 
the  parties  ;  and  in  this  connection  the  value  of  the  property, 
the  existence  of  a  note,  the  fact  that  a  loan  had  been  applied 
for — the  indicia  of  intent — become  material  aid  to  the  court. 
Where  no  words  appear  characteristic  of  security,  prima  facie 
the  transaction  is  one  of  sale.  It  is  then  incumbent  upon  the 
grantor  to  produce  some  evidence  tending  to  show  that  a  mort- 
gage in  fact  was  intended.* 

§  157.  Nevada. — In  this  State  the  doctrine  upon  which  parol 
evidence  is  received  to  show  a  conveyance  absolute  in  form  to 
be  a  mortgage  or  security  for  a  loan,  is  that  such  evidence  is 

1  Code  of  1880,  sect.  1299. 

2  Heirmann  v.  Stricklin,  60  Miss.  234. 
'  Freeman  v.  Wilson,  51  Miss.  333. 
*Gassert  v.  Bogk,  7  Mont.  585. 


BASIS    FOR   THE    INTRODUCTION    OP    PAROL    EVIDENCE.     175 

received  not  to  contradict  the  instrument,  but  to  prove  an 
equity  superior  to  it.  Judge  Whitman  says  that  an  absolute 
conveyance,  whether  real  or  personal  property,  can  in  equity  be 
shown  to  be  a  mortgage,  or  to  have  been  given  only  as  security, 
by  parol  proof;  that  it  was  obtained  or  is  vitiated  by  fraud, 
mistake,  or  undue  influence ;  or  that  the  consideration  upon 
which  it  depends  is  a  loan.  Parol  proof  upon  these  points  is 
admissible.^  So  a  bill  of  sale  may  be  shown  to  be  a  mortgage 
by  parol  evidence.^ 

The  proof  necessary  to  show  a  deed  absolute  on  its  face  to  be 
a  mortgage  should  be  clear,  satisfactory,  and  convincing.  A 
bare  preponderance  of  evidence  is  not  sufficient  to  defeat  the 
natural  effect  of  an  instrument  deliberately  and  freely  executed. 
The  presumption  is  that  persons  intend  that  which  is  the  neces- 
sary and  natural  effect  of  an  instrument  voluntarily  executed. 
To  overcome  such  presumption,  the  proof  must  be  so  cogent, 
weighty,  and  convincing  as  to  leave  no  doubt  upon  the  mind.^ 

§  158.  New  Jersey. — In  equity  any  means  of  proof  may  be 
used  to  show  that  a  deed  absolute  on  its  face  was  intended  as 
a  security  for  a  loan.  The  declaration  of  the  parties,  the  rela- 
tion existing  between  them,  the  value  of  the  property  com- 
pared with  the  money  paid,  the  understanding  that  the  sums 
advanced  should  be  paid,  and  the  payment  of  the  interest 
meanwhile  on  the  amount  may  be  taken  into  consideration  by 
the  court. 

"  The  distinction  between  parol  evidence  to  vary  a  written 
instrument  and  parol  evidence  shov/ing  facts  which  control  its 
operation,  is  employed  to  reconcile  the  allowance  of  such  proofs 
with  the  statute  of  frauds  and  the  general  rule  of  common  law." 
Deeds  absolute  on  their  face  have  been  frequently  decreed  to  be 
mortgages  by  this  court,  and  the  grantors  allowed  to  redeem.* 

Equity  will  give  effect  to  a  deed  according  to  the  intention 

of  the  parties,  and  accordingly,  a  deed  absolute  on  its  face 

^Saunders  v.  Stewart,  7  Nev.  200  ;  Cookes  v.  Culbertson,  9  Nev.  199. 
''Carlyon  r.  Lannan,  4  Nev.  156,  159. 

'Bingham  v.  Thompson,  4  Xcv.  224,  233  ;  Pierce  v.  Traver,  13  Nev.  526. 
*  Sweet  V.  Parker,  22  N.  J.  Eq.  453. 


176  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

may,  where  such  was  the  intention  of  the  parties,  be  declared 
to  be  a  mortgage,  but  its  character  must  be  determined  by  the 
mind  of  the  parties  at  tlie  time  of  its  execution.  If,  at  the  time 
of  its  dehvery,  they  intended  it  to  be  an  absolute  conveyance, 
no  subsequent  change  of  intention  can  make  it  a  mortgage/ 

If  both  parties  understood  that  the  relation  of  debtor  and 
creditor  still  subsisted  in  respect  to  the  loan,  this  fact  alone  is 
decisive  as  to  the  character  of  the  deed  which  must  be  declared 
a  mortgage.^ 

Parol  evidence  is  admissible  in  equity  to  establish  the  true 
nature  and  effect  of  the  instrument  by  showing  the  intention 
of  the  parties  at  the  time  of  its  execution  and  delivery. 

If  it  was  a  security  for  a  loan,  the  transaction  will  be  de- 
clared a  mortgage.  The  intention  and  object  for  making  the 
instrument  may  be  shown.^ 

Oral  evidence  is  inadmissible  to  vary  or  alter  a  mortgage 
and  an  answer  which  sets  up  that  the  mortgage  sued  on 
is  not  due,  because  the  mortgagee  agreed  orally  that  interest 
should  not  become  due  until  demanded  at  the  office  of  the 
mortgagor,  and  that  no  such  demand  had  been  made  before 
suit,  presents  no  defense  and  must  be  stricken  out.* 

§  159.  New  Mexico  Territory. — In  this  Territory  an  abso- 
lute deed  on  its  face  may  be  shown  by  parol  evidence  to  be  a 
mortgage.  If  it  was  the  intention  of  the  parties  to  the  instru- 
ment at  the  time  of  its  execution  and  delivery  that  the  deed 
was  given  as  a  security  for  money  loaned,  parol  evidence  will 
be  admitted  to  establish  this  fact.^ 

§  160.  New  York. — A  deed  absolute  upon  its  face  may  in 
equity  be  shown  by  parol  or  other  extrinsic  evidence,  to  have 
been  intended  as  a  mortgage,  and  fraud  or  mistake  in  the  prep- 
aration or  as  to  form  of  the  instrument,  is  not  an  essential 

^  Frink  v.  Adams,  36  N.  J.  Eq.  485. 
'^  Judge  V.  Reese,  24  N.  J.  Eq.  387. 

'Budd  V.  Van  Orden,  33  N.  J.  Eq.  143  ;  Vandegrift  v.  Herbert,  18  N.  J.  Eq. 
466 ;  Crane  v.  Decamp,  21  N.  J.  Eq.  414 ;  Youle  v.  Richards,  Sax.  Ch.  534. 
*  Van  Ness  v.  Robbins,  47  N.  J.  Eq.  329. 
^  King  V.  Warrington,  2  N.  Mex.  318. 


BASIS   FOE,   THE    INTRODUCTION    OF    PAROL    EVIDENCE.     177 

element  iu  an  action  for  relief  and  to  give  effect  to  the  "  inten- 
tion of  the  parties."  ^ 

This  rule  does  not  conflict  with  that  other  rule  which  forbids 
that  a  deed  or  other  written  instrument  shall  be  contradicted 
or  varied  by  parol  evidence.  The  instrument  is  equally  valid 
whether  intended  as  an  absolute  conveyance  or  a  mortgage. 
Effect  is  only  given  to  it  according  to  the  intent  of  the  parties, 
and  courts  of  equity  will  always  look  through  the  forms  of 
a  transaction  and  give  effect  to  it,  so  as  to  carry  out  the  sub- 
stantial intent  of  the  parties.' 

The  burden  of  establishing  an  oral  defeasance  to  such  a  deed 
is  an  onerous  one,  resting  on  whoever  alleges  it,  and  its  exist- 
ence, and  also  its  precise  terms  must  be  established  by  clear 
and  conclusive  evidence ;  otherwise  the  strong  presumption 
that  the  deed  expresses  the  entire  contract  between  the  parties 
to  it  is  not  overcome.  A  conveyance  of  land  in  fee  so  executed, 
acknowledged,  and  recorded  is  of  too  great  solenniity  and  of 
too  much  importance  to  be  set  aside  or  converted  into  a  mere 
security  upon  loose  or  uncertain  testimony,  and  it  w^ill  not  be 
unless  the  existence  of  the  alleged  oral  defeasance  is  established 
beyond  a  reasonable  doubt.^ 

Parol  evidence  is  admissible  although  no  fraud  or  mistake 
in  making  the  deed  is  alleged  or  proved.* 

In  some  of  the  earlier  cases  parol  evidence  was  admitted 
solely  upon  the  ground  of  fraud  or  mistake,'^  which  doctrine 
has  not  been  followed. 

§  161.  Ohio. — If  the  transaction  resolves  itself  into  a  secur- 
ity, whatever  may  be  its  form,  and  whatever  name  the  parties 

1  Strong  V.  Stewart,  4  Johns.  Ch.  167  ;  Clark  v.  Henry,  2  Cow.  324  ;  Murray 
V.  Walker,  31  N.  Y.  399. 

■^  Horn  r.  Keteltas,  46  N.  Y.  609 ;  Despard  v.  Walbridge,  15  N.  Y.  374  ;  Ful- 
lerton  v.  McCurdy,  55  N.  Y.  637. 

*  Ensign  v.  Ensign,  120  N.  Y.  655  ;  opinion  by  Chief  Justice  Follett ;  Shat- 
tuck  r.  Bascom,  55  Hun,  14 ;  Erwin  v.  Curtis,  43  Hun,  292. 

*  Brown  v.  Clifford,  7  Lans.  46 ;  Loomis  v.  Loomis,  60  Barb.  22  ;  Fiedler  v. 
Darrin,  50  N.  Y.  437  ;  Odell  v.  Montross,  68  N.  Y.  499  ;  Carr  v.  Carr,  52  N.  Y. 
251 ;  Van  Dusen  v.  Worrell,  4  Abb.  App.  Dec.  473. 

*  Swart  V.  Service,  21  Wend.  36 ;  Patchin  v.  Pierce,  12  Wend.  61. 
'  VOL.  I. — 12 


178  NATURE    AND    REQUISITES    OF   THE   CONTRACT. 

may  choose  to  give  it,  it  is  in  equity  a  mortgage.  Parol 
evidence  will  be  admitted  to  prove  a  deed,  absolute  on  its  face, 
to  be  a  mortgage,  in  order  to  protect  the  grantor  against  the 
rapacity  of  the  creditor,  and  to  do  full  justice  between  the  par- 
ties/ 

To  determine  whether  a  deed,  absolute  in  form,  is  in  equity 
a  mortgage  requires  that  the  real  intention  of  the  parties  to  the 
transaction  be  ascertained,  and  parol  evidence  may  be  received 
and  considered,  as  tending  to  show  the  intention  of  the  par- 
ties and  the  true  character  of  the  transaction.^ 

While  in  equity  such  a  deed  will  be  construed  to  be  a  mort- 
gage for  the  purpose  of  preventing  imposition  and  injustice, 
yet  at  law  it  is  simply  what,  on  its  face,  it  purports  to  be,  an 
absolute  sale  in  fee  simple.^  Courts  of  equity  will  scrutinize 
such  transactions,  and  will  not  allow  the  grantor  to  take  any 
undue  advantage ;  he  will  not  be  allowed  to  use  his  position 
as  creditor  to  oppress  or  to  drive  an  unconscionable  bargain. 
He  may,  however,  show  that  the  equity  of  redemption  had  been 
released  by  a  parol  agreement.* 

§  162.  Oregon. — To  determine  whether  a  deed,  absolute  on  its 
face,  was  intended  for  a  mortgage  necessarily  requires  evidence 
of  the  situation  of  the  parties,  of  the  price  paid  in  connection 
with  the  value  of  the  property,  the  conduct  of  the  parties  be- 
fore and  after,  and  all  the  surrounding  facts  and  circumstances 
so  far  as  they  are  adapted  to  explain  the  real  character  of  the 
transaction. 

It  is  in  equity  of  no  consequence  in  what  manner  this  char- 
acter is  established,  whether  by  deed  or  other  writing,  or  by 
parol.  Evidence  of  all  the  circumstances  connected  with  the 
execution  of  the  instrument  are  proved  not  for  the  purpose  of 
contradicting  or  varying  the  deed  but  to  establish  an  equity 
superior  to  its  terms.     As  a  consequence  of  this  doctrine  each 

^  Cotterell  v.  Lon^,  20  Ohio,  464. 

"Slutz   V.  Desenberg,  28  Ohio  St.  371,  378;  Wilson  v.  Giddings,  28  Ohio 
St.  554  ;  IVIarshall  v.  Stewart,  17  Ohio,  356 ;  Stover  v.  Bounds,  1  Ohio  St.  107. 
*  Kemper  v.  Campbell,  44  Ohio  St.  210. 
*Shaw  V.  Walbridge,  33  Ohio  St.  1. 


BASIS    FOR    THE    INTRODUCTION   OF   PAROL    EVIDENCE.     179 

case  must  be  scrutinized  and  judged  by  its  own  surrounding 
facts  and  circumstances/ 

Such  parol  evidence  must  be  clear  and  satisfactory  and  suf- 
ficient to  overcome  the  presumption  that  the  instrument  is 
what  it  purports  to  be.^  If  a  party  were  to  claim  in  such  a 
case  that  the  deed  was  an  absolute  conveyance  when  in  fact  it 
was  only  intended  as  a  security  for  the  payment  of  a  debt,  the 
pretense  would  undoubtedly  be  an  indicium  of  fraud.  And 
a  court  of  equity  will  scrutinize  very  closely  the  affair  and  re- 
quire very  satisfactory  proof  that  it  was  not  for  a  fraudulent 
purpose ;  but  ordinarily  a  security  taken  in  that  way  would  not 
create  discredit  as  to  its  fairness.'' 

It  is  not  necessary  to  show  fraud  or  mistake  in  the  execution 
of  the  deed  to  admit  oral  evidence  to  prove  the  real  character 
of  the  transaction.^ 

§  163.  South  Carolina. — A  deed  absolute  on  its  face  will  be 
declared  to  be  a  mortgage,  when  the  facts  and  circumstances 
are  of  such  a  character  as  to  lead  clearly  to  the  conclusion  that 
such  was  the  intention  of  the  party,  as  shown  by  the  face  of 
the  writings,  or  as  disclosed  by  extrinsic  evidence.^  Parol 
evidence  is  admissible  to  convert  a  deed  absolute  on  its  face 
into  a  defeasible  instrument,  when  the  omission  to  reduce  the 
defeasance  to  writing  was  caused  by  fraud  or  mistake,^  and  in 
other  cases  when  the  evidence  is  clear  and  convincing.'^ 

And  where  a  deed  absolute  is  shown  by  parol  testimony  to 
have  been  intended  for  a  mortgage,  all  the  conditions  may  be 
proved  in  like  manner.*' 

The  evidence  must  be  clear  to  make  the  deed  a  mort- 
gage ;  and  if  it  is  not  shown  that  it  was  accompanied  with 

'Stephens  v.  Allen,  11  Ore.  188. 

*  Albany  &  S.  W.  D.  Co.  v.  Crawford,  11  Ore.  243. 
» Haseltine  r.  Espey,  13  Ore.  301. 

*  Harford  r.  Harned,  6  Ore.  362. 

*  Hodge  V.  Weeks,  31  S.  Car.  276. 

6  Arnold  v.  Mattison,  3  Rich.  Eq.  153. 
^Nesbitt  V.  Cavender,  27  S.  Car.  1. 

« Walker  v.  Walker,  17  S.  Car.  329.  See,  also,  Carter  v.  Evans,  17  S.  Car. 
458. 


180  NATURE   AND    REQUISITES   OF   THE    CONTRACT. 

a  verbal  agreement  to  reconvey  by  decisive  evidence,  the  trans- 
action is  not  a  mortgage/ 

§  164.  Tennessee. — A  deed  absolute  on  its  face  in  equity 
may  be  shown  to  be  only  a  mortgage  or  security  for  money,  as 
between  the  parties  to  the  same,  and  the  rights  of  these  parties 
will  be  always  declared  by  the  court  on  this  basis,  when  clearly 
and  satisfactorily  made  out.^  The  evidence  must  be  clear  and 
decisive  to  overcome  the  presumption  that  the  instrument  is 
what  it  purports  to  be.^ 

Parol  evidence  is  admitted  to  show  the  intention  of  the 
parties  and  the  real  character  of  the  transaction.* 

It  is  well  settled  in  this  State  that  an  absolute  deed  for  land, 
executed  solely  to  secure  a  debt  to  the  grantee,  will  be  treated 
in  equity  as  a  mortgage.^ 

A  creditor  of  a  party  to  whom  land  is  conveyed  by  deed  ab- 
solute on  its  face,  but  which  in  fact  was  only  a  mortgage  to 
secure  the  grantee  from  liability  as  a  surety  of  the  grantor,  can- 
not obtain  a  valid  title  to  the  land  by  execution  levied  and  sale 
made  on  judgment  against  the  grantee,  as  against  the  claim  of 
the  grantor,  who  has  paid  the  mortgage  debt,  and  thereby  en- 
titled himself  to  a  reconveyance.*' 

§165.  Utah  Territory. — The  statute  provides  that  the 
statute  of  frauds  relating  to  agreements  for  the  conveyance  of 
real  estate  shall  not  be  construed  to  prevent  any  trust  from 
arising  or  being  extinguished  by  implication  of  law.^  Under 
this  statute  parol  evidence  is  admissible  to  show  that  an  ab- 

» Hodge  V.  Weeks,  31  S.  Car.  276.  See,  also,  Kaphan  r.  Evan,  16  S.  Car. 
352 ;  Calvert  v.  Nickles,  26  S.  Car.  304  ;  McAteer  v.  McAteer,  31  S.  Car.  313. 

^  Ruggles  V.  Williams,  1  Head,  141 ;  Jones  v.  Jones,  1  Head,  105 ;  Turbe- 
ville  V.  Gibson,  5  Heisk.  565. 

2  Haynes  v.  Swann,  6  Heisk.  560 ;  Hickman  v.  Quinn,  6  Yerg.  96 ;  Nickson 
r.  Toney,  3  Head,  655. 

*Hinson  v.  Partee,  11  Humph.  587;  Nichols  v.  Cabe,  3  Head,  92;  Lane  v. 
Dickerson,  10  Yerg.  373  ;  Leech  v.  Hillsman,  8  Lea,  747. 

^  Robinson  v.  Lincoln  Sav.  Bank,  85  Tenn.  363. 

*  Leech  v.  Hillsman,  8  Lea,  747. 

'Lawsof  1876,  sect.  1011. 


BASIS    FOR    THE    INTRODUCTION    OF    PAROL    EVIDENCE.     181 

solute  conveyauce  is  a  mortgage,  by  proving  that  the  consid- 
eration on  which  it  depends  is  a  loan.  An  absolute  convey- 
ance can  only  be  shown  to  be  a  mortgage  by  proving  that  it 
was  obtained,  or  is  vitiated  by  fraud,  mistake,  or  undue  in- 
fluence, or  that  the  consideration  on  which  it  depends  is  a 
loan,  the  whole  transaction  consequently  defeasible.^ 

§  166.  Vermont. — Upon  the  general  principles  of  equity, 
parol  evidence  is  admissible  and  proper  to  be  considered  as 
bearing  upon  the  question  whether  the  deed  was  an  absolute 
conveyance  or  a  mortgage.^ 

It  is  well  settled  that  a  court  of  chancery  will  treat  an  ab- 
solute deed  of  real  estate,  given  to  secure  the  payment  of  a 
debt,  as  a  mortgage,  as  between  the  immediate  parties,  espe- 
cially if  the  grantor  continues  to  remain  in  possession,  though 
the  defeasance  rests  wholly  in  parol.  When  there  is  an  at- 
tempt to  set  up  such  an  instrument  as  an  absolute  sale  there  is 
a  fraudulent  application  or  use  made  of  it ;  and  this  is  a  proper 
ground  upon  which  chancery  may  proceed.^ 

The  fact  that  the  grantor  remains  in  possession  is  always  a 
strong  circumstance  tending  to  show  that  the  deed  w^as  a 
mortgage.* 

If  the  grantor  has  remained  in  possession  and  the  title  has 
continued  in  the  grantee,  then,  under  the  general  rules  of 
equity,  parol  evidence  may  be  received  to  show  the  nature  of 
the  transaction.^ 

§  167.  Virginia. — A  conveyance  of  land,  absolute  on  its 
face,  may,  in  equity,  be  shown  by  extrinsic  and  parol  evidence 
to  be  a  mortgage  as  between  the  original  parties  and  those 
deriving  title  under  the  grantee,  who  are  not  bona  fide  pur- 
chasers for  value  and  without  notice." 

>  Wasatch  Min.  Co.  v.  Jennings,  5  Utah,  243,  385. 

^  Hills  V.  Loomis,  42  Vt.  562. 

MVright  V.  Bates,  13  Vt.  341. 

*Hill  V.  Loomis,  42  Vt.  562 ;  Rich  v.  Doane,  35  Vt.  125. 

*  Crosby  r.  Leavitt,  50  Vt.  239  ;  Morgan  v.  Walbridge,  56  Vt.  405. 

«Snavely  v.  Pickle,  29  Gratt.  27. 


182  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

But  the  proofs  must  be  clear,  cogent,  and  consistent,  convinc- 
ing the  mind  that  an  absolute  conveyance  was  not  intended/ 
The  fact  that,  though  the  grantor  was  to  retain  possession, 
there  was  no  time  appointed  to  pay  the  principal,  nor  any 
stipulation  to  pay  interest,  nor  any  note  or  security  taken  for 
the  debt  connected  with  the  absolute  form  of  the  deed,  may 
suffice  to  show  that  no  mortgage  was  intended.^ 

Judge  Lewis,  P.,  speaking  for  the  court,  says : 

"  It  is  well  settled  that  a  conveyance  of  land,  absolute  on  its 
face,  may  be  shown  in  equity  by  extrinsic  and  parol  evidence 
to  be,  in  reality,  a  mortgage  as  between  the  original  parties 
and  those  deriving  title  under  the  grantee,  who  are  not  bona 
fide  purchasers  for  value  and  without  notice.  But  the  pre- 
sumption, of  course,  always  is  that  the  deed  is  what  on  its  face 
it  purports  to  be,  and  to  repel  this  presumption  the  evidence 
must  be  clear,  unequivocal,  and  convincing."  ^ 

Vague  and  inconsistent  parol  evidence  is  entitled  to  little 
weight  in  converting  a  deed  absolute  on  its  face  into  a  mort- 
gage.^ 

Of  course  parol  evidence  is  inadmissible  to  contradict,  vary, 
or  add  to  a  written  instrument.  But  parol  evidence  is  always 
admissible  to  show  the  real  nature  and  character  of  the  con- 
sideration.^ And  in  case  of  equivocal  written  instruments  the 
circumstances  under  which  they  were  made  or  facts  collateral 
thereto,  may  be  admitted  to  show  the  intention  of  the  parties.® 

The  question  is  whether  the  parties  intended  to  treat  of  a 
purchase,  or  to  secure  the  repayment  of  money/ 

§  168.  AVashington. — In  this  State  a  deed  absolute  on  its 
face  may  be  shown  to  be  a  mortgage  by  parol  evidence.     Parol 

1  Edwards  v.  Wall,  79  Va.  .S21. 

*Eansone  v.  Frayser,  10  Leigh,  621. 

» Edwards  v.  Wall,  79  Va.  321,  322  ;  Phelps  v.  Seely,  22  Gratt.  573. 

♦Phelps  V.  Seely,  22  Gratt.  573. 

*  Summers  v.  Darne,  31  Gratt.  804. 

®  Crawford  v.  Jarrett,  2  Leigh,  630  ;  French  v.  Williams,  82  Va.  462;  Bruce 
V.  Slemp,  82  Va.  352. 

'  Ross  V.  Norvell,  1  Wash.  14 ;  Dabney  v.  Green,  4  Hen.  &  Munf.  101 ; 
Chapman  v.  Turner,  1  Call.  280 ;  Pennington  v.  Hanby,  4  Munf.  140. 


BASIS    FOR    THE    INTRODUCTION    OF    PAROL    EVIDENCE.     183 

evidence  is  admissible  to  show  the  real  nature  of  the  transac- 
tion and  the  intention  of  the  parties  at  the  time  of  the  execu- 
tion and  delivery  of  the  instrument/ 

§  169.  West  Virginia. — Parol  evidence  to  establish  a  deed 
absolute  on  its  face  to  be  a  mortgage  must  be  clear  and  strong, 
if  it  be  unaided  by  proof  of  the  situation  and  circumstances 
of  the  parties  and  their  conduct  prior  to,  at  the  time  of,  or  after 
the  execution  of  the  deed.  The  following  circumstances  and 
facts  have  great  weight  in  leading  a  court  to  the  conclusion 
that  a  deed  absolute  on  its  face  is  merely  a  mortgage :  First, 
that  the  grantor  was  hard  pressed  for  money,  and  the  grantee 
was  a  known  money-lender ;  second,  that  the  actual  execution 
of  the  deed  was  preceded  by  a  negotiation  for  a  loan  of  money 
by  the  grantor  to  the  grantee ;  third,  that  the  parties  did  not 
apparently  consider  or  contemplate  the  quantity  or  value  of 
the  land,  when  the  deed  was  made ;  fourth,  that  the  price  pro- 
fessedly given  for  the  land  was  grossly  inadequate ;  fifth,  that 
the  possession  of  the  land  has  remained  with  the  grantor 
whether  rent  be  nominally  reserved  or  not,  and  if  no  rent  is 
ever  professedly  reserved  this  last  circumstance  is  entitled  to 
very  great  weight,  if  unexplained.^ 

When  a  deed  absolute  on  its  face  is  converted  into  a  mort- 
gage, if  the  parol  evidence  leaves  the  Cjuestion  doubtful  the 
conveyance  will  not  be  considered  a  mortgage.^ 

§170.  Wisconsin. — The  admissibility  of  parol  evidence  to 
prove  an  absolute  conveyance  to  be  a  mortgage,  has  been  recog- 
nized by  the  court  so  long  that  it  has  become  a  rule  of  prop- 
erty.* It  was  formerly  held  that  the  basis  for  the  introduction 
of  parol  evidence  was,  that  the  attempt  to  use  the  deed  to  prove 
an  absolute  conveyance  was  a  fraudulent  use  of  it  which  equity 

^  'SUWer  V.  Ansenig,  2  Wash.  T.  22. 

'^  Vangilder  v.  Hoffinan,  22  W.  Ya.  1.  See,  also,  Klinck  v.  Price,  4  W.  Va. 
4 ;  I^wrence  v.  Dubois,  16  W.  Ya.  443 ;  Davis  v.  Demming,  12  W.  Ya.  281 ; 
Matheney  v.  Sandford,  26  W.  Ya.  386 ;  Kerr  v.  Hill,  27  W.  Ya.  576 ;  Hoffinan 
V.  Ryan,  21  W.  Ya.  415. 

'Gilchrist  v.  Beswick,  .33  W.  Ya.  168. 

*  Wilcox  V.  Bates,  26  Wis.  465. 


184  NATURE   AND    REQUISITES   OF    THE    CONTRACT. 

interposes  to  detect  and  prevent,  and  for  this  purpose  parol 
evidence  is  admissible,  not  to  vary  the  deed,  but  to  maintain 
the  equity  which  attaches  to  the  transaction  inherently,  and 
which  the  deed  or  contract  of  the  parties  does  not  create  and 
cannot  destroy.* 

The  evidence  must  be  clear  and  convincing.  If  the  proofs 
are  doubtful  and  unsatisfactory,  and  the  mistake  is  not  made 
entirely  plain,  equity  will  withhold  relief  upon  the  ground 
that  the  written  paper  ought  to  be  treated  as  a  full  and  cor- 
rect expression  of  the  intent,  until  the  contrary  is  shown  be- 
yond a  reasonable  controversy.^ 

To  convert  a  deed  absolute  into  a  mortgage,  the  evidence 
should  be  so  clear  as  to  leave  no  substantial  doubt  that  the 
real  intention  of  the  parties  was  to  execute  a  mortgage.^ 
Under  the  general  jurisdiction  of  equity  a  deed  absolute  may 
be  converted  into  a  mortgage,  provided  the  evidence  is  so  clear 
that  no  substantial  doubt  remains  in  the  mind,  that  the  real 
intention  of  the  parties  was  to  execute  a  mortgage  security.* 

This  is  the  settled  rule  in  equity  and  in  law.^ 

Article  4. 
Doctrine  of  Fraud,  Accident,  Mistake,  or  Some  Vice  in  the  Con- 
sideration. 

§  171.  In  General.  §  174.  North  Carolina. 

§  172.  Connecticut.  1 175.  Rhode  Island. 

§173.  Kentucky. 

§171.  In  General. — A  few  of  the  courts  still  hold  to  the 
old  doctrine  that  parol  evidence  can  only  be  introduced  to 
prove  a  deed,  absolute  on  its  face,  to  be  a  mortgage,  when  fraud, 
accident,  or  mistake  is  alleged. 

The  rule  is  not  much  changed,  but  is  quite  uniform  with  the 

*  Rogan  V.  Walker,  1  Wis.  527. 

*  Newton  i\  HoUey,  6  Wis.  592 ;  Lake  ?'.  Meacham,  13  Wis.  355;  Fowler  v. 
Adams,  13  Wis.  458  ;  Harrison  v.  Juneau  Bank,  17  Wis.  340. 

^  Becker  v.  Howard,  75  Wis.  415. 

*  McClellan  r.  Sanford,  26  Wis.  595,  607  ;  Sable  r.  Maloney,  48  Wis.  331, 333 ; 
Schriber  v.  Le  Clair,  66  Wis.  579,  599  ;  McCormick  v.  Herndon,  67  Wis.  648. 

^Kent  V.  Agard,  24  Wis.  378. 


BASIS    FOR    THE    INTRODUCTION    OF    PAROL    EVIDENCE.     185 

courts  thus  holding.  The  language  is  somewhat  modified,  but 
means  the  same.  The  word  "  ignorance  "  is  sometimes  used. 
Thus,  where  the  grantor  is  imposed  on  from  his  ignorance, 
parol  evidence  is  admissible.  But  an  imposition  on  the  grantor 
through  his  ignorance  is  certainly  a  fraud.  Other  courts  use 
the  word  "  vice."  But  a  vicious  contract  is  certainly  fraudulent. 
So  the  decisions  enumerate  the  basis  for  the  introduction  of 
parol  evidence,  when  the  contract  is  illegal  on  account  of  fraud, 
accident,  or  mistake,  or  on  account  of  the  ignorance  of  the 
grantor,  or  when  there  is  some  vice  in  the  contract. 

§172.  Connecticut. — Parol  evidence,  according  to  the  decis- 
ions, is  admissible  to  show  that  an  absolute  deed  was  intended 
as  a  mortgage,  and  that  a  defeasance  was  omitted  through  fraud 
or  mistake ;  ^  hence,  a  deed  absolute  on  its  face  will  in  chancery 
be  held  valid  and  effectual  as  a  mortgage  between  the  parties, 
if  it  was  intended  by  them  to  be  merely  a  security  for  a  debt, 
although  the  defeasance  was  by  an  agreement  vesting  in  parol.^ 

It  is  held  that  as  between  the  grantor  and  the  grantee,  a 
court  of  equity  will  treat  a  deed,  absolute  on  its  face,  as  a 
mortgage,  where  it  appears,  exjDressly  or  by  implication,  that 
such  was  the  intention  of  the  parties.  The  reason  for  this  is, 
that  the  court  will  give  effect  to  the  real  contract  between  the 
parties,  when  the  contract  is  legal,  and  is  not  contrary  to  the 
policy  of  the  law. 

But  when  the  transaction  on  its  face  does  not  purport  to  be 
a  mortgage,  and  it  expressly  appears  that  the  parties  intended 
that  it  should  not  be  a  mortgage,  the  court  cannot  treat  it  as 
such  any  more  than  it  can  make  a  contract  for  the  parties.^ 

Generally  parol  evidence  is  admissible  to  prove  that  a  con- 
tract of  mortgage  has,  by  fraud,  been  converted  into  an  abso- 
lute sale,  and  that  what  was  really  a  loan  has  been  transformed 
into  a  sale.* 

'Reading  v.  Weston,  8  Conn.  117. 

^Washburn  v.  Merrills,  1  Day,  1.39 ;  Noble  v.  Comstock,  3  Conn.  295. 
'  Adams  r.  Adams,  51  Conn.  544. 

*Brainerd  v.  Brainerd,  15  Conn.  575;  Jarvis  r.  Woodruff,  22  Conn.  548; 
•Mills  V.  Mills,  26  Conn.  213. 


186  NATURE    AND    REQUISITES   OP   THE    CONTRACT. 

In  one  case  the  judge  seemed  to  think  this  question  had  not 
been  decided  in  Connecticut/  but  other  later  cases  have  declared 
that  parol  evidence  may  be  admitted  in  case  of  fraud  or  mistake 
to  show  that  a  deed,  absolute  on  its  face,  was  a  mortgage  in  fact.^ 

§  173.  Kentucky. — Wherever  the  transaction  is  infected  by 
usury  or  fraud  and  oppression,  it  is  consistent  with  the  best 
established  rules  of  evidence  to  permit  proof  that  its  real 
character  is  different  from  what  it  imports  to  be  on  the  face  of 
the  transaction.  Where  a  conveyance  is  intended  as  a  security 
for  money,  whether  the  intention  appears  from  the  deed  or  not, 
it  is  always  considered  in  equity  as  a  mortgage.^ 

Parol  evidence  is  sufficient  to  show  that  a  deed  absolute 
upon  its  face  is,  in  fact,  a  mortgage ;  *  and  the  courts,  in  fact, 
lean  to  this  conclusion  in  doubtful  cases.^ 

Many  circumstances  tend  to  show  such  a  deed  to  be  a  mort- 
gage, and  proof  may  be  admitted  as  evidence  of  these  circum- 
stances. Thus,  when  the  grantor  is  in  embarrassed  circum- 
stances, and  greatly  distressed  for  w^ant  of  money,  which  is  well 
known  to  the  grantee ;  when  the  conveyance  grows  out  of  an 
application  by  the  grantor  to  the  grantee  to  borrow  money ; 
when  the  money  advanced  by  the  grantor  is  greatly  inadequate 
to  the  price  of  the  land  at  the  time  of  the  transaction,  and  when 
the  transaction  was  treated  as  a  loan  by  the  parties,  at  the  time 
of  the  execution  of  the  deed,"  and  whenever  there  is  a  fraud, 
mistake,  or  some  vice  in  the  consideration,  parol  evidence  is 
admissible  to  convert  a  deed  into  a  mortgage.^ 

§  174.  North  Carolina.— To  convert  a  deed,  absolute  on  its 
face,  into  a  mortgage  it  must  be  alleged,  and,  of  course,  proved 

1  Osgood  V.  Bank,  30  Conn.  27. 

^  French  v.  Burns,  35  Conn.  359. 

3  Skinner  v.  Miller,  5  Litt.  8-4. 

*  Davis  V.  Eastham,  81  Ky.  116  ;  Blanchard  w.  Kenton,  4  Bibb.  451 ;  Murphy 
V.  Trigg,  1  Mon.  72  ;  Lindley  v.  Sharp,  7  Men.  248  ;  Stapp  v.  Phelps,  7  Dana, 
296 ;  Cook  v.  Colyer,  2  B.  Mon.  71. 

^Seiler  v.  Northern  Bank,  86  Ky.  128. 

8  Skinner  v.  Miller,  5  Litt.  84. 

^  Crutcher  v.  Muir,  13  S.  W.  Rep.  435. 


BASIS  FOR  THE  INTRODUCTION  OF  PAROL  EVIDENCE.  187 

by  parol  or  written  evidence  that  the  clause  of  redemption  was 
omitted  by  reason  of  ignorance,  mistake,  fraud,  or  undue  ad- 
vantage/ And  when  there  is  no  pretense  that  the  alleged 
clause  of  redemption,  was  omitted  under  any  of  these  circum- 
stances the  transaction  will  not  be  upheld  as  a  mortgage.^ 

The  courts  of  North  Carolina  have  added  to  "  fraud,  acci- 
dent, or  mistake  "  two  other  circumstances  or  reasons  for  de- 
claring a  deed  absolute  on  its  face  to  be  a  mortgage,  and  these 
are,  "  ignorance  and  undue  advantage."  So  where  the  grantee 
has  perpetrated  a  fraud  on  the  grantor,  or  there  has  been  a 
mistake  or  accident,  or  where  the  grantor  is  ignorant  or 
the  grantee  has  taken  undue  advantage  of  him,  then  the 
deed  will  be  declared  a  mortgage  and  the  grantor  allowed  to 
redeem.^ 

There  must  be  facts  and  circumstances  shown  which  are  in- 
consistent with  the  idea  of  an  absolute  conveyance  and  proof 
of  fraud,  undue  advantage,  ignorance,  or  mistake  before  a  deed 
will  be  converted  into  a  mortgage.^ 

§  175.  Rhode  Island. — A  deed,  absolute  upon  its  face,  will 
be  valid  and  effectual  as  a  mortgage  as  between  the  parties  if 
it  was  intended  by  them  to  be  merely  a  security  for  a  debt. 
And  this  would  be  the  case,  though  the  defeasance  was  by  an 
agreement  resting  in  parol,  for  parol  evidence  is  admissible  to 
show  that  an  absolute  deed  was  intended  as  a  mortgage,  and 
that  the  defeasance  had  been  omitted  or  destroyed  by  fraud  or 
mistake.^ 

^  Streator  v.  Jonea,  1  Murph.  449 ;  Bonham  v.  Craig,  80  N.  Car.  224. 

^  Egerton  v.  Jones,  102  X.  Car.  278. 

'Green  v.  Sherrod,  105  N.  Car.  197.  See,  also,  Steel  v.  Black,  .3  Jones  Eq. 
427  ;  Sellers  v.  Stalcnp,  7  Ired.  Eq.  13  ;  Elliott  v.  Maxwell,  7  Ired.  Eq.  246  ; 
Kelly  r.  Bryan,  6  Ired.  Eq.  283. 

*  Brothers  v.  Harrill,  2  Jones  Eq.  209. 

*  Taylor  v.  Luther,  2  Sum.  C.  C.  228.  See,  also,  Nichols  v.  Reynolds,  1  R.  I. 
30. 


188  nature  and  requisites  of  the  contract. 

Article  5. 
A  Trust  Q^eated  Between  the  Parties. 

§  176.  In  General.  §  179.  Nebraska, 

i  177.  Delaware.  ^  180.  Texas. 

§  178.  Missouri. 

§  176.  In  General. — Still  other  courts  hold  that  a  deed,  ab- 
solute on  its  face,  may  be  declared  to  create  a  trust  between  the 
parties ;  that  a  court  of  equity  may  establish  a  parol  trust  of 
lands  against  a  grantee  under  an  ordinary  deed  of  bargain 
and  sale. 

It  is  held  by  some  of  the  courts  that  the  grantee  holds  the 
real  estate  for  the  grantor,  and  parol  evidence  may  be  intro- 
duced to  prove  this  resulting  trust.  Or  that  the  denial  of  the 
trust  by  the  grantee  is  a  fraud  of  itself  which  will  be  the  basis 
for  the  introduction  of  parol  proof.  In  such  cases  the  trust 
exists  in  parol  and  is  established  to  prevent  the  fraudulent 
use  of  the  deed  and,  therefore,  it  is  not  necessary  to  allege 
fraud,  accident,  mistake,  or  surprise,  but  the  trust  must  be  es- 
tablished by  clear  and  distinct  proof 

§177.  Delaware. — A  deed,  absolute  on  its  face,  may  be 
shown  to  be  a  mortgage  when  there  is  deception,  undue  in- 
fluence, or  other  fraudulent  means  employed  to  procure  a  deed. 
The  intention  of  the  parties  can  be  shown  by  clear  and  con- 
vincing proof.  Chancellor  Saulsbury  says :  "  There  is  no  doubt 
but  that,  in  equity,  a  conveyance,  whatever  form  it  may  assume, 
will  be  treated  as  a  mortgage  whenever  it  appears  to  have  been 
taken  as  a  security  for  existing  debt,  or  a  contemporaneous 
loan,  and  the  inclination  of  the  court  is  in  doubtful  cases  so  to 
treat  it,  and  allow  the  grantor  to  redeem."  ^ 

In  Delaware  a  court  of  equit}'-  may  establish  a  parol  trust  of 
lands  against  a  grantee  under  an  ordinary  deed  of  bargain  and 
sale,  the  terms  of  which  neither  declare  nor  exclude  a  trust ; 
and  this,  although  no  fraud  or  mistake  in  the  frame  or  phrase- 
ology of  the  deed  be  alleged.     Whether  an  absolute  deed  may, 

1  Walker  v.  Farmers'  Bank,  10  At.  Rep.  94 ;  14  At.  Rep.  819. 


BASIS  FOR  THE  INTEODUCTIOX  OF  PAROL  EVIDENCE.  189 

upon  parol  evidence  and  without  any  allegation  of  fraud  or 
mistake  in  the  omission  of  a  defeasance,  be  converted  into  a 
mortgage  is  a  question  not  yet  decided  in  Delaware.  But  there 
can  be  no  doubt  that  the  grantee  of  a  legal  estate  may  be 
charged  with  trust  dehors  the  deed — that  is,  one  not  declared  in 
it,  but  springing  from  some  agreement  or  arrangement  con- 
temporaneous with  it,  and  of  which  the  conveyance  may, 
itself,  be  the  consideration,  and  that,  in  the  absence  of  any 
prohibitory  statute,  the  agreement,  or  the  circumstances  which 
give  birth  to  the  trust,  may  be  shown  by  parol  evidence  if 
deed  of  bargain  and  sale  is  conclusive,  so  far  as  to  pass  the 
legal  estate,  no  more ;  that  the  beneficial  interest  attends  the 
legal  estate,  is  always  presumed  and,  prima  facie,  the  legal 
estate  passes  clear  of  any  trust ;  but  of  this  the  deed  is  not 
conclusive.^ 

However,  it  is  now  generally  held  a  deed  absolute  on  its 
face  may,  in  a  court  of  equity,  upon  parol  evidence  of  the  real 
transaction,  be  enforced  as  a  mortgage  or  security  for  money, 
if  the  circumstances  make  sufficient  equity  to  have  it  so  treated, 
and  that,  too,  although  it  may  not  appear  that  a  defeasance, 
intended  to  be  inserted,  was  omitted  through  fraud  or  mis- 
take.^ But  a  mortgage  in  this  State  being  but  a  security  for 
the  payment  of  a  debt,  creates  no  trust,  and  establishes  no 
fiduciary  relation.^ 

§  178.  Missouri. — If  the  grantee  deny  the  trust,  equity  on 
proof  of  the  trust  will  treat  such  denial  as  a  fraud,  and 
will  consequently  hold  the  grantee  as  firmly  bound  by  his 
verbal  agreement,  as  though  the  parol  defeasance  was  a  writ- 
ten one  fortified  and  hedged  about  with  all  the  formal 
solemnity  known  to  the  law.  Whenever  the  grantee  repu- 
diates the  trust,  the  way  is  paved  for  the  introduction  of  parol 
evidence.* 

It  is  the  settled  rule  that  a  conveyance,  absolute  in  form,  if 

'Hall  V.  Livingston,  3  Del.  Ch.  348,  375. 

^Hall  V.  Livingston,  3  Del.  Ch.  348,  374. 

'Walker  v.  Farmers'  Bank,  10  At.  Rep.  94 ;  14  At.  Rep.  819. 

*0'Neil  V.  Capelle,  62  Mo.  202. 


190  NATURE    AND    REQUISITES    OP    THE    CONTRACT. 

it  be  made  clearly  to  appear  that  at  the  time  of  the  execution 
it  was  agreed  and  intended  only  as  a  security  for  a  debt, 
will  be  treated  in  equity  as  a  mortgage.^  As  the  legal  and 
equitable  remedies  are  blended,  this  seems  to  be  regarded 
merely  as  a  rule  of  evidence,  and  not  as  a  rule  of  procedure 
depending  upon  the  form  of  the  action.^ 

The  intention  of  the  parties  may  be  shown  by  parol  evi- 
dence on  the  ground  that  the  denial  of  the  trust  character  of 
the  deed  by  the  grantee  is  a  fraud  on  his  part,  which  gives  a 
court  of  equity  jurisdiction  of  the  case,  and  thus  enables  it  to 
hold  to  the  verbal  or  implied  defeasance  as  effectually  as  if 
this  had  been  a  formal  written  one.^ 

§  179.  Nebraska. — The  doctrine  of  the  Nebraska  courts  is 
that  the  grantee,  in  a  deed  absolute  on  its  face,  which  is,  in 
fact,  a  mortgage,  holds  the  real  estate  for  the  grantor,  and  parol 
evidence  may  be  introduced  to  prove  this  resulting  trust.  The 
court  says  that  it  is  competent  to  prove  the  trust  established  by 
parol  testimony.*  Judge  Cobb,  in  delivering  the  opinion  of  the 
court,  cites  Babcock  v.  Wyman  ^  as  authority  for  the  doctrine 
enunciated.  This  case  does  really  coincide  with  the  Nebraska 
court,  and  holds  that  parol  evidence  is  admitted  because  the 
grantor  holds  the  property  in  trust  for  the  grantor,  and  that 
parol  evidence  may  be  introduced  to  prove  this  resulting 
trust. 

The  doctrine  of  the  Nebraska  Supreme  Court  was  that  parol 
evidence  may  be  introduced,  that  such  proof  does  not  contra- 
dict the  writing  or  affect  its  validity.  It  varies  the  import  so 
far  as  to  show  the  true  intention  and  object  of  the  parties  with- 
out a  written  defeasance,  and  establishes  the  trust  purpose  for 
which  the  deed  was  executed.    When  fraud,  accident,  mistake, 

^  Schradski  v.  Albright,  93  Mo.  42. 

=*  Quick  V.  Turner,  26  Mo.  App.  29.  It  seems  to  be  a  rule  of  evidence 
under  the  practice  act,  which  may  be  invoked  even  in  an  action  which,  under 
the  old  system,  is  an  action  at  law :  Wood  r.  Matthews,  73  Mo.  477. 

^  Cobb  V.  Day,  106  Mo.  278  ;  O'Neill  v.  Capelle,  62  Mo.  202. 

*  Tower  v.  Fetz,  26  Neb.  706. 

5  19  How.  (U.S.)  289. 


BASIS    FOR   THE    INTRODUCTION    OF    PAROL    EVIDENCE.     191 

or  surprise  is  not  alleged,  the  evidence  must  be  clear,  certain, 
and  conclusive/ 

§  180.  Texas. — Parol  evidence  is  introduced  to  show  that  a 
deed,  absolute  on  its  face,  was  really  executed  and  delivered 
upon  certain  trusts,  not  reduced  to  writing,  which  the  grantee 
promised  to  perform.  These  trusts  existing  in  parol  are  es- 
tablished to  prevent  the  fraudulent  use  of  the  deed  or  written 
instrument,^  and  it  is  not  necessary  to  allege  fraud,  mistake,  or 
surprise  to  afford  a  basis  for  the  admission  of  parol  evidence.^ 

The  trust  must  be  established  by  clear  and  distinct  proof.* 

When  from  the  inspection  of  the  written  contract  it  is  not 
clear,  whether  it  was  the  purpose  of  the  parties  to  make  a 
mortgage  or  a  conditional  sale,  parol  evidence  may  be  received 
to  determine  the  question.  If  apt  words  are  used,  clearly  in- 
dicating an  intention  to  make  a  mortgage,  parol  evidence  will 
not  be  admitted  to  vary  the  contract.^ 

If  the  deed  recites  in  terms  that  the  sale  is  conditional,  the 
burden  of  proof  is  upon  one  who  seeks  to  have  it  construed  as 
a  mortgage,  and  to  recover  he  must  so  establish  it  with  clear- 
ness and  certainty.^ 

In  an  action  in  trespass  to  try  title,  an  instruction  stating 
that  the  deed  under  whicli  the  other  claims,  though  absolute  on 
its  face,  was  really  intended  as  a  mortgage,  need  not  be  based  on 
clear  and  satisfactory  evidence  that  such  is  the  case,  because  to 
prove  such  "  clearlv  and  satisfactorilv,"  is  erroneous,  in  exacting: 
a  higher  degree  of  proof  than  the  law  requires  in  such  cases/ 

^  Schade  v.  Bessinger,  3  Neb.  140. 

Tower  v.  Fetz  enunciates  a  stronger  doctrine  than  heretofore  accepted  in 
this  State  as  to  a  resultino:  trust.  But  as  it  is  the  last  decision  it  must  be  taken 
to  be  the  established  construction  of  such  a  deed; 

^  Moreland  v.  Bamhart,  44  Tex.  275  ;  Grooms  v.  Rust,  27  Tex.  2.S1. 

^Mead  v.  Randolph,  8  Tex.  191. 

♦Moreland  v.  Barnhart,  44  Tex.  275 ;  Miller  v.  Yturria,  69  Tex.  549  ;  Mark- 
ham  V.  Carothers,  47  Tex.  22  ;  Chmey  v.  Dupree,  21  Tex.  218  ;  Grooms  v.  Rust, 
27  Tex.  2.31 ;  Hughes  v.  Delaney,  44  Tex.  529  ;  Dean  v.  Lyons,  47  Tex.  18 ; 
Pierce  v.  Fort,  60  Tex.  464. 

*  Hubby  V.  Harris,  68  Tex.  91. 

"Miller  v.  Yturria,  69  Tex.  549. 
^    *  Wallace  v.  Berry  (Tex.),  18  S.  W.  Rep.  595. 


CHAPTER  VI. 

requisites  and  validity. 

Article  1. 

Classification  of  Mortgages. 

1 181.  Legal  and  Equitable.  ^  186.  Trust  Deeds  in  the  Nature  of 

§182.  Legal    Mortgages— Third  Es-                      Mortgages. 

sential.  1 187.  Effect  in  those  States  where 

§183.  A     Mortgage     at     Common  a   Mortgage    is   considered 

Law.  merely  a  Security,  and  not  a 

1 184.  Statutory  Forms.  Conveyance. 

§  185.  Power-of-Sale  Mortgages.  §  188.  Equitable  Mortgages. 

§  181.  Legal  and  Equitable. — Mortgages  are  divided  into 
two  classes — legal  and  equitable.  This  is  the  general  classifi- 
cation. The  legal  mortgage  is  executed  with  all  the  formali- 
ties required  by  law.  There  are  three  essentials:  1.  A  mort- 
gagor, who  must  be  a  person  capable  of  granting,  conveying, 
or  assigning  the  property  mortgaged ;  2.  A  mortgagee,  who 
must  be  a  person  capable  of  receiving  a  grant  or  assignment 
of  the  premises ;  3.  The  property  mortgaged,  which  must  be 
granted  or  assigned  in  that  order  and  manner  which  the  law 
requires. 

§  182,  Legal  Mortgages — Third  Essential. — Two  things 
are  necessary  to  the  validity  of  the  third  essential :  First,  a  con- 
veyance of  the  property;  second,  a  contemporaneous  agree- 
ment that  such  conveyance  shall  be  a  security.  The  defea- 
sance, or  agreement  to  reconvey,  may  be  contained  in  the  in- 
strument of  conveyance,  or  in  a  separate  deed,  executed  con- 
temporaneously with  the  deed.^ 

iRelley  v.  Leaehman  (Idaho),  29  Pac.  Rep.  840;  2  Devi,  on  Deeds,  1100, 
1101  ;  Shaw  v.  Erskine,  4.3  Me.  871 ;  Walker  v.  Min.  Co.,  2  Colo.  89  ;  Knowl- 
ton  V.  Walker,  13  Wis.  264 ;  Sharkey  v.  Sharkey,  47  Mo.  543  ;  Ewart  r. 
Walling,  42  111.  453 ;  Benton  v.  Nicoll,  24  Minn.  221 ;  Brush  v.  Peterson,  54 
Iowa,  243  ;  Brinkman  v.  Jones,  44  Wis.  498 ;  Archambau  v.  Green,  21  Minn, 
520 ;  Preschbaker  v.  Feaman,  82  111.  475. 
192 


REQUISITES    AND    VALIDITY.  193 

There  are  three  forms  of  legal  mortgages :  the  common-law 
form,  power-of-sale  mortgage,  and  deeds  of  trust  in  the  nature 
of  a  mortgage. 

§  183.  A  Mortgage  at  Common  Law. — At  common  law  a 
mortgage  must  be  by  deed  and  cannot  be  by  parol  or  by  instru- 
ment not  under  seal.^  The  common-law  form  of  a  mortgage  con- 
tains no  stipulation  for  a  sale  of  the  premises  in  case  of  default 
in  the  payment  of  the  money,  and  hence  can  only  be  foreclosed 
by  entry  and  possession,  or  by  an  equitable  suit  to  foreclose.  No 
particular  form  is  necessary  to  constitute  a  mortgage.^ 

The  writing  must  clearly  indicate  the  creation  of  a  lien, 
designate  the  debt  to  be  secured,  and  specifically  point  out  the 
property  covered.^ 

A  mortgage  in  the  form  of  an  absolute  deed  and  a  defeasance 
back  is  not  favorably  regarded  by  some  courts  because  the  de- 
feasance may  be  lost  and  an  absolute  title  set  up.^ 

The  defeasance  must  be  of  as  high  nature  as  the  deed  itself, 
hence  a  writing  not  under  seal  cannot  at  law  operate  as  a  de- 
feasance of  an  absolute  deed.^  If  the  conveyance  and  the 
agreement  to  reconvey  on  payment  of  the  sum  loaned,  are  of 
even  date  the  transaction  will  be  a  mortgage.^ 

A  contract  to  mortgage,  at  law,  is  within  the  statute  of 
frauds,  and  cannot  be  enforced,  though  the  lender  has  paid 
over  the  money  ^ 

§  184.  Statutory  Forms. — The  common-law  form  of  a 
mortgage  is  long  and  complex ;  the  terms  are  expressed  in 

'  Hughes  V.  Morris,  2  De  Gex,  M.  &  G.  356 ;  Brittain  r.  Rossiter,  11  Q.  B.  Div. 
131 ;  Maddison  v.  Alderson,  L.  R.  8  App.  Gas.  479 ;  Hebron  ?'.  Centre  Harbor, 
11  N.  H.  571 ;  Porter  v.  Muller,  53  Gal.  677. 

*  Mason  v.  Moody,  26  Miss.  184 ;  Burnside  v.  Terry,  45  Ga.  621 ;  Woodworth 
V.  Guzman,  1  Cal.  203  ;  Harris  v.  Jones,  83  N.  Car.  317. 

'  Nat.  Bank  Association  v.  Adams,  109  U.  S.  211. 

*  Baker  v.  Wind,  1  Ves.  161. 

^  Kelleran  v.  Brown,  4  Mass.  443 ;  Flagg  v.  Mann,  14  Kck.  (Mass.)  467 ; 
Murphy  V.  Galley,  1  Allen  (Mass.),  107  ;  Warren  v.  Lovis,  53  Me.  463. 

*Ker  V.  pilmore,  6  Watts  (Pa.),  405. 

'  Washington  Brewerv-  Co.  v.  Carey  (Md.),  24  At.  Rep.  151 ;  Purcell  v.  Miner, 
4  Wall.  (U.  S.)  513. 

VOL.  I. — 13 


194  NATURE    AND    REQUISITES   OF    THE    CONTRACT. 

language  verbose,  technical,  and  archaic.  In  order  to  simplify 
the  language  and  make  it  modern,  many  of  the  States  have 
enacted  statutes  which  reduce  the  mortgage  to  the  shortest  pos- 
sible forms,  which  have  been  declared  as  legal  by  the  courts. 

Such  forms  have  been  adopted  in  Illinois,^  Indiana,^  lowa,^ 
Maryland,*  Mississippi,^  Missouri,^  Tennessee,^  California,* 
North  Dakota,^  and  South  Dakota.^*^ 

These  mortgages,  in  statutory  forms,  are  equivalent  to  one 
containing  all  covenants  of  title." 

The  Illinois  form  may  be  taken  as  an  illustration  of  a 
statutory  mortgage,  which  is : 

The  mortgagor,  A.  B.,  mortgages  and  warrants  to  C.  D.  to 
secure  the  payment  of  (here  recite  the  nature  and  amount 
of  indebtedness,  showing  when  due  and  the  rate  of  interest, 
and  whether  secured  by  note  or  otherwise)  the  following  real 
estate  (here  insert  description),  situated  in  the  county  of 
,  in  the  State  of  Illinois. 

Dated  this         day  of  1   ,    ^  r^,        -, 

A.D.,189     .  }A-B.  [Seal.] 

§185.  Power-of-Sale  Mortgages. — A  power-of-sale  mort- 
gage is  one  in  which  the  parties  agree  that  the  mortgagee  may, 
after  a  specified  time,  sell  the  property  without  going  into  a 
court  of  equity.  The  mortgagee  must  apply  the  proceeds  of 
the  sale,  after  defraying  the  expenses  of  the  trust,  to  the  pay- 

^Annot.  Stat.,  ch.  30,  sect.  12. 

^  1  Eev.  Stat.  364,  sect.  15. 

'Rev.  Code,  sect.  1970. 

*Codel860,  p.  143. 

5  Rev.  Code,  sect.  1236. 

«Rev.  Stat.,  p.  721. 

^  Code,  sect.  2820. 

8CivilCode,  sect.  2948. 

"Codeof  1883,  sect.  1736. 

J"  Code  of  1883,  sect.  1736. 

"  Botsford  V.  Wilson,  75  111.  132.  Omission  of  the  word  "  heirs  "  or  omission 
of  any  other  words  used  in  limiting  a  fee  at  common  law,  is  without  significance 
either  in  deed  or  will,  according  to  the  Illinois  law :  West  v.  Fitz,  109  111. 
425. 


REQUISITES    AND    VALIDITY.  195 

merit  of  the  mortgage  debt,  and  if  there  be  a  surplus  remain- 
ing, pay  it  to  the  mortgagor.  This  kind  of  conveyance  was 
devised  to  facihtate  the  Hquidation  of  the  indebtedness,  and 
prevent  the  delay  in  going  into  equity  to  foreclose. 

This  power  of  sale  is  now  generally  included  in  the  mort- 
gages and  deeds  of  trust  in  the  nature  of  mortgages.^ 

Some  courts  hold  that  this  power  of  sale  is  an  incident  to 
a  power  to  mortgage ;  that  the  authority  to  make  a  mortgage 
means  that  the  mortgage  may  contain  what  mortgages  in  gen- 
eral contain,  and,  hence,  they  may  contain  a  power  of  sale.^ 
But  as  this  kind  of  mortgages  will  be  treated  hereafter  in  a 
chapter  by  themselves,  it  is  not  necessary  to  pursue  the  subject 
further  at  this  stage  of  development  of  the  doctrine. 

At  first  this  mode  of  conveyancing  was  adopted  to  afford  the 
creditor  an  easy,  cheap,  and  speedy  remedy,  and  enable  him 
to  avoid  vexatious  delay,  expense,  and  inconvenience  of  a  fore- 
closure in  court  and  a  sale  under  a  decree.  But  it  appears  that 
this  power  has  been  abused,  and  the  mortgagor  unnecessarily 
inconvenienced  and  damaged,  and  now  some  of  the  States  have 
enacted  that  such  mortgages  shall  be  foreclosed  the  same  as 
those  containing  no  power  of  sale.  Thus  the  Illinois  statute 
provides  that  no  real  estate  shall  be  sold  by  virtue  of  any 
power  of  sale,  contained  in  any  mortgage,  trust  deed  or  other 
conveyance  in  the  nature  of  a  mortgage.  Such  mortgage  must 
be  foreclosed  like  other  mortgages  containing  no  power  of  sale 
— that  is,  in  pursuance  of  a  judgment  or  decree  of  a  court  of 
competent  jurisdiction.^ 

And  the  Supreme  Court  of  this  State  has  declared  that 
such  statute  was  passed  to  prevent  abuse  and  oppression  against 
the  mortgagor.^ 

'  Mitchell  V.  Bogan,  11  Rich.  (S.  Car.)  686  ;  Kinsley  v.  Ames,  2  Met.  (Mass.) 
29 ;  Hyman  v.  Devereux,  63  N.  Car.  624 ;  Lydston  v.  Powell,  101  IVIass.  77 ; 
Brisbane  v.  Stoufrhton,  17  Ohio,  482 ;  Turner  v.  Johnson,  10  Ohio,  204 ;  Loni:- 
with  V.  Butler,  8  111.  74. 

'  Wilson  V.  Troup,  7  Johns.  Ch.  (N.  Y.)  25  ;  In  re  Chawner's  Will,  L.  R.  8 
Eq-  569.  See,  also,  Bridges  v.  Longman,  24  Beav.  27  ;  Cruikshank  v.  Duffin, 
L.  R.  13  Eq.  555. 

'Revised  St.,  ch.  95,  sect.  17. 

*  Ventres  v.  Cobb,  105  HI.  33. 


196  NATURE   AND   REQUISITES   OF   THE   CONTRACT. 

§  186.  Trust  Deeds  in  the  Nature  of  Mortgages. — A 
deed  of  trust  and  a  deed  of  trust  in  the  nature  of  a  mortgage, 
are  two  distinct  instruments.  A  deed  of  trust  absolute  is  un- 
conditional and  indefeasible.  A  deed  of  trust  in  the  nature  of 
a  mortgage  is  conditional  and  defeasible,  and  is,  in  legal  effect, 
a  mortgage.* 

"  The  attributes  of  a  deed  of  trust  for  such  purposes  and  a 
mortgage  with  power  of  sale  are  the  same.  Both  are  intended 
as  securities,  and  in  a  legal  sense  are  mortgages.  In  both  the 
legal  title  passes  from  the  grantor ;  but  in  equity  he  is,  before 
foreclosure,  considered  the  actual  owner  in  both,  and  as 
broadly  in  one  as  the  other ;  the  grantor  has  the  right  to  re- 
deem ;  in  other  words,  the  equity  of  redemption  can  only  be 
barred  by  a  valid  execution  of  the  power."  ^ 

The  addition  of  a  power  of  sale  does  not  change  the  charac- 
ter of  the  instrument.^ 

It  passes  the  legal  title  to  the  grantee  just  as  a  mortgage 
does,  except  where  the  statute  intervenes  and  declares  the 
natural  effect  of  a  conveyance.^ 

§  187.  Effect  in  Those  States  where  a  Mortgage  is 
Considered  Merely  a  Security  and  not  a  Conveyance. — 
In  those  States  where  a  deed  of  trust  in  the  nature  of  a  mort- 
gage is  given,  it  is  generally  held  to  have  the  same  effect  as  a 
mortgage,  even  where  a  mortgage,  is  considered  a  mere  lien. 
The  mere  execution  of  a  trust  deed  in  such  States  conveys  no 
title,  for  a  deed  of  trust  given  to  secure  the  payment  of  money 
is  merely  a  mortgage.^     And  because  a  mortgage  is  in  the  form 

>  Hoffman  v.  Mackall,  5  Ohio  St.  124  ;  Woodruff  r.  Robb,  19  Ohio  212  ;  De 
Wolf  I'.  Sprague  Man.  Co.,  49  Conn.  283;  Eaton  v.  Whiting,  3  Pick.  (Mass.) 
484 ;  Austin  v.  Sprague  Man.  Co.,  14  R.  I.  464 ;  Sargent  v.  Howe,  21  111.  148 ; 
Cliafee  v.  Nat.  Bank,  71  Me.  514 ;  NewTnan  r.  Samuels,  17  Iowa,  528 ;  Hurley 
V.  Estes,  6  Nebr.  386 ;  Lawrence  v.  Farmers'  L.  &  Trust  Co.,  13  N.  Y.  200 ; 
Turner  v.  Watkina,  31  Ark.  429 ;  Fox  v.  Frazer,  92  Ind.  265. 

*  Turner  v.  Watkins,  31  Ark.  429,  opinion  by  Chief  Justice  Walker. 

'  De  Wolf  V.  Sprague  Man.  Co.,  49  Conn.  283  ;  Newman  v.  Samuels,  17  Iowa, 
528 ;  Eaton  v.  Whiting,  3  Pick.  (Mass.)  484. 
♦Turner?'.  Watkins,  31  Ark.  429. 

*  Lenox  v.  Reed,  12  Kan.  223,  227  ;  Chick  v.  Willetts,  2  Kan.  385,  391. 


REQUISITES    AXD    VALIDITY,  197 

of  a  deed  of  trust,  does  not  change  its  character  from  a  mere 
security  for  tlie  payment  of  money,  nor  does  it  convey  a  legal 
title  where  a  mortgage  does  not,  nor  do  the  restrictions  therein 
contained  prevent  the  mortgagor  from  availing  himself  of  the 
safeguards  thrown  around  the  debtor  to  prevent  a  sacrifice  of 
his  property/  A  deed  of  trust  in  legal  effect  is  a  mortgage, 
with  the  power  of  sale  added,  which  does  not  change  its  essen- 
tial attributes.^ 

However,  the  doctrine  of  the  Florida  court  is  not  entirely  con- 
sonant with  this  rule.  It  holds  that  the  conveying  of  certain 
lands  to  trustees  to  sell  and  convey  the  same  by  deeds  of  con- 
vej'^ance,  and  to  devote  the  proceeds  to  the  payment  of  liabilities 
of  the  company,  is  not  a  mortgage ;  but  such  conveyance  vests 
the  legal  title  in  the  trustees,  and  they  are  the  proper  parties  to 
protect  the  title  of  such  lands  as  remain  unconveyed  by  them.* 

In  Wisconsin  it  is  held  that  a  deed  of  trust  conditioned  that 
if  the  grantor  did  not  pay  a  debt  due  from  him  to  a  third  party, 
then  the  trustee  should  advertise  and  sell  the  lands,  pay  the 
debt,  and  return  the  surplus  money  to  the  grantor,  does  not 
constitute  a  mortgrage.  The  trustee  is  the  mere  agent  of  both 
parties,  and  such  a  trust  being  prohibited  by  the  statute,  the 
legal  title  remains  in  the  grantor.  The  test  whether  a  convey- 
ance is  a  mortgage  or  a  trust  is  to  be  determined  by  the  ques- 
tion whether  the  trust  is  to  be  executed  by  the  creditor  or  a 
third  party ;  if  by  the  former,  it  is  a  mortgage ;  if  by  the 
latter,  a  trust.*  A  deed  of  trust  designed  as  security  for  money 
advanced,  or  to  be  advanced,  for  the  benefit  of  another,  creates 
a  lien  on  the  real  property  described  therein,  and  is  in  legal 
effect  a  mortgage.^ 

§188.  Equitable  Mortgage. — This  subject  will  be  treated 
in  a  chapter  by  itself,  so  only  a  definition  will  be  given  in  this 
place.     Equitable  mortgages  are  liens  upon  real  estate  of  such  a 

^Webb  r.  Hoselton,  4  Nebr.  308,  .318. 

'^Newman  r.  Samuels,  17  Iowa,  528 ;  "WoodraflF  v.  Robb,  19  Ohio,  212. 

'Routter  v.  Miller,  15  Fla.  fi25,  027. 

*Mar\nn  r.  Titsworth,  10  Wis.  320. 

*  Thompson  r.  Marshall  (Ore.),  27  Pac.  Rep.  957. 


198  NATURE   AND    REQUISITES    OF    THE    CONTRACT. 

nature  that  they  are  recognized  in  equity  as  securities  for  the 
payment  of  money,  and  are  treated  as  mortgages. 

The  following  instruments  are  treated  as  equitable  mort- 
gages, when  the  nature  of  the  transaction  indicates  that  a 
security  is  intended  by  the  parties :  Assignments  of  con- 
tracts of  purchase,  conveyances  in  consideration  of  the  support 
and  maintenance  of  the  grantor,  an  agreement  to  give  a  mort- 
gage, not  objectionable  for  want  of  consideration,  the  lien  of 
the  vendor  under  a  written  contract  of  reservation,  absolute 
conveyances  with  defeasances  vesting  in  parol,  informal  and 
defectively  executed  mortgages  generally.  Deeds  and  contracts 
which  are  informal  as  a  common-law  mortgage,  intended  as  a 
security,  in  equity,  are  mortgages.^ 

That  class  of  security  which  may  be  considered  as  essentially 
an  equitable  mortgage  is  that  which  arises  by  implication  of 
law,  in  apparent  conflict  with  the  statute  of  frauds,  without 
any  written  agreement  of  the  parties.^ 

Article  2. 
TJie  Date  of  the  Mortgage. 

1 189.  As  to  the  Date  of  the  Mortgage.    ?  190.  The    AdmissibiHty   of   Parol 

Evidence  to  Prove  the  Date. 

§  189.  As  TO  THE  Date  op  the  Mortgage. — ^The  presump- 
tion is  ihsii,  prima  facie,  all  documents  must  be  taken  to  have 
been  made  on  the  day  they  bear  date.  So  a  deed  is  presumed 
to  have  been  executed  and  delivered  on  the  day  it  is  dated.^ 
.  A  deed  is  good,  although  not  dated,  or  though  it  has  a  false 
date,  or  an  impossible  date,  as  February  30,  provided  the 
real  day  of  its  being  dated,  or  delivered  can  be  proved.*  In 
ancient  times,  the  date  was  commonly  omitted.^ 

1  Ketchum  v.  St.  Louis,  101  V.  S.  P.Ofi ;  Brown  v.  Brown,  lOP.  Ind.  23 ;  Wayt 
V.  Carwithon,  21  W.  Ya.  51fi ;  Hoile  v.  Bailey,  58  Wis.  434 ;  Hall  v.  Mobile  & 
Mont.  R.  R.  Co.,  58  Ala.  10,  22. 

^Martindale  on  Convey.,  sect.  425. 

s  Anderson  r.  AVeston,  6  Bing.  (N.  C.)  296 ;  Ofley  v.  Hicks,  2  Cro.  Jac.  264. 

*3B1.  Com.304. 

6  Gibson  v.  Poor,  21  N.  H.  446 ;  Lee  v.  Ins.  Co.,  6  Mass.  209. 


REQUISITES    AND    VALIDITY.  199 

In  the  absence  of  proof  to  the  contrary  the  presumption  is 
that  the  mortgage  was  executed  on  the  day  of  its  date/ 

The  date  is  supposed  to  be  no  part  or  substance  of  the  deed, 
and  may  be  contradicted,^  and  if  the  date  of  the  mortgage  be 
latter  than  that  of  the  acknowledgment,  it  may  be  shown  that 
the  date  of  the  acknowledgment  is  erroneous,  and  tliat  the 
mortgage  was  not  acknowledged  until  after  it  was  executed.^ 

A  mortgage  not  dated,  given  to  secure  a  note  dated  April 
18,  1884,  bearing  interest  on  its  face  "  from  this  date,"  and 
incorporated  into  the  mortgage,  is  a  part  thereof  and  referred 
to  therein  as  "  bearing  interest  from  this  date,"  imports  the 
date  of  its  execution  to  be  coincident  with  that  of  the 
note.* 

The  date  of  the  instrument  may  be  contradicted,  as  not  es- 
sential to  its  operation,^  though  it  is  prima  facie  evidence  of 
the  time  of  its  execution  and  delivery.*'  It  must  be  presumed 
to  be  delivered  after  its  acknowledgment,  or  at  least  as  early 
as  the  day  of  acknowledgment.'' 

§  190.  The  Admissibility  of  Parol  Evidence  to  Prove 
THE  Date. — The  rule  that  parol  evidence  is  not  admissible  to 
contradict  or  vary  the  terms  of  a  written  contract,  is  founded 
on  the  presumption  that  the  whole  engagement  of  the  parties 
and  the  extent  and  manner  of  their  undertaking  were  reduced 
to  writing,  and  that,  therefore,  any  oral  testimony  of  a  previous 
colloquium  or  of  conversations  or  declarations  at  the  time  when 
it  was  completed,  afterward,  would  tend  to  substitute  a  new 

1  Parke  v.  Neeley,  90  Pa.  St.  52. 

*  Comings  v.  Wellman,  14  N.  H.  292;  Gibson  v.  Poor,  21  N.  H.  446;  Hoit 
V.  Russell,  56  N.  H.  559,  566. 

=•  Hoit  V.  Russell,  56  N.  H.  559. 

*  Woolsey  v.  Jones,  84  Ala.  88. 
5  Blake  v.  Fash,  44  111.  302. 

«Darst  V.  Bates,  51  111.  439 ;  Billings  v.  Stark,  15  Fla.  297  ;  Jayne  v.  Gregg, 
42111.413;  Ford  ?;.  Gregory,  10  B.  Mon.  (Ky.)  175;  Ellsworth '  r.  Railwo^d 
Co.,  34  N.  J.  L.  93  ;  County  v.  Bradshaw,  20  Iowa,  355  ;  Sweetser  v.  Lowell,  33 
Me.  446  ;  Harris  v.  Norton,  16  Barb.  (N.  Y.)  264  ;  McConnell  v.  Brown,  Litt. 
(Ky.)  Sel.  Cas.  459  ;  Shep.  Touch.  58,  72.  In  connection  with  this  point  see 
Fontaine  v.  Savings  Institution,  57  Mo.  552. 

'  Clark  V.  Akers,  16  Kan,  166 ;  Loomis  v.  Pingree,  43  Me.  299. ' 


200  NATURE    AND    REQUISITES    OF   THE    CONTRACT. 

and  different  contract  for  the  one  which  was  really  agreed 
upon,  to  the  possible  prejudice  of  one  of  the  parties. 

But  there  are  well-recognized  exceptions  to  this  general  rule, 
and  it  has  been  settled  by  adjudications  that  parol  evidence 
will  be  admitted  to  contradict  or  explain  an  instrument  in 
some  of  its  recitals  or  facts/ 

The  date  is  only  presumptive  evidence  of  the  time  of  de- 
livery, but  the  presumption  may  be  rebutted  by  parol,  and, 
when  this  has  been  done,  the  fact  will  be  established.^  Thus, 
a  party  was  permitted  to  j)rove  that  a  deed  was  made  and  con- 
cluded on  a  day  subsequent  to  that  on  which  the  deed  itself 
stated  on  the  face  of  it  to  have  been  made.^ 

So  the  recital  in  a  mortgage  called  for  a  note  of  $236,  and 
the  note  offered  in  evidence  was  for  $256.  Parol  evidence  was 
admitted  to  prove  that  the  note  produced  was  the  one  referred 
to  in  the  mortgage.* 

As  to  time,  the  date  of  the  mortgage  is  not  to  be  conclusively 
taken  to  be  the  date  or  time  of  the  execution,  and  parol  evi- 
dence is  admissible  to  show  that,  in  point  of  fact,  it  was  subse- 
quently executed  and  delivered.^ 

So  an  office  copy  of  a  mortgage  containing  a  power  of  sale 
from  the  mortgagor  to  sell  for  conditions  broken  was  offered  in 
evidence  ;  the  date  of  the  instrument  was  subsequent  to  that 
of  the  acknowledgment.  The  magistrate  before  whom  the 
deed  was  acknowledged  was  permitted  to  testify  as  to  the  true 
date  of  the  acknowledgment.^ 

Where  the  proof  shows  that  the  deed  was  ante-dated,  the 
date  furnishes  no  indication  of  the  time  of  its  actual  execu- 
tion.'' 

A  mortgage  on  land  in  Delaware  was  given  as  additional 

^  Pascault  r.  Cochran,  34  Fed.  Rep.  358,  opinion  by  Judge  Wales. 
*Lamb  v.  Cannon,  38  N.  J.  L.  302;  Porter  v.  Buckingham,  2  Har.  (Del.) 
197  ;  Parmelee  v.  Simpson,  5  Wall.  (U.  S.)  81. 
^  Hall  V.  Cazenove,  4  East.  477,  opinion  by  Lord  Ellenborough. 
*Hall  V.  Turell,  18  Pick.  (Mass.)  455. 
*  Parke  v.  Neeley,  90  Pa.  St.  52. 
«Hoit  V.  Russell.  56  N.  H.  550. 
'  Costigan  v.  Gould,  5  Denio  (N.  Y.),  290. 


REQUISITES    AND    VALIDITY,  201 

security  for  purchase-price  of  land  in  Maryland,  and  dated 
July  28,  1871,  and  recited  that  the  deed  from  the  vendor 
and  the  purchase-money  mortgage  bore  date  and  were  deliv- 
ered on  that  day.  It  was  held,  on  bill  to  foreclose  the  Dela- 
ware mortgage,  that  the  recital  as  to  date  was  not  conclusive, 
and,  it  being  shown  that  both  mortgages  and  the  deed  were 
dehvered,  all  three  simultaneously,  August  5,  1871,  parol 
evidence  was  admissible  to  show  that  the  three  instruments 
formed  one  transaction/ 


Article  3. 

Description  of  the  Parties. 

1 191.  The  Names  of  the  Parties.  ^  194.  Members    of    Partnerships    as 

§192.  The  Description  of  the  Grantee.  Grantees. 

§193.  Corporations. 

§191.  The  Names  of  the  Parties. — The  names  of  the 
grantor  and  grantee  should  appear  in  the  mortgage.  The  ob- 
ject is  to  distinguish  the  parties  from  all  other  persons.  If 
the  parties,  however,  are  distinguished  so  as  to  identify  them, 
it  is  sufficient,  though  the  true  name  be  not  used,  or  even  no 
name  at  all.^ 

The  description  is  sufficiently  certain  if  the  identity  of  the 
party  can  be  worked  out  through  a  proper  application  of  the 
maxim.  Id  cerium  est  quod  certum  reddi  potest.^ 

The  general  rule  as  to  deeds  and  mortgages  is  settled  to  be 
that  where  several  persons  sign  such  a  conveyance,  and  the 
names  of  one  or  more  of  them  fail  to  appear  as  grantors  de- 
scribed in  the  body  of  the  instrument,  those  not  named  are  not 
bound,  and  it  is  not  their  deed.^ 

In  order  to  convey  by  grant,  the  party  possessing  the  right 
must  be  grantor  and  use  apt  words  to  convey  to  the  grantee, 

^Pascault  V.  Cochran,  .34  Fed.  Rep.  358,  C.  C.  Dist.  Del. 
'Chase  v.  Palmer,  29  111.  .306. 

'3  Wash  Real  Prop.  236,  237 ;  Madden  v.  Floyd,  69  Ala.  221. 
*  Harrison  v.  Simons,  55  Ala.  510  ;  Peabody  v.  Hewett,  52  Me.  33,  50  ;  Mad- 
den V.  Floyd,  69  Ala.  221.     But  see  Elliot  v.  Sleeper,  2  N.  H.  525. 


202  NATURE   AND    REQUISITES   OF   THE   CONTRACT. 

Merely  signing,  sealing,  and  acknowledging  an  instrument  in 
which  another  person  is  grantor  is  not  sufficient.^ 

In  making  a  mortgage  the  names  of  the  grantor  and  grantee 
should  be  given,  their  place  of  residence,  town  or  city,  county 
and  State.  The  occupation,  place  of  residence,  and  matters  of 
that  character  are  often  of  great  assistance  in  identifying  the 
parties  intended,  or  directing  where  they  may  be  found  in  case 
an  inquiry  is  to  be  made  of  them. 

The  fact  that  a  mortgage  is  signed  "  F.  S.  Banks,"  and  the 
acknowledgment,  "  Frederick  S.  Banks,"  does  not  preclude  the 
admission  thereof  in  evidence  as  the  deed  of  "  Frederick  S. 
Banks,"  in  connection  with  testimony  that  the  two  signatures 
were  made  by  the  same  person.^ 

§  192.  The  Description  of  the  Grantee. — If  the  intended 
grantee  in  a  deed  or  mortgage  is  not  named,  he  should  be 
ascertained  by  description  so  as  to  be  distinguished  from  all 
others.^ 

The  grantor  must  undoubtedly,  in  some  way  distinguish 
the  grantee  from  the  rest  of  the  world  ;  but  if  upon  the  view 
of  the  whole  instrument,  he  is  pointed  out,  even  if  the 
name  of  baptism  is  not  given  at  all,  the  grant  will  not 
fail.* 

It  is  not  essential  to  the  validity  of  a  mortgage  or  trust  deed 
that  the  mortgagee  or  beneficiary  shall  appear  therein  by 
name.  It  will  be  sufficient  if  he  is  so  described  or  designated 
that  he  may  be  ascertained  and  distinguished.^ 

But  where  the  evidence  discloses  that  a  person  of  the  same 
name  as  the  mortgagee  named  in  the  mortgage  lived  in  the 
city  where  the  loan  was  negotiated,  but  such  person  disclaimed 
any  knowledge  of  or  connection  with  the  transaction,  the  payee 

1  Agricultural  Bank  v.  Rice,  4  How.  (TJ.  S.)  225.  See,  also,  Chapman  v. 
Crooks,  41  Mich.  595. 

^  Hill  V.  Banks,  61  Conn.  25. 

'  Simmons  V.  Spratt,  20  Fla.  495;  Thomas  v.  Marshfield,  10  Pick.  (Mass.) 
364. 

*  Newton  v.  McKay,  29  Mich.  1. 

*  Nat.  Bank  v.  Schween,  127  111.  573 ;  Lawrenceville  Cement  Co.  v.  Parker, 
15  N.  Y.  Supp.  577. 


REQUISITES    AND    VALIDITY.  203 

and  mortgagee  are  fictitious  and  the  mortgage  void,  though 
the  grantor  acted  in  good  faith/ 

A  mortgagee  capable  of  holding  real  estate  must  be  named 
in  every  mortgage,  or  so  distinguished  as  to  be  ascertained.^ 
So  an  instrument  in  the  form  of  a  mortgage,  but  containing 
the  name  of  no  mortgagee,  does  not  become  effectual  by  its 
delivery  to  one  who  advances  money  upon  the  agreement  that 
he  shall  hold  the  paper  as  security  for  his  loan.^ 

Where  the  description  in  the  instrument  suits  two  persons, 
it  is  incumbent  on  the  one  claiming  under  the  deed  to  show 
that  he  is  the  one  intended.*  The  designation  of  "  junior  "  or 
"  second  "  is  no  part  of  the  grantee's  name,  though  it  is  a  con- 
venient qualifying  word  to  distinguish  him.^ 

§  193.  Corporations. — Where  a  corporation  is  a  party  to  a 
deed  or  mortgage,  a  mistake  in  setting  out  its  name  will  not 
vitiate  the  instrument  if  it  is  apparent  on  its  face  that  the  cor- 
poration was  intended."  A  mortgage  made  in  favor  of  "  the 
trustees  "  of  an  unincorj^orated  society  is  good,  although  the 
trustees  be  not  named.  If  they  are  clearly  distinguished  from 
all  others  it  is  a  sufficient  designation.^ 

A  mortgage  to  a  corporation,  by  a  name  given  as  one  that 
it  was  to  assume  in  the  future,  is  valid  if  the  corporation  was 
in  existence  at  the  time  of  the  execution  of  the  instrument.^ 

§  194.  Members  of  Partnerships  as  Grantees. — It  has 
been  held  that  a  deed  made  to  a  partnership  in  the  company 
name,  in  which  only  the  surnames  of  a  part  of  the  company 
are  mentioned,  they  being  well-known  members,  is  not  cor- 

1  Shirley  v.  Burch,  16  Ore.  83. 

=  Thomas  v.  Wyatt,  31  Mo.  188  ;  77  Am.  Dec.  640 ;  Kelly  v.  Bourne,  15  Ore. 
476.  481. 

'  Chauncey  v.  Arnold,  24  N.  Y.  330. 

*  Grand  Gulf  Banking  Co.  r.  Br\-an,  16  Miss.  234. 

^Cobb  V.  Lucas,  15  Pick.  (Mass.)  1 ;  Kincaid  r.  Howe,  10  Mass.  203. 

« Society  v.  Varick,  13  Johns.  (N.  Y.)  38;  Dousrlass  v.  Bank,  19  Ala.  659; 
Aultman  v.  Richardson,  7  Nebr.  1 ;  Culpepper  Society  v.  Digges,  6  Rand.  (Va.) 
165. 

^  T^wrence  v.  Fletcher,  8  Met.  (INIass.)  153,  163. 
,    «City  Bank  v.  McClellan,  21  Wis.  112. 


204  NATURE   AND   REQUISITES    OF    THE    CONTRACT. 

rect ;  that  such  partners  cannot  take  as  grantees,  but  can  and 
will  hold  in  trust  for  themselves  and  their  copartners.^ 

But  this  doctrine  is  not  the  better  rule.  Thus,  a  deed  was 
made  to  "  Gilmore  &  Ware,"  and  the  court  held  that  a  firm 
name  is  always  held  sufficient  to  designate  the  true  name  of 
all  the  person^  composing  the  firm ;  that  there  did  not  seem 
to  be  any  reason  for  holding  that  a  partnership  in  making  a 
purchase  of  real  estate  for  the  benefit  of  the  firm,  might  not  do 
so  in  the  same  manner  that  they  made  their  other  purchases  ; 
that  is,  in  the  firm  name.^ 

So  a  deed  to  "  Murray,  Ferris  &  Co.,"  and  not  to  the  partners 
by  their  individual  names,  is  valid  the  same  as  a  bond  for  the 
payment  of  money  would  be ;  such  is  a  latent  ambiguity, 
which  may  be  explained  by  parol.^ 

So  it  is  generally  held  that  a  deed  to  a  partnership  by  its 
firm  name  is  not  therefore  void,  but  valid,  and  it  may  be 
shown  by  parol  evidence  who  the  partners  are  that  compose 
the  firm.* 

The  general  tendency  of  the  authorities  is  to  hold  that  the 
name  of  the  partnership,  is  nothing  more  than  a  conventional 
mode  of  designating  the  persons  composing  the  firm,  and  that 
such  firm  may  transact  all  the  partnership  business  in  the 
firm  name,  and  evidence  is  admissible  to  show  who  in  fact 
constitute  the  firm  at  the  time.^ 

^  Beaman  r.  Whitney,  20  Me.  413.  See,  also,  McCauley  v.  Fulton,  44  Cal. 
355  ;  Arthur  v.  "Weston,  22  Mo.  378. 

2  Sherry  v.  Gilmore,  58  Wis.  324. 

^Ferris  r.  Blackledije,  71  N.  Car.  492.  But  the  court  paid  that  this  mode 
of  making  a  deed  is  a  careless  one,  and  might  be  insecure,  but  the  deed  was 
not  void. 

*Kelley  v.  Bourne,  15  Ore.  476  ;  Shaw  v.  Loud,  12  Mass.  447. 

^Stroman  r.  Rottenbury,  4  Des.  Eq.  (S.  Car.)  267  ;  Lady  Superior  v.  Mc- 
Namara,  3  Barb.  Ch.  (N.  Y.)  380  ;  Newton  v.  McKay,  29  Mich.  1 ;  Staak  v. 
Sigelkow,  12  Wis.  234,  242;  Hogg  v.  Odom,  Dudley  (Ga.),  185 ;  Morse  v.  Car- 
penter, 19  Vt.  613 ;  Lindley  on  Partnership  (4th  ed.)  208  ;  Carruthers  v.  Shed- 
don,  6  Taunt.  14 ;  Maugham  v.  Sharpe,  17  Com.  B.  (N.  S.)  443  ;  Pristwick  v. 
Foley,  43  L.  J.,  Com.  P.  (N.  S.)  190 ;  Elphinstone's  Inter,  of  Deeds,  p.  126. 

But  it  is  not  held  that  a  partnership  may  take  the  title  to  land  in  its  firm 
name  when  such  firm  name  does  not  contain  the  surname  of  one  or  more  of 
the  partners :  Kelley  v.  Bourne,  15  Ore.  476,  484. 


requisites  and  validity.  205 

Article  4. 
Description  and  Identification  of  the  Property. 

1 195.  Requisites  of  Description.  1 198.  Taking  the  Mortgaged  Prop- 

1 196.  Description      by      Metes      and  erty  from  a  Larger  Tract. 

Bounds.  1 199.  Valid    Descriptions — lUustra- 

§  197.  Identification  of  the  Premises  by  tions. 

Reference    to    other    Instru-  §200.  Invalid    Descriptions  —  Illus- 

ments.  trations. 

§  195.  Requisites  of  Description. — The  description  of  the 
property  should  be  plain  and  full,  leaving  nothing  to  be  sup- 
plied. But  any  descri^Dtion  of  lands,  however  general  and 
indefinite,  which  is  capable  of  being  made  practically  certain 
by  oral  evidence,  is  sufficient.^  Where  land  is  described  by  a 
general  name  or  designation,  the  deed  is  not  necessarily  void 
for  uncertainty.  It  is  competent  to  show  by  extrinsic  evidence 
what  particular  lands  are  embraced  by  the  general  description.^ 

A  certain  mortgage  on  real  estate  described  the  same  as  "  the 
one-half  interest  "  in  a  certain  specified  tract,  excepting  "  about " 
a  specified  number  of  acres  embraced  in  such  tract,  as  described 
in  a  deed  for  the  portion  excepted,  heretofore  executed  to  the 
mortgagor  on  a  certain  date  by  a  third  person  named ;  it  was 
held  a  sufficient  description.'^ 

Extrinsic  evidence  will  be  admitted  to  make  certain  a  faulty 
description  thereby  identifying  the  premises  mortgaged.* 

In  Connecticut  it  is  necessary  to  give  definite  information  so 
as  to  identify  the  property  covered.^ 

A  mortgage  of  all  the  lots  the  mortgagor  then  owned  in  a 
certain  town,  conveys  all  lots  which  can  be  identified  as  belong- 
ing to  him,  either  by  legal  or  equitable  title.^     The  following 

'  Ryerss  v.  Wheeler,  22  Wend.  (N.  Y.)  148 ;  Woods  v.  Sawin,  4  Gray  (Mass.), 
322 ;  Vaughn  v.  Schmalsle,  10  Mont.  186. 

*  Tucker  v.  Field,  51   Miss.  191 ;  :McGuire  v.  Stevens,  42  Miss.  731 ;  Car- 
michael  v.  Foley,  1  How.  (Miss.)  591. 

^Wallace  v.  Furljer,  62  Ind.  103. 

*  Coogan  V.  Burling  Mills,  124  ]ilass.  390. 

*De  Wolf  V.  Sprague  Manuf.  Co.,  49  Conn.  282,  316;  Herman  v.  Deming, 
44  Conn.  124  ;  North  v.  Belden,  13  Conn.  376,  380. 

*  Starling  v.  Blair,  4  Bibb  (Ky.),  288.  See  Mills  r.  Shepard,  .30  Conn.  98; 
Crawford  v.  Bonner,  53  Tex.  194 ;  Easter  r.  Severin,  64  Ind.  375. 


206  NATURE    AND    REQUISITES    OP   THE    CONTRACT. 

phrases  in  descriptions  do  not  make  the  mortgage  invalid  by 
reason  of  their  generality  :  "  of  all  my  estate,"  "  of  all  my  lands, 
wherever  situated,"  or  "  of  all  my  property."  ^ 

Mortgages  with  such  general  descriptions  cannot  be  made  to 
embrace  after-acc[uired  lands.^ 

The  description  of  the  premises  in  the  granting  part  of  the 
mortgage  must  control  when  inconsistent  with  a  provision  con- 
tained in  the  condition.^ 

§  196.  Description  by  Metes  and  Bounds. — The  rule  is 
well  settled  that  in  case  of  a  discrepancy  in  area  the  lines  of 
ascertained  boundaries  must  control,  unless  there  is  such  an 
averment  or  covenant  of  quantity  as  to  show  that  the  exact 
quantity  was  the  thing  granted.* 

When  the  boundaries  of  land  conveyed  are  definitely  given 
and  the  area  is  stated  as  so  much,  "  more  or  less,"  the  fact  that 
the  actual  area  is  less  than  stated  does  not  make  the  descrip- 
tion by  boundaries  uncertain.^ 

The  mortgage  is  to  be  so  construed  as  to  give  effect  to  the 
intention  of  the  parties,  if  this  can  be  ascertained  from  the  in- 
strument. The  conveyance  is  not  to  be  restricted  to  the  prem- 
ises described  in  a  deed  referred  to  for  a  particular  description, 
if  the  instrument  contains  another  clear  and  unequivocal  de- 
scription embracing  more  land  than  is  described  in  the  deed 
referred  to.^ 

If  the  description  embraces  more  land  than  the  deed  referred 
to,  although  the  premises  are  described  as  "  the  same  estate," 
the  mortgage  is  not  restricted  to  such  premises  as  are  described 
in  the  deed,  but  it  will  embrace  the  land  described  by  metes 
and  bounds.*^ 

A  mortgage  contained  a  description  of  a  part  of  lot  ten,  block 

^Wilson  V.  Boyce,  92  U.  S.  320 ;  Usina  v.  Wilder,  58  Ga.  178. 
2  Calhoun  v.  Railroad  Co.,  2  Flip,  C.  C.  442,  448. 
»Donnan  r.  Print.  &  Pub.  Co.,  70  Mo.  168. 
♦3  Washb.  on  Real  Prop.  (3d  ed.)  630. 
5  Doyle  V.  Mellen,  15  R.  I.  523. 

^  Melvin  v.  Proprietors,  5  Met.  (Mass.)  15  ;  Hastings  v.  Hastings,  110  Mass, 
280. 
''  Congregational  Church  v.  Walker,  124  Mass.  69. 


REQUISITES    AND    VALIDITY.  207 

thirty-seven,  in  a  certain  city.  The  metes  and  bounds  given 
made  45  feet  and  six  inches  on  D  Street  by  163  feet  and  seven 
inches  in  depth.  It  also  included  other  ground  described  as 
"  also  14  feet  and  six  inches  off  the  south  side  of  lot  eleven  in 
said  square  37  of  the  city  named  before,  being  in  all  60  feet  front 
on  D  Street  by  163  feet  and  six  inches  in  depth."  Lot  eleven  was, 
in  fact,  196  feet  deep.  It  was  held  that  the  words  in  italics  are 
not  words  of  description  cjualifying  the  preceding  words,  but 
words  expressing  quantity  merely,  and  that  the  strip  of  ground 
off  the  south  side  of  lot  eleven,  14  feet  and  six  inches  wide  by 
196  feet  deep  passed  by  the  mortgage  and  sale.^  And  where 
a  mortgage  describing  land  as  adjoining  the  land  of  certain 
persons,  and  recites  that  it  contains  223  acres,  more  or  less,  and 
alleges  by  mistake  that  it  was  purchased  by  the  mortgagor 
from  the  heirs  of  M.,  but  it  appeared  that  the  mortgagor  had 
bought  50  acres  from  the  heirs  of  M.,  and  the  boundaries  given 
in  the  mortgage  included  the  50  acres  as  well  as  the  other  lands 
of  the  mortgagor,  it  was  held  the  description  by  boundaries 
would  control,  and  the  50  acres  were  included  in  the  mortgage.^ 
Where  parties  cannot  reasonably  have  intended  to  locate  a 
certain  canal  on  the  south  when  it  was  actually  on  the  east, 
the  true  easterly  boundaries  of  the  mortgaged  land  should  be 
regarded  as  the  canal.  Hence  the  fact  that  a  quantity  of  land 
stated  in  a  deed  of  trust  falls  short  in  actual  measurement  by 
taking  a  certain  canal  as  the  eastern  boundary  instead  of  a 
certain  turnpike,  is  immaterial,  since  words  indicating  quan- 
tity must  yield  to  description  by  boundary.^ 

§  197.  Identification  of  the  Premises  by  Reference  to 
Other  Instruments. — A  description  may  be  sufficient  by 
reference  to  other  instruments.*  The  boundaries  in  a  deed  did 
not  include  a  lot  which  had  been  part  of  a  farm,  and  which, 
with  the  remainder  of  the  farm,  exactly  made  up  the  area  of 
46  acres,  given  in  the  deed.     Reference  to  another  deed  by 

^  McGuire  v.  Bissell,  1 19  Ind.  345. 
^  Steele  v.  Williams  (Ky.),  15  S.  W.  Rep.  49. 
'  Hunter  v.  Hume  (Va.),  13  S.  E.  Rep.  305. 
*  Wallace  v.  Furber,  62  Ind.  103. 


208  NATURE    AND    REQUISITES   OF    THE    CONTRACT! 

way  of  identification  showed  that  the  two  were  partition  deeds, 
and  that,  if  the  area  of  46  acres  was  not  maintained,  a  small 
lot  of  trifling  value  was  left  undivided.  This  made  it  evident 
that  the  thing  granted  was  the  whole  area.  It  was  mentioned 
first  in  the  description,  and  was  necessary  to  a  complete  divis- 
ion of  the  land.  It  was  held,  therefore,  that  the  description 
by  area  must  control.^ 

And  where  the  mortgaged  premises  were  described  as  con- 
taining 100  acres  of  land,  another  tract  of  nine  acres,  the 
title  to  which  was  derived  from  another  source,  cannot  be 
claimed  as  covered  by  such  mortgage,  although  the  description 
in  the  mortgage  concluded  with  a  general  reference  to  a  deed 
which  conveyed  both  tracts.^ 

A  deed  described  the  lots  as  bounded  by  certain  un- 
opened streets,  and  contained  the  following  additional  clause : 
"  Together,  as  respects  each  of  the  said  lots  of  ground  above 
granted  and  released,  with  its  full  proportion  of  the  soil  of  the 
street  or  streets  "  on  which  it  is  situated.  The  grantee  executed 
a  mortgage  on  the  lots  describing  them,  as  in  the  deed,  but 
omitting  the  clause  as  to  the  soil  of  the  streets.  It  was  held 
that  the  mortgage  conveyed  the  same  interest  that  the  grantee 
took  under  the  deed.' 

When  the  name  of  the  town,  county,  and  State  are  omitted, 
in  describing  the  premises,  this  omission  may  be  rendered 
nugatory,  when  the  mortgage  refers  to  a  deed  which  has  an 
accurate  description.* 

Where  the  documents  of  title  are  referred  to  as  accompany- 
ing the  mortgage,  a  description  of  the  land  in  the  mortgage 
need  not  be  made  or  set  out.^ 

§  198.  Taking  the  Mortgaged  Property  from  a  Larger 
Tract. — Where  the  description  in  the  mortgage  of  a  parcel 

*  "Waterman  v.  Andrews,  14  R.  I.  589. 

^  Holmes  v.  Abrahams,  31  N.  J.  Eq.  415. 
3  Patterson  v.  Harlan,  124  Pa.  St.  67. 

*  Robinson  v.  Brennan,  115  Mass.  582 ;  Boon  v.  Pierpont,  32  N.  J.  Eq.  217 ; 
Slater  v.  Breese,  36  Mich.  77  ;  Harding  v.  Strong,  42  111.  148. 

*  Rodriguez  v.  Haynes,  76  Tex.  225. 


REQUISITES   AND    VALIDITY.  209 

of  a  tract  of  larger  extent  does  not  locate  it,  the  mortgagee  be- 
comes a  tenant  in  common  pro  rata  in  the  whole  tract.  Thus, 
a  party  took  a  mortgage  of  an  unascertained  200  acres  of  a 
900-acre  tract  of  land,  and  it  was  held  that  he  acquired  title 
to  an  undivided  two-ninths  of  the  entire  tract.^ 

This  principle  is  illustrated  by  Mr.  Washburn.  He  says : 
"  Where  A.  granted  one  acre  of  woodland  lying  in  common 
with  his  other  woodland,  it  was  held  to  be  such  an  aliquot 
part  of  his  woodland  in  common,  as  one  acre  would  be  to  the 
whole  woodland  owned  by  the  grantor.  And  upon  a  similar 
principle,  wdiere  a  deed  of  a  given  quantity  of  land,  parcel  of 
a  larger  tract,  does  not  locate  it  by  its  description  the  purchaser 
becomes  a  tenant  in  common  pro  rata  in  the  whole  parcel,"  ^ 

So  a  mortgage  of  50  acres  of  land  by  description,  of  a 
larger  amount,  or  the  next  and  adjoining  50  acres  that  is 
unincumbered,  provided  the  first  is  not  free  from  liens,  is  valid 
and  the  description  is  sufficient  for  either  tract.^ 

§199.  Valid  Descriptions — Illustrations. — Illustrations 
will  be  of  great  importance  and  are  given  that  the  interpreta- 
tions may  be  studied  and  applied.  Thus,  the  following 
description  is  sufficient :  The  descriptive  words  were  "  a  tract 
of  land  lying  in  G.  County,  North  Carolina,  adjoining  the  land 
of  L.  and  B.,  situated  on  the  east  side  of  the  road  leading  from 
J.  Church  to  L.'s,  it  being  a  portion  of  their  part  of  the  original 
G.  R.  P.  tract  and  containing  50  acres."  * 

So  a  written  agreement  by  a  debtor  to  transfer  to  his  creditor 
"  a  lot  of  land  near  F.,  north  of  the  Fair  grounds,  containing 
30  acres,  more  or  less,"  to  be  sold  in  payment  of  the  debt,  the 
excess,  if  any,  to  be  returned  to  the  debtor,  is  not  void  for 

'  Brown  v.  Maury,  85  Tenn.  358.  Opinion  by  Snodgrass,  J.  Judges  Tur- 
ney  and  Caldwell  did  not  concur  in  so  much  of  this  opinion  as  held  the  de- 
scription sufficient.    Compare  Cochran  r.  Utt,  42  Ind.  267. 

"^  1  "Wash.  Real  Prop.  (4th  ed.)  p.  654,  and  cases  cited. 

'  Lee  V.  Woodworth,  2  Green  Eq.  (X.  J.)  36.    The  mortgage  will  not  be  de- 
feated though  the  whole  larger  tract  be  incumbered,  but  if  part  be  free  from 
incumbrance,  the  first  50  acres  of  such  nearest  to  that  first  described  will 
be  covered  by  the  mortgage. 
,  *  Edwards  v.  Bowden,  103  N.  Car.  50. 
VOL.  I. — 14 


210  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

uncertainty,  it  appearing  that  the  debtor  owned  but  one  such 
lot  in  that  vicinity,  but  may  be  aided  by  parol  evidence ;  and 
the  creditor  need  not  have  been  placed  in  actual  possession/ 
And  where  a  mortgage  executed  to  the  State  for  the  use  of  the 
Congressional  school  fund  appears  upon  its  face  to  have  been 
executed  by  residents  of  a  certain  county  of  that  State,  it  will 
be  presumed  that  the  land  described  by  section,  township,  and 
range  is  located  within  the  same  State,  and  a  more  specific 
description  is  not  necessary.^ 

A  mortgage  which  describes  the  lots  conveyed  on  a  certain 
street  and  extending  back  to  another  named  street,  the  descrip- 
tion being  accurate  except  as  to  the  block  which  should  be 
"  No.  7,"  passes  title  to  the  numbered  lots  in  the  latter  block.^ 

When  clauses  are  added  to  a  description  that  do  not  aid  in 
the  identification,  they  may  be  rejected  as  surplusage.  Thus, 
when  a  mortgage  describes  the  land  as  all  of  a  certain  lot 
described  on  a  plat  of  the  town  by  a  particular  number,  the 
words  "  whereon  is  situated  a  two-story  building,"  and  which 
follow  the  description  by  number,  may  be  rejected  as  surplus- 
age.* 

If  the  property  is  described  with  such  certainty  as  to  identify 
it,  an  error  in  the  number  of  the  range  or  the  omission  of  it, 
will  not  make  the  mortgage  void.^ 

A  mistake  in  the  number  of  the  lot  may  be  explained  when 
the  boundaries  are  fixed  and  certain.^ 

A  defective  description  may  be  rendered  certain  by  a  refer- 
ence to  the  land  of  adjacent  owners.^ 

The  description  will  cover  no  other  property,  when  the  prop- 
erty is  particularly  described  as  "located  at  and  near  the 
mouth  of  Alder  Gulch,  in  section  ten."     This  description  will 

1  O'Neal  V.  Seixas,  85  Ala.  80. 
*Mann  v.  State,  116  Ind.  385. 
3  Cake  V.  Cake,  127  Pa.  St.  400. 
♦  Gerald  V.  Gerald,  31  S.  Car.  171. 

5  White  V.  Hermann,  51  111.  243.  And  see  Kile  v.  Yellowhead,  80  111.  208; 
Thomhill  v.  Burthe,  29  La.  Ann.  639  ;  Sickmon  v.  Wood,  69  111.  329. 

6  Cooper  v.  Bigly,  13  Mich.  463.    See,  also,  Cake  v.  Cake,  127  Pa.  St.  400. 

7  Ells  V.  Sims,  2  La.  Ann.  251. 


REQUISITES    AND    VALIDITY,  211 

not  embrace  property  of  the  mortgagor  located  in  other  sections 
of  the  township/ 

A  description  by  a  known  meridian  will  prevail  over  that 
by  a  county.^ 

Wlien  a  description  in  a  mortgage  makes  two  east  and  west 
lines,  to  run  at  nearly  right  angles  to  a  certain  section  line,  it 
merely  implies  that  the  east  and  the  W' est  line  of  the  section 
do  not  run  due  north  and  south,  and  the  mortgage  is  not  void.^ 

An  act  of  mortgage  declaring  the  object  mortgaged  to  be  the 
mortgagor's  entire  interest  in  a  parish  named,  giving  the  num- 
ber of  acres,  and  mentioning  the  river  near  which  it  lies,  and 
by  which  it  is  bounded  wdth  reference  to  certain  titles  of  the 
mortgagor  to  be  found  in  the  recorder's  office  for  the  parish 
is  a  sufficient  description/ 

So  a  description  of  land  as  "  320  acres  of  land  known  as  M. 
Place,  where  the  said  H.  lived  last  year,  and  where  T.  now 
lives,"  is  not  void  for  uncertainty,  and  parol  evidence  may  be 
received  to  show  w^hat  lands  were  so  know^n/ 

So  is  the  description  sufficient  which  places  the  premises  in 
*'  township  forty  (41),"  executed  and  acknowledged,  though  the 
parties  afterward  correct  the  description  so  as  to  read  "  town- 
ship forty-one  (41)." ' 

Where  a  mortgage  show\s  that  the  parties  resided  in  the  State, 
a  description  of  land  according  to  the  United  States  govern- 
ment survey  and  legal  subdivision  will  be  sufficient,  though  it 
does  not  state  the  county  and  State  where  the  land  is  situated, 
which  will  be  presumed  to  be  in  the  State  mentioned/ 

Where  a  mortgage  specifically  describes  land,  together  with 
all  the  lands,  mines,  and  minerals  of  every  kind  belonging  to 
the  mortgagor  in  a  designated  county,  it  covers  all  mineral 

'  Largey  v.  Sedman,  3  ^Mont.  472. 
*Sickmon  r.  AVood,  69  111.  320. 
^Teetfhorn  v.  Hull,  30  Wis.  162. 
*  Nat.  Bank  r.  Barrow,  21  La.  Ann.  396. 
^Tranuin  v.  Wilkinson,  81  Ala.  408. 
«Ca«lcr  V.  Byers,  129  111.  657. 

'  Smith  V.  Green,  41  Fed.  Rep.  455.  See,  also,  Mann  v.  State,  116  Ind.  385  ; 
Staples  V.  May,  87  Cal.  178. 


212  NATURE   AND   REQUISITES    OP   THE    CONTRACT. 

lands  in  that  county  shown  by  proper  evidence  dehors  the 
mortgage  which  belonged  to  the  mortgagor  at  the  time  of  its 
execution/  In  like  manner  parol  evidence  may  be  admitted 
to  correct  an  error  in  copying  the  description.  Thus  the 
handwriting  of  the  mortgage  was  scarcely  legible,  and  in  re- 
cording the  land,  it  was  described  as  the  N.  W.  I  of  the  S.  W. 
I.  But  the  only  land  the  mortgagor  owned  was  the  N.  W.  I 
of  the  S.  E.  I,  and  the  scrivener  was  allowed  to  testify,  and 
gave  evidence  that  he  copied  the  description  from  the  mort- 
gagor's deed,  and  that  the  mortgage  before  him  read  N.  W.  ^ 
of  the  S.  E.  ^.  This  was  held  sufficient  evidence  to  justify  the 
finding  that  the  mortgage  was  so  written.^ 

An  indebtedness  was  to  be  secured  "  on  about  908  acres  of 
land  in  H.,  headright  in  M.  county."  The  mortgage  to  be  se- 
cured on  500  acres  of  said  laud,  beginning  at  the  west 
boundary  and  extending  east  sufficiently  far  to  embrace  500 
acres.     Held,  that  this  was  a  sufficient  description.^ 

A  description  began  with  the  phrase,  "beginning  on  a 
Spanish  oak,"  and  then  gave  the  courses  and  distances  as  well 
as  monuments,  stating  that  the  described  area  contained  242|- 
acres.  It  then  excepted  all  of  the  described  land  lying  west 
of  a  certain  stream  and  7|  acres  of  the  east,  which  excepted 
parts  "were  sold  off  by  H.  Y.,"  leaving  142J  acres  remaining 
in  the  tract,  all  on  the  east  side  of  the  stream.  Parol  evidence 
was  admitted  to  identify  the  property.* 

A  description  of  a  mortgaged  property  as  "  un  vaste  terrain 
d  Ven  coignure  des  rues  Orleans  et  Bourbon"  will  be  sufficient.^ 
And  in  general,  a  mortgage  will  not  be  declared  void  for  un- 
certainty in  the  description  of  the  mortgaged  land,  if  the  land 
can  be  located  with  reasonable  certainty.  If  two  phrases 
cannot  be  reconciled,  that  which  would  defeat  the  mortgage 
should  be  rejected.^ 

1  Staples  V.  May,  87  Cal.  178. 

*  Shoemaker  r.  Smith,  80  Iowa,  655. 

^  Westmoreland  v.  Carson,  7G  Tex.  619. 

*  County  V.  McDowell,  99  Mo.  632. 

*  Roberts  v.  Bauer,  35  La.  Ann.  453. 
« People  V.  Storms,  97  N.  Y.  364. 


REQUISITES    AND    VALIDITY.  213 

Thus,  the  mortgage  of  "  all  lands  owned  by  "  the  mortgagor 
is  good,  for  it  can  be  made  certain.^ 

And  it  is  a  rule  of  construction  that,  if  there  are  two  de- 
scriptions in  a  deed,  and  they  do  not  coincide,  the  grantee  may 
elect  to  accept  that  which  is  most  favorable  to  him." 

A  mortgage  which  specifically  describes  a  tract  of  land  in 
which  there  is  a  vein  or  lode  of  metal  on  which  some  mining 
has  been  done,  with  all  the  mines,  minerals,  mining  rights, 
privileges,  and  appurtenances  belonging  or  appertaining  to  the 
same,  does  not  cover  an  undeveloped  portion  of  the  lode  con- 
tained in  the  land  adjoining  the  tract  described,  and  in  which 
also  is  the  situs  of  the  lode.^ 

A  mortgage  described  real  estate  as  "  the  undivided  I  of  lots 

1-2-3  block  25  in  the  original  town  of  M ,  including  the 

undivided  ^  of  all  buildings  and  machinery  therein,  and  all 
fixtures,  and  the  undivided  ^  of  all  stock,  assets,  and  material 
of  the  firm  of  F.  &  Co.,  being  said  G.'s  interest  in  the  property 
of  such  firm,  or  that  may  hereafter  be  acquired,"  situated  in 
a  certain  county  and  State ;  it  was  held  sufficient  as  to  the 
personal  property.*  But  when  the  owner  of  a  plantation  sells 
a  half  interest,  mules,  wagons,  carts,  and  agricultural  imple- 
ments on  the  place  at  the  time  for  its  service,  and  improvements 
are  covered  by  a  specific  mortgage  for  the  purchase-money, 
but  where  the  vendor  and  vendee  enter  into  a  planting  part- 
nership, the  specific  mortgage  does  not  cover  the  mules  put  on 
the  place  by  the  firm.^ 

A  mortgage  of  "  all  the  real  estate  "  the  mortgagor  owns  in 
a  certain  town  "  of  whatsoever  name  or  nature  "  includes  the 
mortgagor's  right  as  tenant  in  common  of  undivided  land  in 
such  towns.^ 

§  200.  Invalid  Descriptions — Illustrations. — Many  de- 
fective descriptions  may  be  made  effectual  by  parol  evidence 

1  Leslie  v.  Merrick,  99  Ind.  180. 

*  Sharp  V.  Thompson,  100  111.  447. 

'Staples  V.  May,  87  Cal.  178. 

*Cook  V.  Shorthill  (Iowa),  48  N.  W.  Rep.  84. 

*Townsend  v.  Payne,  42  La.  Ann.  909. 

«Drew  V.  Carroll,  154  Mass.  181. 


214  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

and  reformed.  But  when  a  description  is  so  indefinite  that  the 
estate  conveyed  cannot  be  identified,  the  mortgage  must  fail. 
Thus,  a  mortgage  is  void  for  uncertainty  when  it  describes  prop- 
erty as  being  parts  of  certain  legal  sections,  without  designating 
what  township  or  range  the  sections  are  in.  There  being  differ- 
ent townships  in  the  county  embracing  the  same  numbered  sec- 
tions and  parts  thereto,  the  description  is  void  for  uncertainty.^ 

As  a  general  rule,  if  the  description  in  a  conveyance  be  so 
defective  that  it  cannot  be  known  what  estate  is  conveyed,  the 
conveyance  is  void.^ 

Accordingly,  a  mortgage  with  a  description  of  the  premises 
as  "  all  the  west  half  of  the  northwest  quarter  of  section  8, 
town  6,  range  7,"  without  stating  in  what  county  or  State  the 
land  is  situated,  or  at  what  particular  land  office  it  was  subject 
to  entry,  is  void  for  uncertainty.^ 

So,  in  Arkansas,  the  following  description  is  void  for  uncer- 
tainty :  "  The  following  described  land,  situated  in  Yell  County, 
Arkansas,  to  wit :  A  portion  of  the  northeast  quarter  of  section 
22,  in  township  6,  range  20,  containing  twenty  acres."  The 
court  held  this  to  be  fatal  because  there  were  no  expressions  in 
the  instrument  nor  reference  to  other  documents,  natural  ob- 
jects, artificial  monuments,  or  adjoining  lands  by  which,  with 
the  aid  of  extrinsic  evidence,  the  particular  land  meant  to  be 
conveyed  could  be  identified.* 

So  a  description  of  land  in  a  mortgage  as  "  261  acres  of  land 
off  of  lots  numbered  5,  27,  and  28,  in  the  ninth  district  of  R. 
County,"  is  void  for  uncertainty.^ 

And  when  it  is  apparent  on  the  face  of  the  instrument,  in 
connection  with  the  plat  referred  to  therein,  that  the  particular 
lot  conveyed  cannot  be  identified,  the  mortgage  is  void  for  un- 
certainty, for  want  of  a  sufficient  and  certain  description  of  the 
premises.^ 

iBoyd  V.  Ellis,  11  Iowa,  97,  101. 

*  Bosworth  V.  Farenholz,  3  Iowa,  85 ;  Worthington  v.  Hylyer,  4  Mass.  196, 204. 
^  Cochran  v.  Utt,  42  Ind.  267.    Compare  Brown  v.  Maury,  85  Tenn.  358. 

*  Freed  v.  Brown,  41  Ark.  495. 

5  Atkins  V.  Paul,  67  Ga.  97. 

6  Stead  V.  Grosfield,  67  Mich.  289. 


REQUISITES    AND    VALIDITY.  215 

In  general,  if,  taking  the  instrument  as  a  whole,  the  subject 
of  the  mortgage  cannot  be  ascertained,  the  mortgage  cannot  be 
upheld/ 

Article  5. 
Clause  of  Defeasance  and  Recitals. 

1 201.  The  Condition.  and  the  Mortgage  Contains 

1 202.  Recitals  as  to  the  Indebtedness.  no  Promise  to  Pay. 

1 203.  Notes  and  Mortgage.  §  206.  Recitals  as  to  the  Time  of  Pay- 
§  204.  When  no  Note  or  Bond  is  Given.  ment  of  the  Debt. 

1 205.  When  no  Note  or  Bond  is  Given      §  207.  Stipulation  as  to  the  Rate  of 

Interest. 

§  201.  The  Condition. — In  ordinary  mortgages  the  haben- 
dum is  followed  by  a  clause  of  defeasance  which  provides  that 
if  the  mortgagor  pays,  the  estate  granted  shall  cease,"  or  "  then 
this  deed  shall  be  void."  ^    Any  equivalent  clause  is  sufficient.^ 

Nothing  is  better  settled  than  that  a  conveyance  of  land, 
with  an  agreement,  condition,  or  stipulation  incorporated 
therein,  that  the  same  shall  become  null  and  void,  or  cease 
and  determine,  or  become  of  no  effect,  or  that  the  estate  so  con- 
veyed shall  be  reconveyed  when  the  money  is  paid,  or  other 
equivalent  expressions,  is  a  mortgage.  The  form  of  the  defea- 
sance is  immaterial,  if  the  intention  clearly  appears  from  the 
language  employed.  Any  stipulation  or  agreement  that  plainly 
indicates  the  intention  to  return  or  reconvey  the  property  upon 
payment  of  the  sum  named,  makes  the  instrument  a  mortgage.^ 
,  If  the  deed  does  not  include  the  clause  that  this  deed  shall  be 
null  and  void,  or  an  equivalent  expression,  after  the  satisfaction 
of  the  deed  or  obligation,  then  the  deed  becomes  inoperative 
as  a  mortgage,^  unless  it  appears  from  the  whole  instrument 
that  it  was  intended  as  a  security ;  if  it  is  irregular  on  its  face 

'  Campbell  r.  Johnson,  44  Mo.  247  ;  Boardman  v.  Reed,  6  Pet.  (U.  S.)  328  ; 
Wofford  ?'.  McKinna,  23  Tex.  44  ;  1  Wood  on  Conv.  206  ;  Martindale  on  Conv., 
sect.  87. 

*  Hclfenstein'a  Estate,  135  Pa.  St.  293 ;  26  Week.  N.  Cas.  194. 

'  Freeman's  Bank  r.  Yose,  23  Me.  98 ;  Adams  r.  Stevens,  49  Me.  362. 

*  Cowles  r.  Marble,  37  Mich.  158 ;  Adams  v.  Stevens,  49  Me.  362. 

*Pearce  v.  Wilson,  111  Pa.  St.  14,  21 ;  Reitenbaugh  v.  Ludwick,  31  Pa.  St. 
131 ;  Kelly  v.  Thompson,  7  Watts  (Pa.),  401. 

*  Freeman's  Bank  v.  Vose,  23  Me.  98 ;  Adams  v.  StevenSv49  Me.  362. 


216  NATUKE    AND    REQUISITES    OF    THE    CONTRACT. 

but  describes  the  notes  and  states  the  usual  condition  upon 
non-payment,  it  will  be  construed  as  a  mortgage.^ 

Although  the  proviso  is  inartificial  and  imperfectly  expressed, 
yet,  if  the  intention  of  the  parties  is  shown  to  have  been  the 
making  of  a  mortgage,  which  intention  is  shown  upon  the  face 
of  the  instrument,  it  will  be  construed  as  a  mortgage.^ 

Neither  is  it  requisite  that  the  condition  shall  be  so  completely 
certain  as  to  preclude  the  necessity  of  extrinsic  evidence.^  But  a 
stipulation  that  the  conveyance  is  to  be  void  upon  payment  of 
the  sum  due  is  one  of  the  essential  elements  of  a  mortgage/ 

But  this  defeasance  clause  is  not  always  inserted.  If  the 
intention  be  to  give  a  security,  the  transaction  will  be  con- 
strued as  a  mortgage.  Thus,  a  deed  conveyed  land  to  be  held 
and  retained  as  security  until  certain  notes  or  obligations  were 
satisfied,  after  which  the  land  was  to  be  reconveyed.  It  was 
held  that  this  transaction  was,  in  effect,  a  mortgage.^ 

§  202.  Recitals  as  to  the  Indebtedness. — A  mortgage, 
though  without  covenants  or  bond  to  pay,  implies  a  loan ;  and 
every  loan  implies  a  debt,® 

Mortgages  may  be  given  without  mentioning  any  bond,  note, 
or  other  obligation.  A  contract  for  the  payment  of  a  debt  is 
not  merged  in  the  security  created  by  the  mortgage,'' 

The  validity  of  a  deed  of  mortgage  stands  upon  the  genu- 
ineness of  the  debt  described  in  the  condition  thereof,  and 
need  not  exist  in  the  form  of  a  promissory  note.  The  form  in 
which  the  indebtedness  appears  is  not  material.^     A  statement 

1  Snyder  v.  Bunnell,  64  Ind.  403. 

'^  Steele-.  Steel,  4  Allen  (Mass.),  417;  Lanfair  v.  Lanfair,  18  Pick.  (Mass.) 
299  ;  Skinner  v.  Cox,  4  Dev.  L.  (N.  Car.)  59. 

^Monell  V.  Smith,  5  Cow.  (N.  Y.)  441 ;  Robinson  v.  Williams,  22  N.  Y.  380 ; 
Stonjjliton  V.  Pasco,  5  Conn.  442 ;  Merrills  v.  Swift,  18  Conn.  257 ;  Kramer  v. 
Bank,  15  Ohio,  253  ;  Youngs  v.  Wilson,  27  N.  Y.  351, 

*Goddard  v.  Coe,  55  Me.  385. 

SHelfenstein's  Estate,  135  Pa.  St.  293 ;  26  Week.  N.  Cas.  194. 

"King  V.  King,  3  P.  Wm.  358 ;  Howel  v.  Price,  1  P,  Wm,  291 ;  Cope  v.  Cope, 
2  Salk.  449. 

^  Yates  V.  Aston,  4  Adol.  &  Ellis  (N.  S.),  182. 

« Lund  V.  Lund,  1  N,  H.  39  ;  Weeks  v.  Eaton,  15  N.  H.  145 ;  Hodgdon  v.  Shan- 
non, 44  N,  H,  572, 


I 


REQUISITES    AND    VALIDITY.  217 

that  there  is  a  personal  obligation  on  the  part  of  the  mortgagor 
to  pay  the  amount  of  the  debt  is  not  necessary.^ 

A  mortgage  to  secure  past  indebtedness  due  and  owing  from 
the  mortgagor  to  the  mortgagee  contains  a  sufficient  description 
of  the  indebtedness.^  So  a  mortgage  given  to  secure  existing 
debts  of  the  mortgagor  to  the  mortgagee  is  vahd  without  speci- 
fying the  debts  or  their  amounts.^  Neither  is  it  necessary  that 
all  of  the  particulars  of  the  note  secured  be  set  forth  in  the  con- 
dition of  the  mortgage.  Substantial  correctness,  such  as  may 
prevent  mistake  or  uncertainty  as  to  the  debt  intended  to  be 
secured,  is  all  that  is  required.* 

In  Connecticut,  the  rule  was  that  the  record  of  the  mortgage 
must  show,  with  as  much  certainty  as  the  nature  of  the  case 
will  admit  of,  "  the  true  state  of  the  incumbrance."  ^  In  Mer- 
rills V.  Swift "  the  court  was  equally  divided  upon  the  question 
whether  a  mortgage,  to  secure  several  notes  and  a  book  account 
to  the  amount  of  $1,500,  or  thereabouts,  was  valid. 

The  courts  of  Connecticut  have  not  modified  their  former 
decisions,  though  in  reference  to  certain  deeds  under  examina- 
tion, it  was  said : 

"  Although  our  early  decisions  would  hold  them  void,  for 
vagueness,  our  decisions  for  the  last  ten  or  fifteen  years  have 
gone  further,  and  established  the  law  to  sustain  mortgages 
quite  as  indefinite  and  vague  as  the  present."  '^  But  the  late 
decisions  do  not  indicate  this  liberality,  for  in  Bramhall  v. 
Flood,*  the  mortgage  describes  the  debt  secured  as  a  note  of 
$1,000.  No  such  note  had  ever  been  given,  but  the  mortgagor 
was  indebted  for  goods  to  the  amount  of  $471.26,  and   the 

>  Hickox  V.  Lowe,  10  Cal.  197. 
""  Machette  v.  Wanless,  1  Colo.  225. 
'Mich.  Ins.  Co.  v.  Brown,  11  Mich.  265. 

*  Webb  V.  Stone,  24  N.  H.  282  ;  Melvin  v.  Fellows,  33  N.  H.  401 ;  Robertson  v. 
Stark,  15  N.  H.  109  ;  Page  v.  Ordway,  40  N.  H.  253 ;  Ricketson  v.  Richardson, 
19  Cal.  330  ;  Booth  v.  Barnum,  9  Conn.  286;  Sheafe  v.  Gerry,  18  N.  H.  245  ; 
Gilman  v.  Moody,  43  N.  H.  239 ;  Gill  v.  Pinney,  12  Ohio  St.  38. 

*  Pettibone  v.  Griswold,  4  Conn.  158. 
«18  Conn.  257. 

^  Utley  V.  Smith,  24  Conn.  290. 
'41  Conn..  68. 


218  NATURE   AND    REQUISITES    OF    THE    CONTRACT. 

latter  had  agreed  to  furnish  additional  goods  to  the  extent  of 
$1,000,  and  the  mortgagor  made  the  mortgage  as  security  for 
tiie  whole.  The  mortgage  was  held  void  against  subsequent 
attaching  creditor.  The  doctrine  of  this  case  accords  with  the 
earlier  decisions  of  Connecticut  courts. 

Of  course  the  interest  of  the  mortgagor  demands  that  the 
incumbrance  be  stated  correctly  with  a  view  of  his  future  deal- 
ings. The  inconvenience  which  may  occasionally  arise  to  third 
persons  from  uncertainty  of  description  of  the  debt,  is  more 
sufFerable  than  the  gross  injustice  which  would  frequently  be 
inflicted  by  a  stringent  rule  as  to  certainty.^ 

The  mortgage  should  set  forth  the  amount  of  the  debt  to  be 
secured,  and  recite  that  it  is  witnessed  b}^  a  note,  a  stated 
account,  or  other  evidence  of  debt,  but  the  neglect  to  do  this 
does  not  invalidate  the  mortgage  security.  In  general,  if  the 
mortgage  contains  a  general  description,  sufficient  to  embrace 
the  liability  intended  to  be  secured,  it  is  effectual.^ 

All  written  deeds  and  contracts,  with  sufficient  explicitness 
to  identify  them,  are  to  be  regarded  as  so  far  constituting  a 
part  of  such  deeds  and  contracts  as  to  be  read  with  them,  in 
order  to  determine  their  terms  and  conditions.  So  when  a 
note  secured  by  a  mortgage  is  referred  to  by  its  date,  the  name 
of  the  maker,  the  day  of  its  maturity,  the  rate  of  interest  pro- 
vided for,  and  the  time  it  becomes  payable,  it  is  a  sufficient  de- 
scription to  identify  the  note  and  authorize  it  to  be  read  in 
order  to  determine  the  terms  of  the  mortgage.^ 

And  a  mortgage  which  states  the  indebtedness  secured 
thereby  as  a  certain  gross  amount,  is  sufficiently  specific, 
where   such   indebtedness   is   in   fact   upon   secured   promis- 

1  Hurd  V.  Eobinson,  11  Ohio  St.  232,  239. 

*  Curtis  V.  Flinn,  4G  Ark.  70  ;  Carnall  v.  Duval,  22  Ark.  136  ;  Jarratt  v.  Mc- 
Daniel,  32  Ark.  598  ;  Page  v.  Ordway,  40  N.  H.  253  ;  Lashbrooks  v.  Hatheway, 
52  Mich.  124. 

*  Fetea  v.  O'Laughhn,  62  Iowa,  532.  See,  also,  Kellogg  v.  Frazier,  40  Iowa, 
502  ;  Clark  v.  Hyman,  55  Iowa,  14  ;  Bourne  v.  Littlefield,  29  Me.  302  ;  Ricket- 
son  V.  Richardson,  19  Cal.  330 ;  Gill  v.  Pinney,  12  Ohio  St.  38 ;  Tousley  v. 
Tousley,  5  Ohio  St.  78  ;  Hurd  v.  Robinson,  11  Ohio  St.  232 ;  Babcock  v.  Lisk, 
57  111.  327  ;  Booth  v.  Barnum,  9  Conn.  286 ;  Stoughton  v.  Pasco,  5  Conn.  442 ; 
13  Am.  Dec.  72. 


REQUISITES    AND    VALIDITY.  219 

sory  notes,  which,  with  secured  interest,  aggregate  the  amount 
stated/ 

But  a  mortgage  which  purports  to  be  made  to  secure  two 
notes,  one  for  $700,  dated  July  13,  1828,  and  one  for  $500, 
dated  January  31,  1835,  is  insufficient  when  the  evidence 
shows  that  the  mortgagee  never  had  such  notes,  but  that  he 
held  three  notes  of  the  mortgagor,  one  for  $800,  one  for  $1,000, 
on  which  $500  had  been  paid,  and  one  of  $700,  none  of  them 
bearing  dates,  as  stated  in  the  mortgage.^ 

Where  a  mortgage  describes  the  indebtedness  secured  by  it 
as  a  note  for  $1,500,  the  time  and  manner  of  payment  to  be  as 
therein  appears,  the  description  is  sufficient.^  So  where  a 
mortgage  recites  that  it  was  given  to  secure  the  payment  of 
$300  on  the  9th  day  of  May,  1883,  $400  on  the  9th  day  of 
May,  1885,  and  $100  on  the  9th  day  of  May,  1884,  with 
interest,  etc.,  but  the  consideration  was  said  to  be  $300, 
and  but  one  note  was  there  named,  the  mortgage  was  held 
a  valid  security  for  all  three  notes.*  So  a  note  may  control 
and  cure  the  defective  description  of  the  debt  in  the  mort- 
gage.** 

In  general  that  part  of  a  contract  describing  the  subject- 
matter  to  which  it  relates  need  not  be  certain  in  itself,  and  does 
not  require  that  degree  of  certainty  that  is  required  in  defining 
the  thing  to  be  done  by  each  of  the  contracting  parties.  "  One 
object  of  the  condition  of  a  mortgage  is  to  point  out  the  debt 
intended  to  be  secured  thereby.  It  of  itself  imposes  no  obliga- 
tion upon  either  of  the  parties.  It  is  descriptive  in  its  character, 
and  is  like  the  descriptive  part  of  a  deed  or  other  instrument 
of  conveyance,  describing  the  property  conveyed.  It  need 
only  point  out  the  thing  conveyed  with  reasonable  certainty. 
It  is  not  required  that  the  description  shall  be  certain  and  pre- 
cise in  every  particular."  ^ 

'  Clark  V.  Hyman,  55  Iowa,  14. 

*  Jewett  V.  Preston,  27  Me.  400. 

'  Kinj?  ?'.  Kilbride,  58  Conn.  109. 

*  Shoemaker  v.  Smith,  80  Iowa,  655. 

*  Cleaven(>;er  v.  Beath,  53  Ind.  172. 

^Winchell  v.  Coney,  54  Conn.  24,  30  ;  opinion  by  Carpenter,  J. 


220  NATURE   AND   REQUISITES    OF    THE    CONTRACT. 

§  203.  Notes  and  Mortgages. — When  the  note  or  notes  and 
mortgage  are  made  at  the  same  time,  in  relation  to  the  same 
subject,  they  are  a  part  of  one  transaction  and  constitute  one 
transaction,  and  must  be  construed  together  as  if  they  were 
parts  of  one  transaction.^  They  explain  each  other  so  far  as 
the  indebtedness  is  concerned.  The  mortgage  points  directly 
to  the  note  in  most  cases,  and  the  amount  of  the  note  is  the 
amount  of  the  indebtedness  in  the  mortgage.^ 

The  mortgage  and  notes  constitute  but  one  transaction, 
virtually  one  instrument,  where  the  mortgage  sufficiently 
identifies  the  note.  And  to  comprehend  the  full  meaning 
of  the  transaction  the  note  as  well  as  the  mortgage  must  be 
examined. 

Thus,  notes  for  a  large  amount  were  payable  in  five  years 
from  date,  "  with  interest  annually  at  six  per  cent.,"  but  were 
described  in  the  mortgage  as  "  bearing  interest  at  six  per  cent, 
per  annum."  It  was  held  that  the  notes  expressed  the  real 
contract  between  the  parties  as  to  the  time  of  payment  of  in- 
terest, and  controlled  the  description  of  them  in  the  mortgage ; 
that  the  description  of  them  in  the  mortgage  as  "  bearing  in- 
terest at  six  per  cent,  per  annum  "  was  sufficient  to  put  a  pur- 
chaser of  the  property  on  inquiry  as  to  the  time  of  payment  of 
interest  expressed  in  the  notes  ;  that  the  mortgage  and  notes 
taken  together  made  the  former  a  security  for  the  payment  of 
annual  interest.^  So  a  trust  deed  was  given,  which  did  not 
purport  to  describe  the  interest  which  was  to  become  due  on 
the  note,  but  it  clearly  showed  that  it  bore  interest  at  some 
rate  and  payable  at  some  time  or  times,  and  this  was  sufficient 
to  put  a  subsequent  purchaser  on  inquiry  as  to  what  the  rate 
of  interest  and  the  time  or  times  of  payment  were.  The  deed, 
in  effect,  declared  that  its  purpose  was  to  secure  the  payment 
of  such  interest  as  has  been  reserved  by  the  note  ;  the  amount, 
and  date,  and  time  of  payment  of  which  are  mentioned.     The 

^  Muzzy  V.  Knight,  8  Kan.  456  ;  Meyer  v.  Graeber,  19  Kan.  165. 
"Somersworth  Sav.  Bank  v.  Roberts,  38  N.  H.  22 ;  Grafts  v.  Crafts,  13  Gray 
(Mass.),  360. 
^  Winchell  v.  CJoney,  54  Conn.  24. 


REQUISITES    AND    VALIDITY.  221 

mere  omission  to  describe  in  the  deed  what  that  interest  was 
to  be  was  not  a  defect  which  could  not  be  remedied.^ 

A  note  was  described  in  a  deed  of  release  as  -payable  May 
21,  1834,  when  in  fact  it  was  payable  April  21.  It  was  held 
that  parol  evidence  was  admissible  to  identify  the  note.^ 
Where  a  note  was  given,  payable  in  five  years  from  date,  with 
interest  at  ten  per  cent.,  and  the  mortgage  recited  that  the  in- 
terest should  be  "  payable  annually,"  it  was  decided  that  the 
interest  was  at  ten  per  cent,  and  payable  annually.^ 

It  is  not  necessary  that  all  the  particulars  of  the  note 
secured  should  be  set  forth  in  the  condition  of  the  mortgage. 
It  is  enough  if  it  appears  with  reasonable  certainty  to  be  the 
note  intended."* 

Stipulations  in  the  mortgage  may  control  an  action  on  the 
note.  Thus,  a  promissory  note  and  mortgage  to  secure  the 
payment  of  the  same  were  executed  at  the  same  time,  and  the 
mortgage  contained  the  following  stipulation :  "  But  it  is 
agreed  a  general  execution  shall  not  issue  therein."  It  was 
held  that  the  mortgagee  could  not  recover  a  general  judgment 
on  the  note,  but  must  resort  to  the  property.^ 

§  204.  When  no  Note  or  Bond  is  Given. — If  a  mortgage 
under  seal  expressly  declares  and  recites  an  indebtedness,  this 
is  sufficient  evidence  of  the  indebtedness ;  no  law  requires  any 
note  or  bond  or  the  like  in  addition  to  the  mortgage.®  Every 
mortgage,  even  with  no  covenant  or  bond  to  pay  the  money, 
implies  a  loan,  and  every  loan  implies  a  debt.^ 

So  when  a  mortgage  is  given,  the  want  of  a  covenant  for 
repayment  of  the  mortgage  money  is  no  bar  to  redemption.* 

1  Richards  v.  Holmes,  18  How.  (U.  S.)  143. 

^Pierce  v.  Parker,  4  Met.  (Mass.)  80.  See,  also,  Johns  v.  Church,  12  Pick. 
(Mass.)  557  ;  Hall  v.  Tufts,  18  Pick.  (Miss.)  455 ;  Jackson  ?'.  Bowen,  7  Cow. 
(N.  Y.)  13 ;  Molvin  v.  Fellows,  33  N.  H.  401 ;  Prescott  v.  Hayes,  43  N.  H.  593  ; 
Bourne  v.  Littlefield,  29  Me.  302. 

'  Muzzy  V.  Kni<rht,  8  Kan.  456. 

MVebb  V.  Stone,  24  N.  H.  282. 

*  Kennion  v.  Kelsey,  10  Iowa,  443. 

*  Whitney  r.  Buckman,  13  Cal.  536. 
'  King  V.  King,  3  P.  Wm.  358. 

,  *Mellor  V.  Lees,  2  Atk.  494. 


222  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

When  the  deed  contains  a  covenant  to  pay  the  money,  the 
mortgagee  may  sue  in  debt  upon  it,  the  same  as  if  he  had 
taken  a  separate  bond  for  the  money.*  If  the  party,  in  the 
mortgage,  acknowledges  his  indebtedness  in  a  sum  certain  and 
declares  that,  for  the  purpose  of  securing  payment  thereof  he 
transfers  the  property  specified  in  the  instrument,  the  mort- 
gagee, on  default  in  payment  may  bring  action,  and  is  not 
bound  in  the  first  instance  to  resort  for  satisfaction  to  the  prop- 
erty.- 

§  205.  When  no  Note  or  Bond  is  Given,  and  the  Mort- 
gage Contains  No  Promise  to  Pay. — A  covenant  to  pay  a 
debt  or  to  repay  the  money  lent  is  not  an  indispensable  ingre- 
dient to  a  mortgage.  If  a  security  for  the  money  is  intended, 
the  transaction  is  a  mortgage.^ 

The  office  of  the  mortgage  is  to  furnish  security  for  the  pay- 
ment of  the  money  loaned  or  the  performance  of  some  other 
act,  but  it  is  not  necessary  to  give  personal  security  in  connec- 
tion with  the  mortgage.*  But  if  the  mortgage  contains  no 
admissions  of  a  debt  on  which  a  personal  action  will  lie  against 
the  mortgagor,  and  no  collateral  promise,  the  mortgagee  has 
no  claim  upon  the  person  of  the  mortgagor,^  and  his  only 
remedy  is  against  the  property  itself.^ 

It  is  a  general  rule  that,  if  the  instrument  contains  no  ex- 
press covenant  to  pay  money,  no  action  will  lie  against  the 
mortgagor.^ 

1  Cou-er  V.  Lancaster,  6  Yerg.  (Tenn.)  477. 

^Elder..  Rouse,  15  Wend.  (N.  Y.)  218;  Brown  ..  Cascaden  43  Iowa,  10.  , 
Newbury..  Butter,  38  Iowa,  179  ;  Dunkley  ..  Van  Buren,  3  Johns.  Ch. 
(N  Y )  330 ;  Vansant  v.  Allmon,  23  111.  30  ;  Lichty  v.  McMartin,  11  Kan.  565. 

'Dougherty  v.  McColgan,  6  Gill  &  J.  (Md.)  275. 

*  Brookings  v.  White,  49  Me.  479. 

5Weedr.Co^^ll,14Barb.  (N.Y.)242.  ^     ,,      .    19  TTnw    m   ^) 

«Rice  V  Rice  4  Pick.  (Mass.)  349;  Russell  v.  Southard,  12  How.  (U.  S.) 
13M52.    S^ral'o  Smith  ..  People's  Bank,  24  Me.  185  ;  Mitchell .  Burnham, 

^^  Culvfr  ■..  Sisson,  3  N.  Y.  264.  See,  also,  Briscoe  ,.  King,  2  Cro  Jack.  281 ; 
Sufheld  V.  Baskeroil,  2  Mod.  36 ;  Smith  ..  Stewart,  6  Blackf.  (IndO  62  Scott 
V.  Fields,  7  Watts  (Pa.),  360;  Drummond  v.  Richards,  2  Munf.  (Va.)  337, 
Sahsbury  v.  Philips,  10  Johns.  (N.  Y.)  57. 


requisites  and  validity.  223 

§  206.  Recitals  as  to  the  Time  of  Payment  of  the  Debt. 
— The  time  oi  payment  fixed  by  the  mortgage,  or  the  note 
secured,  must  control,  and  no  notice  of  such  time  is  necessary 
to  be  served  on  the  mortgagor.^ 

On  mere  instalhnents  of  interest  the  debtor  is  not  entitled  to 
days  of  grace,^  and  the  interest  must  be  paid  on  the  day  fixed.^ 

But  when  the  payment  is  made  in  installments  on  a  day 
certain,  each  payment  has  days  of  grace.  Such  note,  payable 
in  installments,  is  entitled  to  grace  on  each  installment,  for  the 
reason  that  it  is  considered  and  treated  as  so  many  instruments 
in  one  form.* 

"When  a  note  or  installment  of  a  note  bears  interest,  the  in- 
terest being  a  mere  incident  of  the  principal,  follows  the  latter, 
and  becomes  then  payable  at  the  same  time.^ 

Where  the  mortgage  stipulates  that  upon  default  of  payment 
on  any  installment,  the  whole  shall  become  due  and  payable, 
the  indebtedness  not  then  due  is  not  matured,  so  that  a  personal 
judgment  can  be  rendered  against  the  mortgagor  for  the  debt 
by  suit.® 

§  207.  Stipulation  as  to  the  Rate  of  Interest. — Where 
the  bond  and  mortgage  call  for  interest  without  naming  the 
rate,  the  rate  fixed  by  the  law  at  the  date  of  the  instrument 
will  be  chargeable.'' 

After  default,  it  is  the  American  rule  that  interest  continues, 
though  not  specified,  as  the  invariable  legal  incident  of  the 
principal  debt,  from  the  date  of  default,  whenever  the  debtor 
knows  precisely  what  he  is  to  pay,  and  when  he  is  to  pay  it.^ 

However,  when  the  payment  is  uncertain,  interest  is  recov- 
erable only  from  the  date  of  the  demand  for  payment.^ 

'  Ing  V.  Cromwell,  4  Md.  31,  36. 

"McCloon  V.  Smith,  49  Wis.  200;  Nat.  Bank  v.  Kirby,  108  Mass.  497,  501. 

'Catlin  V.  Lyman,  16  Vt.  44. 

*Oridge  v.  Sherborne,  11  Mees.  &  Wels.  374. 

*  Coffin  V.  Loring,  5  Allen  (Mass.),  153. 

*  Mason  v.  Barnard,  36  Mo.  384  ;  Morgan  v.  Martien,  32  Mo.  438. 
^Ackens  u.  Winston,  22  N.  J.  Eq.  444. 

8 People  V.  New  York,  5  Cow.  (N.  Y.)  331 ;  1  Am.  Lead.  Cas.,  Hare  &  Wal- 
lace's Notes,  497-523 ;  Spencer  v.  Pierce,  5  R.  I.  63. 
'  Gardiner  v.  Woodmansee,  2  R.  I.  558. 


224  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

'When  it  is  expressly  stated  in  a  note  that  if  it  is  not  paid  at 
maturity  it  shall  thereafter  bear  interest  at  a  rate  named,  the 
rate  named  is  recoverable,  although  it  is  much  larger  than 
the  usual  or  statutory  rate,  the  rate  not  being  prohibited  by  the 
statute.^  But  when  a  note  is  payable  at  a  future  day,  with  a 
certain  rate  of  interest  per  annum,  and  nothing  is  said  therein 
about  the  rate  of  interest  which  it  shall  draw  thereafter,  if  not 
paid  at  maturity,  some  courts  hold  that  it  will  draw  the  inter- 
est named  till  maturity,  and  after  that  the  usual  or  statutory 
rate.^  Thus,  a  note  payable  at  a  future  day,  with  interest  at 
two  per  cent,  a  month,  in  which  nothing  is  said  about  the 
rate  of  interest  after  maturity,  will  draw  that  rate  of  interest 
till  the  note  matures,  and  after  that  only  the  usual  statutory 
rate.^ 

So  Lord  Selborne  says  the  reason  of  this  is,  that  the  interest 
for  the  delay  of  payment,  post  diem,  is  not  given  on  the  prin- 
ciple of  im2:»lied  contract,  but  as  damages  for  a  breach  of  con- 
tract ;  that  while  it  might  be  reasonable  under  some  circum- 
stances, and  the  debtor  might  be  willing  to  pay  five  per  cent, 
per  month  for  a  short  time,  it  would  by  no  means  follow  that 
it  would  be  reasonable,  or  that  the  debtor  would  be  willing  to 
pay  at  the  same  rate,  if,  for  some  unforeseen  cause,  payment  of 
the  note  should  be  delayed  a  considerable  length  of  time,* 

Judge  Taney  says  that  when  the  note  is  entirely  silent  as  to 
the  rate  of  interest  thereafter,  if  it  is  not  paid  at  maturity,  the 
creditor  is  entitled  to  interest  after  that  time  by  operation  of 
law,  and  not  by  virtue  of  any  promise  which  the  debtor  has 
made ;  that  if  the  right  to  interest  depends  upon  the  contract, 
the  holder  would  be  entitled  to  no  interest  whatever  after  the 
day  of  payment.^ 

If  the  parties  to  the  note  or  other  contract  for  the  payment 
of  money  intend  that  it  shall  carry  the  stipulated  rate  of  in- 

1  Capen  v.  Crowell,  66  Me.  282. 
^Ludwick  V.  Huntzinger,  5  Watts  &Serg.  (Pa.)  51. 

3  Brewster  v.  Wakefield,  22  How.  (U.  S.)  118;  Burnhisel  v.  Firman,  22 
Wall.  (IT.  S.)  170. 
*Cook  r.  Fowler,  L.  R.  7  H.  L.  27. 
6  Brewster  v.  Wakefield,  22  How.  (U.  S.)  118. 


REQUISITES    AND    VALIDITY.  225 

terest  till  paid,  they  can  easily  entitle  themselves  to  it,  by 
saying  so,  in  so  many  words.' 

This  doctrine,  however,  is  not  in  accord  with  some  other 
courts  which  seem  not  to  be  in  accord  with  tlic  weight  of 
authority.  Accordingly  it  has  been  held  in  Massachusetts 
that  when  a  recovery  is  had  upon  a  note  bearing  ten  per  cent, 
interest,  the  payee  is  entitled  to  interest  at  the  same  rate  till 
the  time  of  verdict.  "  Because  the  plaintiff  recovers  interest, 
both  before  and  after  the  note  matures,  by  virtue  of  the  con- 
tract, as  an  incident  or  part  of  the  debt,  and  is  entitled  to  the 
rate  fixed  by  the  contract."  ^ 

This  doctrine  is  at  variance  with  the  reasoning  in  the  House 
of  Lords  in  the  case  cited,  and  with  the  reasoning  of  the  Su- 
preme Court  of  the  United  States,  in  the  cases  cited,  and,  in 
fact,  with  the  reasoning  of  the  Massachusetts  court  itself,  in 
Ayer  v.  Tilden,^  though  this  case  is  cited  as  authority.  In  this 
case  it  is  said  that  the  interest  after  maturity  "  is  not  a  sum 
due  by  the  contract ;  that  it  is  given  as  damages  for  the  breach 
of  the  contract,  and  must  follow  the  rule  in  force  within  the 
jurisdiction  where  judgment  is  recovered." 

Other  courts  agree  with  that  of  Massachusetts.  Thus,  in 
Ohio,  a  note  after  maturity,  without  an  express  agreement  to 
that  effect,  will  continue  to  bear  the  stipulated  rate  until  pay- 
ment. Because  if  the  judgment  rendered  upon  the  notes  is  to 
bear  the  stipulated  rate  of  interest  from  its  rendition  until  pay- 
ment, the  inference  is  irresistible  that  the  notes  after  maturity 
and  before  judgment  must  bear  the  stipulated  rate. 

"  In  other  words,  the  principal  of  a  note  will  bear  the  stipu- 
lated rate  of  interest  from  the  time  it  is  due  until  it  is  paid, 
whether  payment  is  made  voluntarily  or  enforced  by  judgment 
and  execution."  * 

*  Pierce  v.  Swanpoint  Cemeterj',  10  R.  I.  227;  Searle  v.  Adam?,  3  Kan. 
515 ;  Eaton  r.  Boipponnault,  fi7  Me.  540 ;  Virginia  v.  Canal  Co.,  32  Md.  501 ;  Lash 
«.  Lambert,  15  Minn.  416 ;  Rilling  v.  Thompson,  12  Bush  (Ky.),  310;  Langs- 
ton  V.  Railroad  Co.,  2  S.  Car.  248 ;  Hubbard  v.  Callahan,  42  Conn.  524. 

*Brannon  v.  Hursell,  112  Mass.  63. 
'15  Gray  (Mass.),  17S. 

*  Marietta  Iron  Works  i-.  Lottimer,  25  Ohio  St.  621;  Etnyre  v.  McDaniel, 

VOL.  I. — 15 


226  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

The  authorities  are  not  uniform,  and,  therefore,  no  general 
rule  can  be  enunciated/ 

Article  6. 

Execution. 

?  208.  In  General.  §  216.  Qualification  of  the  Officer  tak- 

§  209.  Sealing.  ing  the  Acknowledgment, 

i  210.  Signing.  §  217.  The  Capacity  of  the  Officer. 

i  211.  Attestation.  §  218.  The  True  Distinction. 

I  212.  Acknowledgment.  §  219.  How   Far  Certificates  of  Ac- 

^  213.  Release  of  Homestead  Right.  knowledgment  may  be  Cor- 

§  214.  Dower.  reeled. 

§  215.  Acknowledgment  of  a  Married    ^  220.  Equity  Will  Not  Correct  such 

Woman.  Officers'  Mistakes  and  Omis- 


§  208.  In  General. — If  the  defeasance  is  inserted  in  the 
instrument,  tlie  mortgage  should  be  executed  according  to  the 
same  rules  that  govern  the  execution  of  deeds.  Where  the 
defeasance  is  by  a  separate  instrument,  then  the  rules  for  the 
execution  of  a  mortgage  are  not  always  the  same  in  the  differ- 
ent Sates.  At  common  law,  the  instrument  of  defeasance 
should  be  of  as  high  a  nature  as  the  deed  itself  which  is  to  be 
defeated.^ 

§  209.  Sealing. — According  to  a  strict  definition  a  seal  is 
an  impression  upon  wax,  wafer,  or  some  other  tenacious  sub- 
stance affixed  to  the  paper  or  parchment  on  which  an  instru- 
ment is  written.  In  many  of  the  States  this  kind  of  a  seal 
has  been  abolished  and  a  scroll  or  device  used   in  its  place. 

28  111.  201 ;  McLean  v.  Abrams,  2  Nev.  199 ;  Pruyn  v.  Milwaukee,  18  Wis. 
367;  Kohler  ?'.  Smith,  2  Cal.  597;  Hand  v.  Armstrong,  18  Iowa,  324;  Hop- 
kins V.  Crittenden,  10  Tex.  189 ;  Miller  v.  Burroughs,  4  Johns.  Ch.  (N.  Y.) 
436. 

^See  Cromwell  r.  County,  96  U.  S.  51;  Brewster  v.  Wakefield,  22  How. 
(U.  S.)  118;  Burnhisel  v.  Firman,  22  Wall.  (U.  S.)  170;  Cook  v.  Fowler,  L.  R. 
7  H.  L.  27 ;  Morgan  v.  Jones,  8  Exch.  620 ;  Keene  v.  Keene,  3  C.  B.  (N.  S.) 
144  ;  Price  v.  Railroad  Co.,  16  Mees.  &  Wes.  244 ;  Grordillo  v.  Weguelin,  L.  R. 
5  Ch.  Div.  287. 

*Lund  V.  Lund,  1  N.  H.  39;  Baker  v.  Wind,  1  Ves.  Sr.  160;  Bodwell  v. 
Webster,  13  Pick.  (Mass.)  411 ;  Richardson  v.  Woodbury,  43  Me.  206. 


REQUISITES    AND    VALIDITY.  227 

Still  other  States  have,  by  statutory  provisions,  dispensed  with 
private  seals. 

At  law  a  seal  is  essential  to  make  a  mortgage  operative,  ex- 
cept in  those  States  where  no  seal  is  required.^ 

But  courts  of  equity  will  interpose  for  the  relief  of  a  vendee 
who  has  taken  a  defective  conveyance,  and  will  compel  the 
vendor  and  his  heirs,  and  all  other  persons  claiming  under 
him  with  notice^  as  a  general  rule,  to  make  good  the  convey- 
ance.' 

Thus,  for  want  of  a  seal  the  mortgagee  is  entitled,  in  equity, 
to  a  lien  on  the  mortgaged  land  and  to  have  the  same  per- 
fected in  preference  to  a  creditor  with  notice  of  the  defective 
mortgage.^  As  against  the  mortgagor,  the  mortgagee  may 
have  the  unsealed  mortgage  reformed  by  affixing  a  seal.* 

The  law  of  Ohio  is  not  in  accord  with  the  weight  of  author- 
ity. In  this  State,  an  instrument  without  a  seal  is  not  a  mort- 
gage, and  at  most  but  a  contract  for  a  mortgage.^ 

Thus,  an  instrument  intended  for  a  mortgage,  but  defective 
for  want  of  a  seal,  though  otherwise  duly  executed  as  required, 
creates  no  lien  in  favor  of  the  intended  mortgagee  or  as  against 
third  parties  with  notice.*"'  While  this  is  undoubtedly  the  law 
of  Ohio,  both  in  equity  and  at  law,  yet  in  "White  v.  Denman," 
the  court  says,  after  reviewing  cases  upon  this  point :  "  If  the 
question  involved  here  had  not  been  determined  by  adjudica- 
tion in  this  State,  and  affirmed  and  adhered  to  for  a  number 
of  5'ears,  a  majority  of  this  court  would  feel  constrained  to  take 
a  different  view  of  it." 

The   general   rule  is   contrary  to  the  Ohio  decisions,  and 

'  Martin  v.  Nixon,  92  Mo.  26. 

*  Mastin  v.  Halley,  61  Mo.  19(5. 

^Bullock  V.  Whipp,  15  R.  I.  195 ;  Lebanon  Sav.  Bank  ?•.  Hollenbock,  29 
Minn.  .322. 

*  Sprinjrfield  Sav.  Bank  v.  Springfield  Cong.  Society,  127  Mafts.  olfi  ;  West- 
erly Sav.  Bank  v.  Stillman  ]\Ianf.  Co.,  16  R.  I.  497  ;  Greene  v.  Haskell,  5  R.  I. 
447. 

» White  V.  Denman,  Ifi  Ohio,  59. 

^Erwin  v.  Shuey,  8  Ohio  St.  509  ;  Bloom  v.  Noggle,  4  Ohio  St.  45  ;  Pratt  v. 
Clemens,  4  W.  Va.  443. 
'  1  Ohio  St.  110. 


228  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

holds  that  a  person  who  takes  a  conveyance,  with  notice  of  a 
prior  unrecorded  transfer,  takes  it  subject  to  that  transfer.  A 
man  cannot  stand  by  and  see  another  part  with  his  money 
upon  the  faith  of  a  conveyance,  and  then,  taking  advantage 
of  some  defect  known  to  him,  claim  that,  under  a  subsequent 
conveyance,  he  has  acquired  a  title  superior  in  equity  to  that 
of  the  first  purchaser  or  mortgagee.^ 

If  the  seal  becomes  detached  after  reaching  the  recorder's  office 
it  does  not  invalidate  the  mortgage.^  In  California  an  unsealed 
mortgage  is  not  entitled  to  be  recorded,  but  if  recorded,  it  is 
not  notice  to  subsequent  purchasers  and  incumbrancers.^ 

The  general  rule  at  law  is  that  no  lien  can  be  created  by 
way  of  mortgage  on  real  property  by  any  instrument  which  is 
not  a  deed  under  seal,*  except  in  those  States  where  private 
seals  are  abolished.^ 

§  210.  Signing. — By  the  common  law,  deeds  were  executed 
by  the  seal  of  the  grantor,  without  any  signature.  A  statute  ^ 
was  enacted  requiring  that  in  all  grants  of  land  the  deed  must 
be  signed.'^ 

To  sign  an  instrument  it  is  not  necessary  that  the  name  be 
written  at  the  end  of  the  instrument ;  it  may  be  in  any  part  of  it. 
Subscribing  means  the  same  as  signing.^ 

In  Georgia,,  a  record  of  a  mortgage  is  not  constructive  notice 
to  third  parties,  if  the  mortgagor  has  not  signed  it.^ 

But  in  Missouri  a  deed  of  trust,  regular  in  form  and  ac- 

1  Hai-t  V.  Bank,  33  Vt.  252 ;  Bullock  v.  Whipp,  15  R.  1. 195. 

*  Van  Riswick  v.  Goodhue,  50  Md.  57. 
'  Racouillat  v.  Sansevain,  32  Cal.  376. 

*  Erwin  v.  Shuey,  8  Ohio  St.  510 ;  Philips  v.  Bank,  18  Pa.  St.  394  ;  Schmidt 
V.  Hoyt,  1  Edw.  Ch.  (N.  Y.)  652.  But  in  many  of  the  States  the  private  seal 
has  been  abolished  by  statutory  provisions.  In  Pennsylvania  a  valid  mort- 
gage may  be  created  by  a  written  instrument  not  under  seal :  Woods  v.  Wal- 
lace, 22  Pa.  St.  171. 

^Ames  V.  Holderbaum,  44  Fed.  Rep.  224.    See,  also,  Bryce  v.  Massey  (S. 
Car.),  14  S.  E.  Rep.  768. 
«  29  Charles  II,  ch.  3. 
'  2  Bl.  Com.  306. 

8  James  v.  Patten,  8  Barb.  (N.  Y.)  344 ;  1  Pars.  Cont.  28. 
•Shepherd  v.  BurkhaJter,  13  Ga.  443. 


REQUISITES    AND    VALIDITY.  229 

knowledged  by  the  grantor  before  the  proper  officer,  as  his  act 
and  deed,  but  lacking  the  grantor's  signature,  which  was 
omitted  by  mistake,  will  be  regarded  in  equity  as  a  mort- 
gage, and  enforced  against  the  lien  of  a  judgment  creditor  of 
the  mortgagor  subsequently  acquired/ 

A  signature  to  a  mortgage  is  binding,  if  made  at  the  proper 
time  and  duly  acknowledged,  whether  signed  by  the  person 
owning  the  name  or  by  some  one  else  with  his  consent.^  Or 
the  mortgagor  may  ratify  his  signature,  after  made  by  some 
one  else;^  The  mortgage  is  good  if  signed  by  some  one 
else  with  the  mortgagor's  name  in  his  presence  with  his 
consent/ 

It  is  held  in  Connecticut  that  an  unsigned  mortgage  conveys 
no  title,  legal  or  equitable ;  hence,  when  so  given  the  mort- 
gagee acquires  no  lien  on  the  property.  "  The  deed  not  having 
been  signed  by  the  grantor  in  any  form,  is  not  merely  a  defect- 
ive conveyance,  but  is  wholly  void."  An  acknowledgment 
cannot  dispense  with  the  manual  act  of  subscribing  by  the 
grantor.^-  Transposition  of  the  names  of  the  grantor  and 
grantee  in  the  granting  clause  of  a  mortgage  does  not  affect 
its  validity  if  signed  and  acknowledged  by  the  mortgagor.® 

Land  was  conveyed  to  a  married  woman  and  she  and  her 
husband  executed  their  promissory  note,  under  seal,  for  part 
of  the  price.  To  secure  this  note  the  vendor  took  a  mortgage 
on  the  land,  which  recited  that  "  for  and  in  consideration  of  a 
certain  deed  of  land  given,  and  my  promissory  note  for  part 
price  thereof  .  .  .  that  it  hereby  secures  to  them,"  etc.  Both 
husband  and  wife  signed  the  mortgage,  but  neither  name, 

^  IMartin  v.  Nixon,  92  Mo.  26. 

"Johnson  v.  Davis  (Ala.),  10  South  Rep.  911;  Johnson  r.  Van  Yelsor,  43 
Mich.  208. 

'Bartlett  v.  Drake,  100  Mass.  174 ;  Greenfield  Bank  v.  Crafts,  4  Allen  (Mass.), 
447. 

*Videau  r.  Griffin,  21  Cal.  389;  Jansen  r.  McCahill,  22  Cal.  563;  Gardner 
V.  Gardner,  5  Cush.  (Mass.)  483 ;  Frost  v.  Deering,  21  Me.  156 ;  Rex  r.  In- 
habitants, 4  Barn.  &  Adol.  648. 

*  Goodman  r.  Randall,  44  Conn.  321.    See,  also,  White  v.  Wilson ,  6  Blackf. 
(Ind.)  448. 
,  'Beaver  v.  Slanker,  94  111.  175. 


230  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

nor  any  other  name  appeared  in  the  body  thereof,  and  it  was 
held  that  the  mortgage  was  sufficiently  executed.'  A  party 
may  sign  by  his  mark,  if  properly  done.^ 

§  211.  Attestation. — The  common  law  required  no  attest- 
ing witnesses.  The  statutes  of  several  of  the  States  provide 
that  deeds  and  other  conveyances  of  real  estate  shall  be  at- 
tested by  two  witnesses,  and  in  others  one  witness  is  sufficient. 
But  a  mortgage  without  witnesses  is  good  between  the  parties 
thereto.'^ 

The  attesting  witnesses  should  be  these  who  are  disinterested 
in  the  transaction.^  But  a  mortgage  given  by  a  corporation 
and  attested  by  one  of  its  employes,  together  with  another  wit- 
ness is  valid.^ 

So  a  mortgage  witnessed  by  a  brother-in-law  of  the  mort- 
gagee, who  was  a  notary  public,  does  not  make  it  illegal.^ 

So  a  mortgage  attested  by  a  notary  who  was  the  attorney  at 
law  for  both  parties  is  sufficient.^  A  mortgage  is  valid  as 
between  the  parties,  though  it  was  witnessed  by  an  attorney  of 
the  mortgagee  as  notary  public.^  So  the  validity  of  a  mort- 
gage is  not  affected  by  the  fact  that  the  attesting  witness, 
who  was  a  justice  of  the  peace,  omitted  to  affix  his  official 
signature.^ 

If  a  mortgage  is  attested  by  one  witness,  when  two  are  re- 
quired, this  does  not  make  it  void,  and  is  valid  as  to  third  par- 
ties with  notice."^  And  it  is  generally  held  that  though  a  deed 
is  attested  by  only  one  witness  when  two  are  required,  it  may 

^Sheldon  r.  Carter,  90  Ala.  380,  distinguishing  Harrison  v.  Simons,  55 
Ala.  510.  As  to  signing  and  acknowledgment  in  Kentucky,  see  Meazles  v. 
Martin,  18  S.  W.  Rep.  1028. 

2 Johnson  r.  Davis  (Ala.),  10  South.  Rep.  911,  distinguishing  Carlisle  v. 
Campbell,  76  Ala.  247. 

3  Baker  v.  Clark,  52  Mich.  22 ;  Gardner  v.  Moore,  51  Ga.  268. 

*  Winstead  Sav.  Bank  v.  Spencer,  26  Conn.  195. 

^Conley  ?'.  Campbell  Printing  Press  and  Manf.  Co.,  78  Ga.  569. 

6  Welsh  V.  Lewis,  71  Ga.  387. 

^  Wardlaw  v.  Mayer,  77  Ga.  620. 

8  Marble  v.  Mayer,  78  Ga.  60. 

®  Janes  v.  Penny,  76  Ga.  796. 

^  Gardner  v.  Moore,  51  Ga.  268. 


REQUISITES    AND    VALIDITY.  231 

be  enforced  in  equity/  as  against  the  mortgagor  and    as  to 
third  parties  with  notice.^ 

In  some  States  no  attestation  is  necessary.^ 

§  212,  Acknowledgment. — The  purpose  of  an  acknowledg- 
ment, as  a  general  rule,  is  to  prove  its  execution,  in  order  that 
it  may  be  used  in  evidence,  and  that  it  may  be  entered  of 
record.  A  deed  which  has  not  been  acknowledged  is  not,  as  a 
general  rule,  entitled  to  record,  and  although  it  has  been 
placed  upon  record,  is  not  notice  to  third  parties,  and  is  a 
nullity  as  to  all  the  benefits  conferred  by  statute  upon  regis- 
tered instruments.* 

In  some  of  the  States,  however,  the  record  of  a  deed  that  has 
not  been  acknowledged  will  operate  as  constructive  notice  of 
the  contents  of  the  instrument.^  And  it  may,  in  some  States, 
operate  as  actual  notice.^ 

In  Illinois,  a  deed  is  valid  between  the  parties  to  it,  without 
being  acknowledged  ;  where  a  purchase-money  mortgage  was 
executed  on  the  same  date,  the  delivery  is  perfected  so  as  to 
preser\'e  the  lien  of  the  purchase-money  mortgage,  even  though 
it  be  not  acknowledged  by  the  mortgagor  till  six  months  after 
delivery  and  recording  of  the  deed.'' 

And  a  mortgage  is  not  rendered  invalid  because  the  justice 
taking  the  acknowledgment  held  at  the  same  time  another 
office,  and  the  law  declared  the  two  offices  to  be  incompatible, 
it  not  being  declared  which  should  be  forfeited.* 

So  a  mortgage  properly  executed  and  acknowledged,  al- 
though the  certificate  of  acknowledgment  is  defective,  is  valid 

^Lake  v.  Doud,  10  Ohio,  415. 

"Ross  V.  Worthinpton,  11  Minn.  438 ;  Wadsworth  v.  Wendell,  5  Johns.  Ch, 
(N.  Y.)  225 ;  Pohonck  v.  Ellingwood,  3  Edw.  Ch.  (N.  Y.)  175 ;  Sanborn  v. 
Robinson,  54  N.  H.  2?>9. 

='Carrico  7-.  Bank,  .33  Md.  235. 

*Brydon  r.  Campbell,  40  Md.  331;  Carpenter  v.  Dexter,  8  Wall.  (U.  S.) 
532;  Stronir  v.  Smith,  3  INIcLean  C.  C.  302;  Graves  ?'.  Graves,  6  Gray  (iNIass.), 
391 ;  Blood  V.  Blood,  23  Pick.  (Mass.)  80 ;  Todd  v.  Outlaw,  79  N.  Car.  235. 

*  Simpson  v.  Mundee,  3  Kan.  181 ;  Reed  v.  Kemp,  16111.  445. 

*  Miisgrove  ?'.  Bonser,  5  Ore.  313 ;  Bass  v.  Estill,  50  Miss.  300. 
^Roane  r.  Baker,  120  111.  308 ;  Robinson  v.  Robinson,  116  111.  250. 
8  Adam  v.  IMengel  (Pa.),  8  Atl.  Rep.  606. 


232  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

against  a  subsequent  purchaser  having  knowledge  of  it  as  re- 
corded, though  not  of  its  proper  acknowledgment,  where  he 
parts  with  no  value  and  incurs  no  liability.^ 

A  mortgage  was  acknowledged  before  a  deputy  clerk,  and 
the  principal  clerk,  in  writing  out  the  certificate,  failed  to  set 
forth  the  facts  and  include  the  indorsement  by  the  dei^uty.  It 
was  held  that  the  mistake  might  be  corrected  under  the  act  of 
May  10,  1884,  relative  to  the  accruing  of  such  defects,  although 
the  act  was  passed  subsequent  to  the  bringing  of  the  suit,  and 
the  lien  under  the  mortgage  was  good.^ 

When  a  certificate  of  acknowledgment  of  a  mortgage  bears 
the  same  date  as  the  note  it  will  be  presumed  that  the  note 
and  mortgage  were  executed  and  delivered  at  that  time ;  and 
the  mere  fact  that  an  earlier  date  appears  at  the  commence- 
ment of  the  mortgage  is  immaterial  and  constitutes  no  vari- 
ance.^ 

The  certificate  of  acknowledgment  is,  at  least,  presumptive 
evidence  that  the  note  and  mortgage  were  executed  and  deliv- 
ered at  the  time  of  execution.*  The  certificate  should  follow 
the  form  given  by  the  statute,  though  it  need  not  be  in  the 
exact  words ;  ^  but  words  of  equivalent  import  should  be  used." 

The  certificate  will  be  ujiheld  whenever  substance  is  found, 
and  courts  will  not  suff'er  conveyances  or  proof  of  them  to  be 
defeated  by  technical  or  unsubstantial  objections.  In  constru- 
ing them  resort  may  be  had  to  the  deed  or  instrument  to 
which  they  are  appended.'^ 

'  Hutchinson  v.  Ainsworth,  73  Cal.  452. 
•■^Edmunds  v.  Leavell  (Ky.),  3  S.  W.  Rep.  134. 
^Protz  V.  Schantz,  70  Wis.  497. 

*  Smith  V.  Allis,  52  Wis.  337;  Pereau  v.  Frederick,  17  Nebr.  117. 

*  Allen  V.  Lenoir,  53  Miss.  321;  Keeling  v.  Hoyt,  31  Nebr.  453;  Alvis  v. 
Morrison,  63  III.  181 ;  Duval  v.  Covenhoven,  4  Wend.  (N.  Y.)  561 ;  Meriam 
V.  Harsen,  2  Barb.  (N.  Y.)  Ch.  232. 

« Johnson  r.  Badger,  etc.,  Co.,  13  Nev.  351 ;  Vance  v.  Schuyler,  0  111.  160 ;  Davar 
V.  Card  well,  27  Ind.  478 ;  Dickerson  v.  Davis,  12  Iowa,  353 ;  Pickett  v.  Doe,  5  Sm. 
&  M.  (Miss.)  470;  Alexander  v.  Merry,  9  Mo.  514  ;  Monroe  v.  Arledge,  23  Tex. 
478 ;  Carpenter  v.  Dexter,  8  Wall.  (IT.  S.)  513 ;  Hartshorn  v.  Dawson.  79  111.  108 ; 
Talbot  V.  Simpson,  Pet.  C.  C.  188 ;  Hawkins  v.  Pugh  (Ky.),  16  S.  W.  Rep.  277. 

'  Wells  V.  Atkinson,  24  Minn.  161. 


REQUISITES    AND    VALIDITY.  233 

If  the  acknowledgment  be  by  an  agent,  the  certificate  should 
show  that  the  deed  was  that  of  the  principal  made  in  behalf 
of  him  by  the  agent,  and  this  must  be  shown  with  reasonable 
clearness.^  In  the  case  of  a  corporation,  the  deed  may  be 
acknowledged  by  any  officer  thereof  lawfully  authorized  to  do 
so.^  And  when  no  statutory  provisions  control,  then  the  officer 
affixing  the  corporate  seal  is  the  proper  person  to  make  the 
acknowledgment.^  Surplusage  in  a  certificate  will  not  render 
it  invalid,  provided  the  rest  of  the  certificate  is  in  form/  And 
the  uncorroborated  evidence  of  the  mortgagor  that  the  mort- 
gage was  not  acknowledged  in  the  manner  recited  in  the  cer- 
tificate of  acknowledgment,  is  not  sufficient  to  overcome  the 
recitals.^ 

Stating  that  the  mortgagor  "  personally  appeared  before  me 
and  acknowledged  the  same,"  but  omitting  "  personally  known  " 
to  the  officer,  is  not  so  defective  as  to  render  the  mortgage  in- 
admissible as  evidence.'^  The  wife's  statement  that  she  was 
not  examined  separate  and  apart  from  her  husband  cannot  be 
admitted  to  overthrow  such  a  statement  in  the  certificate/ 

Although  an  alien  is  ineligible  as  a  notary  public,  yet,  if  he 
has  been  duly  commissioned  as  such,  he  is  a  de  facto  notary, 
and  has  authority  to  acknowledge  deeds ;  and  such  acknowl- 
edgment involves  no  federal  question/ 

If  the  officer  certifies  that  he  knows  the  person  to  be  the  one 
who  executed  the  mortgage,  a  variance  in  spelling  the  name  of 
such  party  appearing  in  the  certificate  will  be  presumed  to  be 
a  clerical  error  merely,  and  will  not  vitiate  the  acknowledg- 
ment/ 

'McDaniels  v.  Flower  Brook  Manuf.  Co.,  22  Vt.  274;  McAdam  v.  Block, 
6  Mont.  601 ;  Coombe's  Case,  9  Co.  76  b ;  Elwell  v.  Shaw,  16  Mass.  42. 

'^Merrill  v.  Montgomery,  25  Mich.  73. 

3  Kelly  V.  Calhoun,  95  U.  S.  710. 

*Orr  V.  Blackwell  (Ala.),  8  South.  Rep.  418. 

5Pof=it  V.  Bank,  138  111.  559  ;  Fitzgerald  v.  Fitzgerald,  100  111.  385. 

'Wilson  V.  Quigley  (Mo.),  17  S.  W.  Rep.  891. 

^  Gray  v.  Shelby  (Tex.),  18  S.  W.  Rep.  809. 
•     *  Wilson  V.  Kimmel  (Mo.),  19  S.  W.  Rep.  24. 

'  Rodes  V.  St.  Anthony,  etc.,  Co.  (Minn.),  52  N.  W.  Rep.  27  ;  Rogers  v.  Manley, 
46  Minn.  403. 


234  NATURE    AND   REQUISITES   OF   THE    CONTRACT. 

§  213.  Release  op  Homestead  Right. — Under  the  law 
exempting  the  homestead  of  families,  the  statutory  provisions 
must  be  strictly  followed.  Thus,  a  married  woman  cannot 
release  her  homestead  in  the  estate  of  her  husband  by  her  sep- 
arate deed,  duly  acknowledged.  The  clear  and  unequivocal 
terms  of  the  statute  must  be  followed,  which  prescribes  the  only 
way  in  which  the  homestead  right  can  be  conveyed.^  A  valid 
deed  releasing  the  homestead  right  can  only  be  executed  by 
the  joint  consent  of  the  husband  and  wife  when  that  relation 
exists.^  Hence,  separate  deeds,  executed  by  husband  and 
wife  are  invalid  to  convey  the  homestead  right.^  Thus,  when 
a  wife  tries  to  ratify  her  husband's  acknowledgment  for  her 
in  a  mortgage,  made  without  her  consent,  mortgaging  the 
homestead  by  a  separate  instrument,  her  act  is  void.^  But  it 
has  been  held  that  when  a  wife's  signature  and  assent  to  the 
conveyance  of  the  homestead  have  been  defectively  acknowl- 
edged and  certified,  she  may  make  a  new  acknowledgment 
with  intent  to  cure  the  defect;  and  such  acknowledgment 
when  properly  made  and  certified  will  relate  back,  rights 
of  third  parties  not  intervening,  to  the  date  of  the  original 
delivery  of  the  conveyance.^ 

Under  the  constitution  of  Texas,^  and  the  revised  statutes,^ 
which  provide  that  no  lien  can  be  created  upon  a  homestead, 
except  for  the  purchase-money,  "  or  for  work  and  materials 
used  in  the  constructing  improvements  thereon,"  a  trust  deed 
upon  the  homestead  to  secure  money  borrowed  for  the  purpose 
of  erecting  a  building  thereon  creates  no  lien.^     And  when  the 

^  Succession  of  Montgomery  (La.),  10  South.  Rep.  772 ;  Dickerson  v.  McLean, 
57  N.  H.  31 ;  Hoge  v.  Hollister,  2  Tenn.  Ch.  606. 

'  Ott  V.  Sprague,  27  Kan.  620 ;  Chambers  v.  Cox,  23  Kan.  393. 

^  Poole  V.  Gerrard,  6  Cal.  71 ;  Cook  v.  McChristian,  4  Cal.  23  ;  Moore  i).  Tit- 
man,  33  111.  630 ;  Kitchell  v.  Burgman,  21  111.  45 ;  Connor  v.  McMurray,  2 
Allen  (Mass.),  202;  Greenough  v.  Turner,  11  Gray  (Mass.),  332  ;  Armstrong  v. 
Ross,  20  N.  J.  Eq.  109. 

^  Howell  V.  McCorie,  36  Kan.  636. 

5  Cahall  V.  Citizen's  Mut.  Associa'n,  61  Ala.  233.  See,  also,  Smith  v.  Pearce, 
85  Ala.  264 ;  Motes  v.  Carter,  73  Ala.  553. 

«  Art.  16,  sect.  50. 

'Art.  3174. 

«Ellerman  v.  Wurz  (Tex.),  14  S.  W.  Rep.  333. 


REQUISITES    AND    VALIDITY.  235 

wife  has  the  right  to  release  her  homestead  riglit,  no  equitable 
lien  can  be  created  upon  a  homestead  by  a  verbal  promise  to 
give  a  mortgage  thereon  to  secure  a  debt/ 

§  214.  Dower. — In  order  that  a  mortgage  be  valid  against 
the  dower  right  of  the  wife,  she  must  release  it  according  to 
the  statutory  provisions.  If  the  wife  is  not  entitled  to  dower, 
her  release  is  unnecessary.  Thus,  a  conveyance  to  a  husband 
who,  as  part  of  the  same  transaction,  executes  a  deed  of  trust 
to  secure  the  unpaid  purchase-money,  does  not  give  the  hus- 
band such  a  seisin  of  the  land  as  will  entitle  his  wife  to  dower 
as  against  the  mortgagee  in  the  deed  of  trust.^ 

If  a  wife  joins  in  a  conveyance  of  the  land,  which  convey- 
ance is  set  aside  as  fraudulent,  then  she  will  be  entitled  to  her 
dower  right.^  She  is  entitled  to  dower  against  all  persons  ex- 
cept the  mortgagee,  and  to  dower  in  the  surplus.*  But  if  she 
joins  her  husband  in  a  mortgage  and  subsequently  in  an 
absolute  deed  of  the  land,  and  the  mortgage  is  foreclosed, 
but  she  is  not  made  a  party  to  the  proceedings,  the  subsequent 
absolute  conveyance  will  bar  her  of  the  right  of  redemption 
for  her  dower  interest,  as  by  the  conveyance  it  was  released.^ 

§  215.  Acknowledgment  of  a  Married  AVoman. —  The 
power  to  sell  the  homestead  in  a  prescribed  manner  generally 
includes  the  power  to  mortgage  it ;  for  a  mortgage  may  be 
considered  as  a  conditional  sale.^ 

The  words  "  without  undue  influence  or  compulsion  of  her 
husband  "  in  the  certificate  of  a  married  woman,  in  their  com- 
mon acceptation,  are  equivalent  to  the  expression  of  "  her  own 

'  King  V.  Welbom,  83  Mich.  195. 
^IIurf?t  V.  Dulaney,  87  Ya.  444. 

^  Wilkinson  r.  Paddock,  125  X.  Y.  748.  See,  also,  Walker  v.  Rand,  131  111. 
27  ;  Lake  v.  Noland,  81  Mich.  112. 

*  Burrall  v.  Bender,  61  Mich.  608  ;  Bun-all  r.  Clark,  61  Mich.  624. 

*  Grant  v.  Jackson,  5  Del.  Ch.  404.  See,  also,  Mandel  v.  McClave,  46  Ohio 
St.  407. 

'Sampson  v.  Williamson,  6  Tex.  102 ;  Dunker  v.  Chedic,  4  Nev.  378  ;  John- 
son V.  Fay,  16  Gray  (Mass.),  144  ;  Boyd  v.  Cudderback,  31  111.  113  ;  Jordan  v. 
Peak,  38  Tex.  439. 


236  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

free  will  without  undue  influence  or  compulsion  of  her  hus- 
band," and  the  certificate  is  valid/ 

So  a  married  woman's  certificate  of  acknowledgment  of  a 
conveyance  of  real  estate,  as  shown  by  the  magistrate's  certifi- 
cate, which  agrees  in  substance,  though  not  in  words,  with  that 
prescribed  by  the  statutes,  is  sufficient.^ 

If  the  acknowledgment  shows  that  she  has  voluntarily  exe- 
cuted the  conveyance  it  is  sufficient,  though  the  certificate  is 
not  in  the  exact  form  of  the  statute.^ 

But  where  the  husband  has  not  joined  in  the  execution  of  a 
wife's  separate  estate  in  New  Jersey,  a  court  of  equity  will 
charge  the  debt  upon  her  separate  estate  generally.  The  giv- 
ing of  the  mortgage  shows  the  intention  to  charge  her  separate 
estate  with  the  debt.* 

If  the  certificate  shows  that  a  married  woman  was  examined 
separate  and  apart  from  her  husband,  and  voluntarily  released 
her  dower  and  homestead  rights  under  the  provision  of  a  statute, 
it  cannot  be  impeached  b}^  evidence  that  there  was  no  private 
examination,  and  that  she  did  not  acknowledge  the  deed  as  her 
act  and  deed,  or  that  the  contents  of  the  deed  were  not  made 
known  to  her,  or  that  she  did  not  release  her  homestead  right. 
To  impeach  the  certificate,  fraud  must  be  alleged  and  proved.^ 

§  216.  Qualifications  of  the  Officer  Taking  the  Ac- 
knowledgment.— The  officer  should  be  duly  appointed  and 

iTubbs  V.  Gatewood,  26  Ark.  128. 

^Owen  V.  Norris,  5  Blackf.  (Ind.)  479. 

3  Stevens  v.  Doe,  6  Blackf.  (Ind.)  475. 

*  Armstrong  v.  Ross,  20  N.  J.  Eq.  109.  See,  also,  Insurance  Co.  v.  Nelson, 
103  U.  S.  544. 

5  Coleman  v.  Smith,  55  Ala.  36R ;  Miller  v.  Marx,  55  Ala.  322;  Lefebvre  v. 
Dutruit,  51  Wis.  326 ;  Williams  v.  Pouns,  48  Tex.  141 ;  M'Neely  v.  Rucker,  6 
Blackf.  (Ind.)  391  ;  McPherson  v.  Sanborn,  88  111.  150 ;  Crane  v.  Crane,  81 
111.  165 ;  Lowell  v.  Wren,  80  111.  238  ;  Blackman  v.  Hawks,  89  111.512 ;  Oppen- 
heimer  v.  Wright,  106  Pa.  St.  569  ;  Singer  Manf.  Co.  v.  Rook,  84  Pa.  St.  442  ; 
Heeter  v.  Glasgow,  79  Pa.  St.  79  ;  Ridgely  v.  Howard,  3  Har.  &  McH.  (Md.) 
321  ;  Johnson  v.  Van  Velsor,  43  Mich.  208  ;  Baldwin  v.  Snowden,  11  Ohio  St. 
203  ;  Johnston  v.  Wallace,  53  Miss.  331 ;  Moore  v.  Fuller,  6  Ore.  272  ;  Mon- 
roe r.  Poorraan,  62  111.  523  ;  Kerr  v.  Russell,  69  111.  666  ;  Russell  v.  Baptist 
Theolog.  Union,  73  111.  337  ;  Hartley  v.  Frosh,  6  Tex.  208  ;  Jamison  v.  Jami- 
son, 3  Whart.  (Pa.)  457  ;  Insurance  Co.  v.  Nelson,  103  U.  S.  544. 


REQUISITES    AND    VALIDITY.  237 

qualified.  The  acts  of  an  officer  de  facto  are  valid  where  they 
concern  the  public  or  the  rights  of  third  parties  who  have  no 
interest  in  the  acts  done,  and  the  acts  of  such  officer  cannot  be 
incjuired  into  in  any  proceedings  to  which  he  is  not  a  party. 

Thus,  an  officer  who  is  doing  business  in  a  county,  and  act- 
ing as  a  magistrate,  claiming  authority  under  his  commission 
which  is  still  in  life,  has  color  of  title  when  he  thus  acts,  when 
such  acts  are  not  expressly  declared  void  by  statute,  though 
the  performance  of  such  acts  may  be  j)unished  by  a  penalty.^ 

Such  a  certificate  made  by  a  justice  of  the  peace  de  facto, 
merely,  is  a  sufficient  authorization  for  registration  of  a  deed.^ 

A  commissioner  who  takes  acknowledgments  of  deeds  has 
no  power  to  take  acknowledgments  out  of  the  State,  though  it 
seems  he  may  take  the  acknowledgment  in  any  county  within 
the  State,  though  out  of  the  county  for  which  he  is  appointed.^ 

A  mortgage  does  not  become  invalid  if  in  the  certificate  of 
the  acknowledgment  the  officer  taking  it  describes  himself  as 
"  a  justice  of  the  peace  within  said  county,"  no  particular 
county  being  named  in  the  certificate  or  its  caption,  when  the 
grantor  and  grantee  are  both  described  in  the  body  of  the 
mortgage  as  of  a  particular  county,  and  no  other  county  is 
named  therein.* 

The  authority  of  a  notary  who  is  lawfully  qualified  by  hold- 
ing some  other  office  to  take  acknowledgments,  is  quite  as 
ample  to  authenticate  conveyances  for  the  purpose  of  registra- 
tion as  if  he  were  a  notary  by  appointment.^ 

iPrepcott  V.  Hayes,  42  N.  H.  56;  Fowler  r.  Beebe,  9  Mass.  2.31;  Potter  t-. 
Luther,  .3  Johns.  (N.  Y.)  431 ;  M'Instry  v.  Tanner,  9  Johns.  (N.  Y.)  135 ;  Doe 
V.  Brawn,  5  Barn.  &  Aid.  243. 

2  Brown  v.  Lunt,  37  Me.  423.  See,  also,  Plymouth  r.  Painter,  17  Conn.  585  ; 
Smith  V.  State,  19  Conn.  493 ;  People  v.  White,  24  Wend.  (N.  Y.)  527 ; 
McGregor  v.  Balch,  14  Vt.  428. 

'Jackson  v.  Colden,  4  Cow.  (N.  Y.)  266. 

*Beckel  v.  Petticrew,  6  Ohio  St.  247;  Fuhrman  v.  Loudon,  13  Sarg.  &  R. 
(Pa.)  386.  See,  also.  King  v.  Inhabitants,  1  Barn.  &  Aid.  330 ;  Coles  v.  Hulme, 
8  Barn.  &  Cress.  568 ;  Chandler  v.  Spear,  22  Vt.  407 ;  King  v.  Wright,  1  Adol. 
&  El.  434;  A^Tiittlesy  v.  Starr,  8  Conn.  134;  Joumeay  v.  Gibson,  56  Pa. 
St.  .57. 

^Wilson  r.  Simpson,  68  Tex.  306. 


238  NATURE    AND    REQUISITES    OF   THE    CONTRACT. 

The  general  rule,  irrespective  of  statutory  provisions,  is  that 
an  officer  cannot  take  the  acknowledgment  of  a  conveyance  to 
which  he  is  a  party,  or  in  which  he  is  directly  or  indirectly 
interested. 

Thus,  an  acknowledgment  of  the  grantor  in  a  deed  of  trust 
taken  before  the  trustee  as  notary  public,  is  void,  though  the 
latter  has  not  accepted  the  trust ;  the  deed  being  for  his  benefit, 
his  acceptance  will  be  presumed  until  his  dissent  is  shown.^ 

Where  a  notary  who  has  signed  a  certificate  of  acknowledg- 
ment to  a  mortgage  and  other  witnesses  testify  that  the  mort- 
gagor acknowledged  the  mortgage,  which  he  denies,  the  fact  that 
the  notary  was  also  attorney  for  the  mortgagee  does  not  change 
the  presumption  in  favor  of  the  certificate,  and  the  burden  is 
still  on  the  mortgagor  to  show  that  he  did  not  acknowledge  it.^ 

Where  a  mortgage  was  acknowledged  before  a  deputy  clerk, 
who  made  an  indorsement  thereto  on  the  back,  but  the  clerk 
in  making  out  the  certificate  failed  to  include  the  indorsement 
therein,  is  a  mistake  which  may  be  corrected.^ 

But  a  clerk  cannot  pass  on  the  correctness  of  a  certificate 
acknowledged  by  himself  and  wife.  Thus,  a  clerk  of  a  court, 
who  was  the  grantor  in  a  deed  of  trust,  acknowledged  and 
executed  the  same  before  a  justice  of  the  peace  who  alpo  took 
the  privy  examination  of  the  grantor's  wife ;  and  then  the  clerk 
adjudged  the  certificate  made  by  the  justice  of  such  acknowl- 
edgment and  privy  examination  to  be  in  due  form,  and  admitted 
the  instrument  to  probate  and  ordered  registration ;  the  court 
held  such  action  on  the  part  of  the  clerk  as  wholly  void.* 

§  217.  The  Capacity  of  the  Officer. — Ministerial  or 
Judicial. — Whether  the  act  of  taking  the  acknowledgment  is 

^  Bowden  v.  Parrish,  86  Va.  67.  See,  also,  Wilson  v.  Traer,  20  Iowa,  231 ; 
Groesbeck  v.  Seeley,  13  Mich.  329 ;  Brown  v.  Moore,  38  Tex.  645 ;  Wasson 
V.  Connor,  54  Miss.  352;  Withers  v.  Baird,  7  Watts  (Pa.),  227;  Darst 
V.  Gale,  83  111.  136.  Compare  Nat.  Bank  v.  Conway,  14  Bank.  Reg.  513 ;  Gib- 
son V.  Norway  Bank,  69  Me.  579.  See,  also,  Rothschild  v.  Dougher  (Tex.),  20 
S.  W.  Rep.  142. 

^  Dikeman  v.  Arnold,  78  Mich.  455. 

^Ralston  v.  Moore,  83  Ky.  571. 

^  White  V.  Connelly,  105  N.  Car.  65. 


REQUISITES    AND    VALIDITY.  239 

ministerial  or  judicial  is  a  question  which  has  been  differently 
answered.  It  is  held  by  one  class  of  decisions  that  the  magis- 
trate does  not  exercise  judicial  functions  in  taking  such  ac- 
knowledgment;  that  he  is  not  required  to  determine  the 
grantor's  capacity,  and  does  not  do  so  by  using  the  word  "  vol- 
untarily "  in  the  certificate.  If  the  grantor  acknowledges  the 
signing  and  sealing  of  the  instrument,  it  is  the  officer's  duty  to 
certify  that  fact,  and  there  his  duty  ends.  The  act,  though 
official,  is  purely  ministerial,  and  the  adverse  party  is  not 
thereby  precluded  from  showing  the  grantor's  incapacity  at 
the  time  of  acknowledgment.^  So  the  taking  a  certificate 
of  acknowledgment  implies  the  discharge  of  no  judicial  duty, 
but  is  purely  ministerial.^  In  other  States,  however,  it  is  held 
that  the  officer  taking  the  acknowledgment  acts,  at  least,  in  a 
quasi  judicial  capacity. 

The  Mississippi  Supreme  Court  holds  that  whatever  may 
be  said  of  the  receiving  for  record  and  recording  of  a  deed,  it 
is  evident  that  the  taking  of  an  acknowledgment  of  a  grantor 
is  a  quasi  judicial  act  and  cannot  be  performed  by  the  grantee 
in  the  deed.  The  officer  who  takes  an  acknowledgment  acts 
in  a  judicial  character  in  determining  whether  the  person  rep- 
resenting himself  to  be,  or  represented  by  some  one  else  to  be, 
the  grantor  named  in  the  conveyance,  actually  is  the  grantor. 
He  determines  further  whether  the  person  thus  adjudged  to  be 
the  grantor  does  actually  and  truly  acknowledge  before  him 
that  he  executed  the  instrument.  By  his  certificate  he  makes 
an  official  record  of  his  adjudication  on  these  points,  which 
cannot  be  impeached  by  himself ;  and  sometimes  cannot  be 
impeached  by  the  grantor.^ 

But  the  current  of  authority  holds,  especially  as  to  acknowl- 
edgments of  married  women,  that  the  act  of  the  officer  taking 

'  Truman  v.  Lore,  14  Ohio  St.  144 ;  Williamson  v.  Carskadden,  36  Ohio  St.  664. 

'Lynch  v.  Livingston,  6  N.  Y.  422,  434  ;  Kimball  v.  Johnson,  14  Wis.  674 ; 
Elliott  V.  Peirsol,  1  Pet.  (U.  S.)  341 ;  Emmal  v.  Webb,  36  Cal.  197 ;  Odiorne 
V.  Mason,  9  N.  H.  24  ;  Frink  v.  Pond,  46  N.  H.  125  ;  Gill  v.  Fauntleroy,  8  B. 
Mon.  (Ky.)  179.  See,  also,  Dawson  v.  Thurston,  2  Hen.  &  Munf.  (Va.)  132 ; 
Hamilton  v.  Pitcher,  53  IVIo.  334. 

'  Wasson  v.  Connor,  54  Miss.  352. 


240  NATURE    AND    REQUISITES   OP    THE    CONTRACT. 

the  acknowledgment  is  judicial.  The  officer  acts  judicially, 
not  ministerially.  The  law  imposes  on  him  the  duty  of  ascer- 
taining, by  his  view  and  examination,  the  truth  of  the  matters 
to  which  he  is  to  certify,  and  points  out  precisely  his  duty. 
Having  thus  entrusted  him  to  see  that  the  proper  forms  are 
observed,  his  solemn  certificate  that  they  have  been  observed, 
on  the  faith  of  which  parties  act,  contracts  are  made,  moneys 
are  paid,  and  deeds  and  mortgages  accepted,  must,  except  in 
cases  of  fraud  or  collusion,  be  considered  as  entitled  to  full  faith 
and  credit ;  and  cannot,  without  rendering  titles  to  real  estate 
exceedingly  insecure,  be  left  at  any  distance  of  time  afterward 
to  the  uncertainty  and  frailty  of  parol  proof,  and  to  all  the 
mistakes,  prejudices,  imperfections,  and  hazards  that  attend  it. 
This  rule  is  founded  on  reason  and  sound  business  principles, 
and  inust  prevail  except  in  cases  of  fraud.^ 

Thus  the  act  of  the  officer  by  whom  the  acknowledgment  of 
a  married  woman  is  taken  and  certified  is  judicial,  and,  for  the 
security  of  titles,  must,  in  cases  where  the  wife  has  signed  the 
deed  or  mortgage  and  appeared  before  the  officer,  be  held  to 
be  conclusive  against  her  in  favor  of  a  perfectly  bona  fide 
grantee,  for  valuable  consideration.^ 

Some  jurisdictions  permit  a.  feme  coverfs  acknowledgment  of 
a  deed  to  be  contradicted  by  parol  evidence.^     Others   hold 

'  Jamison  v.  Jamison,  3  Whart.  (Pa.)  457;  Paul  v.  Carpenter,  70  N.  Car.  502 ; 
Scanlan  v.  Turner,  1  Bailey  (S.  Car.)  421 ;  Kerr  v.  Russell,  69  111.  666 ;  Ham- 
mers V.  Dole,  61  111.  307 ;  Withers  v.  Baird,  7  Watts  (Pa.),  227 ;  Heeter  v. 
Glasgow,  79  Pa.  St.  79 ;  Kottman  v.  Ayer,  1  Strobh.  (S.  Car.)  576 ;  Black  v. 
Gregg,  58  Mo.  565 ;  Wilson  v.  Traer,  20  Iowa,  231 ;  Suddereth  v.  Smyth,  13 
Ired.  (N.  Car.)  452 ;  Ford  v.  Gregory,  10  B.  Mon.  (Ky.)  175 ;  Johnston  v. 
Slater,  11  Gratt.  (Va.)  321 ;  Brown  v.  Moore,  38  Tex.  645 ;  Sutton  v.  Sutton,  I 
Dev.  &.  Bat.  (N.  Car.)  582 ;  Bancks  v.  Ollerton,  26  Eng.  L.  &  Eq.  509 ;  Men- 
hennet's  Case,  L.  R.  5  C.  P.  16 ;  Williams  v.  Baker,  71  Pa.  St.  476 ;  Homoeo- 
pathic Mut.  Life  Ins.  Co.  v.  Marshall,  32  N.  J.  Eq.  103. 

2  Hartley  v.  Frosh,  6  Tex.  208 ;  Bissett  v.  Bissett,  1  Harr.  &  McH.  (Md.) 
211;  Schrader  v.  Decker,  9  Pa.  St.  15;  Michener  r.  Cavender,  2  Wright 
(Pa.),  336 ;  Johnston  v.  Wallace,  53  Miss.  335  ;  Landers  v.  Bolton,  26  Cal.  406 ; 
M'Neeley  v.  Rucker,  6  Blackf.  (Ind.)  391;  McCandless  v.  Engle,  51  Pa. 
St.  309.  ' 

^Sharpe  v.  McPike,  62  Mo.  300;  Wannell  v.  Kem,  57  Mo.  478;  Dodge  v. 
Hollinshead,  6  Minn.  25 ;  Drury  v.  Foster,  2  Wall.  (U.  S.)  24 ;  Hays  v.  Hays, 
5  Rich.  (S.  Car.)  31 ;  Bruce  v.  Perry,  11  Rich.  (S.  Car.)  121 ;  Morris  v.  Sar- 
gent, 18  Iowa,  90 ;  Van  Orman  v.  McGregor,  23  Iowa,  300. 


I 


REQUISITES   AND   VALIDITY.  241 

that  such  acknowledgments  are  conclusive,  in  the  absence  of 
fraud  or  duress.^ 

Other  States  have  enacted  laws  making  such  acknowledg- 
ments only  prima  facie  correct,^  and  they  may  be  overthrown 
without  alleging  fraud,  but  the  proof  must  be  clear,  cogent, 
and  convincing.^ 

iM'Neeley  v.  Rucker,  6  Blackf.  (Ind.)  391;  Jordan  v.  Corey,  2  Carter 
(Ind.),  385  ;  Wright  v.  Bundy,  11  Ind.  400 ;  Hartley  v.  Frosh,  6  Tex.  208 ;  Pool 
V.  Chase,  46  Tex.  207 ;  Bissett  v.  Bissett,  1  Harr.  &  McH.  (Md.)  211 ;  Eidgely 
V.  Howard,  3  Harr.  &  McH.  (Md.)  321 ;  Central  Bank  v.  Copeland,  18  Md. 
305 ;  Hornbeck  v.  Mut.  Build.  Assn.,  88  Pa.  St.  64 ;  Heeter  v.  Glasgow,  79  Pa. 
St.  79 ;  Miller  r.  Wentworth,  82  Pa.  St.  280 ;  Singer  Manf.  Co.  v.  Rook,  84  Pa. 
St.  442 ;  Louden  v.  Blythe,  16  Pa.  St.  532 ;  Williams  v.  Baker,  71  Pa.  St.  476 ; 
Hoffinan  v.  Coster,  2  Whart.  (Pa.)  453 ;  Hill  v.  Bacon,  43  111.  477 ;  Calumet,  etc., 
Co.  V.  Russell,  68  111.  426 ;  Kerr  v.  Russell,  69  111.  666;  Graham  v.  Anderson,  42  111. 
614 ;  Eyster  v.  Hathaway,  50  111.  521 ;  Lickman  v.  Harding,  65  111.  505  ;  AVood- 
bourne  v.  Gorrel,  66  N.  Car.  82  ;  Paul  v.  Carpenter,  70  N.  Car.  502 ;  Mount  v. 
Kesterson,  6  Cold.  (Tenn.)  452 ;  Finnegan  v.  Finnegan,  3  Tenn.  Ch.  510 ; 
Norton  v.  Nichols,  35  Mich.  148 ;  Stone  v.  Montgomery,  35  Miss.  83 ;  Was- 
son  V.  Connor,  54  Miss.  352 ;  Johnston  v.  Wallace,  53  Miss.  331 ;  Kavanaugh 
V.  Day,  10  R.  I.  393 ;  Greene  v.  Godfrey,  44  Me.  25 ;  Cahall  v.  Citizens' 
Ass'n,  61  Ala.  232;  Harkins  v.  Forsyth,  11  Leigh  (Va.),  294;  Tod  v.  Baylor, 
4  Leigh  (Va.), 498 ;  Carper  v.  M'Dowell,  5  Gratt.  (Va.)  212 ;  Bancks  7'.  Ollerton, 
26  Eng.  L.  &  Eq.  508  ;  Thompson  v.  Thompson,  2  Chan.  Chamb.  (Canada)  211 ; 
Robinson  v.  Chassey,  1  Hannay  (N.  Bruns.),  50.  Compare  Howard  r.  Scott, 
2  Chan.  Chamb.  274 ;  Allen  v.  Lenoir,  53  Miss.  321 ;  Harrell  v.  Elliott,  2 
Hayw.  (Tenn.)  68 ;  Russell  v.  Baptist  Theolog.  Union,  73  111.  337 ;  Byer  v. 
Etnyre,  2  Gill  (Md.),  150. 

"Ford  V.  Teal,  7  Bush  (Ky.),  156;  Woodhead  v.  Foulds,  7  Bush  (Ky.),  222; 
Jett  V.  Rogers,  12  Bush  (Ky.),  564.  (Formerly  such  acknowledgments  were 
conclusive  in  Kentucky  :  Barnett  v.  Shackleford,  6  J.  J.  Marsh,  532 ;  Allen  v. 
Shortridge,  1  Duv.  34.)  Landers  v.  Bolton,  26  Cal.  406;  Eaton  v.  Woydt,  32 
Wis.  277 ;  Jackson  v.  Schoonmaker,  4  Johns.  (N.  Y.)  161 ;  Priest  v.  Cummings, 
16  Wend.  (N.  Y.)  617 ;  Watson  i'.  Campbell,  28  Barb.  (N.  Y.)  421 ;  Steffin  v. 
Bauer,  70  Mo.  399.  Compare  Fogarty  v.  Finlay,  10  Cal.  239 ;  Rexford  v. 
Rexford,  7  Lans.  (N.  Y.)  6. 

How  far  a  foreign  certificate  has  been  held  conclusive  may  be  seen  in  the 
following  cases :  Crispen  v.  Hannavan,  50  Mo.  415 ;  Sessions  v.  Reynolds,  7 
Sm.  &  M.  (Miss.)  130 ;  Southerin  v.  Mendum,  5  N.  H.  420 ;  Lacey  v.  Davis, 
4  Mich.  140 ;  Welles  v.  Cole,  6  Gratt.  (Va.)  645 ;  Wright  v.  Bundy,  11  Ind.  399 ; 
McPherson  v.  Foatherstone,  37  Wis.  632 ;  Eaton  v.  Woydt,  32  Wis.  277 ;  Living- 
ston V.  M'Donald,  9  Ohio,  168;  Mott  v.  Smith,  16  Cal.  533;  Keller  v.  Moore, 
51  Ala.  340 ;  Hart  v.  Ross,  57  Ala.  518 ;  Coldswell's  Case,  L.  R.  10  C.  P.  667. 

'Bohan  v.  Casey,  5  Mo.  App.  101 ;  Mather  v.  Jarel,  33  Fed.  Rep.  366;  In- 
surance Co.  r.  Nelson,  103  U.  S.  544  ;  Youngs  v.  Duvall,  109  U.  S.  573. 

A  certificate  under  this  ruling  is  regarded  only  as  prima  facie  evidence  of 

VOL.  I. — 16 


242  NATURE   AND    REQUISITES    OF    THE    CONTRACT. 

§  218.  The  True  Distinction. — The  conflict  of  authority- 
can  be  reconciled.  The  common  law  required  that  the  ac- 
knowledgment of  the  wife  should  be  made  in  open  court  by 
fine  or  recovery,  and  it  always  became  a  matter  of  record.  In 
the  levy  of  a  fine  the  privy  examination  constituted  part  of  a 
judicial  proceeding  and  never  could  be  contradicted. 

The  privy  examination  of  the  married  woman  before  the 
officer  taking  the  acknowledgment  and  his  certificate  to  the 
fact  of  such  examination  and  acknowledgment  were  substi- 
tuted for  the  fine,  and  are  given  the  same  eff'ect  by  statutory  en- 
actments. By  authorizing  a  notary  public  or  clerk  of  a  court 
to  take  such  acknowledgments  and  privy  examination,  the 
legislature  has  conferred  upon  them  duties  of  the  same  nature 
as  those  formerly  exercised  by  courts,  which  give  to  their  acts 
the  dignity  of  judicial  proceedings.  Hence  the  official  act  of 
taking  the  privy  examination  of  a  married  woman,  whether 
by  a  court,  justice,  or  notary  public,  is  a  judicial  act,  or  as  it  is 
sometimes  designated,  a  guasi-judicial  act.^ 

Accordingly  the  private  examination  of  a  feme  covert  is  a 
judicial  act.^ 

So  this  doctrine  of  a  judicial  act  had  its  origin  in  the  con- 
sideration of  acknowledgment  by  married  women  when  the 
officer  is  required  to  make  the  privy  examination  designated 
in  the  statute,  and  applied  to  such  case,  this  rule  is  sound  in 
reason  and  precedent ;  ^  otherwise  it  is  a  ministerial  act.  But 
in  many  of  the  States  the  privy  examination  of  a  married 
woman  has  been  abolished  by  statute,  and  she  is  treated  as  a 
feme  sole.  Accordingly  an  acknowledgment  by  a  married 
woman  under  such  an  act  is  ministerial.  Those  cases  which 
hold  that  it  is  always  a  judicial  act  will  be  found  upon  exami- 
nation to  have  improperly  applied  the  ruling  in  regard  to 

the  matters  therein  stated,  and  it  may  be  overthrown  without  alleging  and 
proving  fraud  and  collusion. 

^  Henderson  v.  Smith,  26  W.  Ya.  829.  See,  also,  Ennor  v.  Thompson,  46  HI. 
214. 

2  Singer  Manuf.  Co.  v.  Rook,  84  Pa.  St.  442  ;  Hom.  Mut.  Life  Ins.  Co.  t;.  Mar- 
shall, 32  N.  J.  Eq.  103. 

» Calumet,  etc.,  Co.  v.  Russell,  68  111.  426 ;  Kerr  v.  Russell,  69  111.  666. 


M 


REQUISITES    AND    VALIDITY.  243 

acknowledgment  by  a  feme  covert  where  a  privy  examination 
is  made  necessary  by  statute,  to  acknowledgments  not  made  by 
married  women,  or  where  there  has  been  no  requirement  of 
such  an  examination.^ 

Statutes  which  confer  upon  judges  the  power  to  take  the  ac- 
knowledgments of  deeds  and  to  solemnize  marriages,  are  not 
judicial  in  their  nature.^  And  this  is  the  true  doctrine.  Un- 
less a  private  examination  of  a  married  woman  is  necessary, 
taking  her  acknowledgment  is  ministerial  as  are  all  other  ac- 
knowledgments.^ 

§  219.  How  Far  Certificates  of  Acknowledgment  May 
Be  Corrected. — It  seems  that  an  officer  may  correct  his  own 
mistake  after  the  acknowledgment  has  been  taken.^ 

In  case  he  refuses  to  make  the  correction  he  may  be  com- 
pelled to  do  so  by  mandamus.^  A  mistake  in  the  date  of  an 
acknowledgment  may  be  shown  and  the  true  date  established.^ 

But  evidence  in  contradiction  of  facts  set  forth  in  the  certifi- 
cate will  not  be  admitted.^  If  the  deed  shows  that  the  grantee 
made  the  acknowledgment,  this  mistake  cannot  be  corrected  in 
a  court  of  equity,  so  as  to  give  the  deed  legal  effect  from  its 
execution.^ 

And  it  is  generally  held  that  parol  evidence  is  not  admissible 
when  no  fraud  has  been  perpetrated,  to  supply  omissions  and 
to  correct  mistakes  of  the  officer.^     That  a  magistrate  cannot 

1  People  V.  Bartels,  138  111.  322. 

=*  People  V.  Nelson,  133  111.  565. 

'Lynch  v.  Livingston,  6  N.  Y.  422;  Truman  v.  Lore,  14  Ohio  St.  144; 
Williamson  r.  Carskadden,  36  Ohio  St.  664 ;  Curtiss  v.  Colby,  39  Mich.  456 ; 
Doran  v.  Butler,  74  Mich.  643  ;  Fo.earty  v.  Finlay,  10  Cal.  239. 

*  Jordan  r.  Corey,  2  Carter  (Ind.),  385. 

MVannall  v.  Kem,  51  Mo.  150 ;  Miller  v.  Powell,  53  Mo.  254. 

*Hoit  V.  Russell,  56  N.  H.  559. 

'Williamson  r.  Carskadden,  36  Ohio  St.  664;  Johnston  v.  Wallace,  53Mi.'^3. 
331,  338. 

8  Wood  V.  Cochrane,  39  Yt.  544. 

'Robinson  v.  Noel,  49  Miss.  253  ;  Robinson  v.  Barfield,  2  Murph.  (N.  Car.) 
390 ;  Barnet  v.  Bamet,  15  Serg.  &  R.  (Pa.)  72  ;  O'Ferrall  v.  Simplot,  4  Iowa, 
381 ;  Hayden  v.  Westcott,  11  Conn.  129  ;  Chauvin  v.  Wagner,  18  Mo.  531,  544  ; 
Wood  V.  Cochrane,  39  Yt.  544 ;  Leftwich  v.  Neal,  7  W.  Ya.  569 ;  Ennor  v. 
Thompson,  46  HI.  214  ;  Hughes  v.  Wilkinson,  35  Ala.  453 ;  Conn.  Ins.  Co.  v. 


244  NATURE    AND    REQUISITES    OP    THE    CONTRACT. 

impeach  his  own  acts,  is  the  general  rule.^  When  one  in  good 
faith  has  purchased  the  property  without  notice  of  fraud,  he 
will  be  protected.^     This  is  the  general  rule.^ 

§  220.  Equity  Will  Not  Correct  such  Officer's  Mis- 
takes AND  Omissions. — Equity  will  not  correct  the  officer's 
mistakes  and  omissions  where  there  is  no  fraud  perpetrated. 
Thus,  a  mistake  in  the  certificate  of  acknowledgment,  whereby 
the  grantee  appears  to  have  made  the  acknowledgment,  cannot 
be  corrected  in  a  court  of  equity,  so  as  to  give  the  record  of 
the  deed  or  mortgage  legal  effect  from  the  inception,  for  the 
reason  that  it  cannot  be  determined  from  the  face  of  the  in- 
strument whether  the  error  consists  in  inserting  the  wrong 
name,  or  in  taking  the  acknowledgment  of  the  wrong  man.* 

While  it  is  generally  held  that  an  officer  may  correct,  at 
any  time,  a  mistake  in  his  certificate,  conformably  with  the 
facts,^  yet  a  court  of  equity  has  no  jurisdiction  to  correct  such 
mistakes  or  omissions.^ 

McCormick,  45  Cal.  580 ;  Jamison  v.  Jamison,  3  Whart.  (Pa.)  457.  Compare 
Angier  v.  Scliieffelin,  72  Pa.  St.  106  ;  A^an  Sickle  v.  People,  29  Mich.  61 ;  Rob- 
inson V.  Barfield,  2  Murph.  (N.  Car.)  390. 

lElwood  V.  Klock,  13  Barb.  (N.  Y.)  50;  Stone  v.  Montgomery,  35  Miss.  83; 
Greene  v.  Godfrey,  44  Me.  25  ;  Central  Bank  v.  Copeland,  18  Md.  305.  Com- 
pare Truman  v.  Lore,  14  Ohio  St.  144  ;  Hoit  v.  Russell,  56  N.  H.  559 ;  Jansen 
V.  McCahill,  22  Cal.  563. 

*  Heeter  v.  Glasgow,  79  Pa.  St.  79  ;  Hall  v.  Patterson,  51  Pa.  St.  289. 

3  Moses  V.  Dade,  58  Ala.  211 ;  White  v.  Graves,  107  Mass.  325  ;  Schrader  v. 
Decker,  9  Pa.  St.  14 ;  Green  v.  Scranage,  19  Iowa,  461 ;  Mastin  v.  Halley,  61 
Mo.  196 ;  Williams  v.  Baker,  71  Pa.  St.  476 ;  Pool  v.  Chase,  46  Tex.  207 ; 
Louden  v.  Blythe,  27  Pa.  St.  22.  Compare  Michener  v.  Cavender,  38  Pa.  St. 
334  ;  Anderson  v.  Anderson,  9  Kan.  112 ;  Norton  v.  Nichols,  35  Mich.  148. 

*  Wood  V.  Cochrane,  39  Vt.  544. 
^  Jordan  v.  Corey,  2  Ind.  385. 

«  Wannall  v.  Kem,  51  Mo.  150  ;  O'Ferrall  v.  Simplot,  4  Iowa,  381 ;  Green  v. 
Banton,  1  Dev.  Eq.  (N.  Car.)  504  ;  Flanagan  r.  Young,  2  Harr.  &  McH.  (Md.) 
38  ;  Henderson  v.  Rice,  1  Coldw.  (Tenn.)  223 ;  Selover  v.  Com.  Co.,  7  Cal. 
266  ;  Butler  v.  Buckingham,  5  Day  (Conn.),  504 ;  Jacoway  v.  Gault,  20  Ark. 
190;  Barnett  ?.  Shackelford,  6  J.  J.  Marsh  (Ky.),  532;  AVillis  v.  Gattman, 
53  Miss.  721  ;  Martin  v.  Dwelly,  6  Wend.  (N.  Y.)  9 ;  Chauvin  r.  Wagner, 
18  Mo.  531;  Campbell  v.  Taul,  3  Yerg.  (Tenn.)  548;  Grapengether  v. 
Fejervary,  9  Iowa,  163;  Carr  v.  Williams,  10  Ohio,  305;  M'Farland  v. 
Febiger,  7  Ohio,  194  ;  Heaton  v.  Fryberger,  38  Iowa,  185.    Compare  Simpson 


REQUISITES   AND    VALIDITY.  245 

The  certificate  may  be  impeached,  however,  for  fraud,  duress, 
or  undue  inilueuce '  in  a  court  of  equity. 

Neither  will  a  court  of  equity  compel  a  married  woman  to 
correct  her  acknowledgment ; "  nor  compel  the  registry  of  an 
miacknowledged  deed ;  ^  nor  authorize  a  magistrate  to  give  a 
new  certificate  in  the  place  of  one  lost* 

Article  7. 
Delivery  of  the  Instrument. 

^221.  Deliver}' and  Acceptance.  ^  225.  Eegistration    of      Mortgage    is 

§  222.  Presumption  of  Delivery.  Prima  Facie  Evidence  of  De- 

^223.  Illustrations.  livery. 

1 224.  Subsequent     Acceptance  by    1 226.  Delivery  of  Deed  in  Escrow. 
Mortgagee. 

§  221.  Delivery  and  Acceptance. — It  is  essential  to  the 
validity  of  a  deed  or  mortgage  that  it  be  delivered  and  ac- 
cepted by  the  grantee  or  his  agent,  or  if  not  actually  delivered 
to  the  grantee  or  his  agent  authorized  to  receive  it,  to  prove  notice 
to  him  of  its  existence  and  such  additional  circumstances  as 
will  afford  a  reasonable  presumption  of  his  acceptance  of  it.^ 

The  better  opinion  seems  to  be  that  no  deed  can  take  effect 
as  having  been  delivered  until  such  act  of  delivery  has  been 
assented  to  by  the  grantee,  and  he  shall  have  done  something 
equivalent  to  an  acceptance  of  it.''  There  can  be  no  delivery 
without  an  acceptance.  The  delivery  need  not  be  to  the 
grantee  in  person  ;  it  may  be  to  any  authorized  person  for  him.' 

V.  Montgomery,  25  Ark.  365 ;  Kilbourn  v.  Fury,  26  Ohio  St.  153 ;  Kane  v. 
McCown,  55  Mo.  181. 

^Eyster  v.  Hatheway,  50  111.  521  ;  Montgomery  v.  Hobson,  Meigs  (Tenn.), 
437 ;  Fisk  v.  Stul)bs,  30  Ala.  335 ;  Witbeck  v.  Witbeck,  25  Mich.  439 ;  De- 
vorse  r.  Snider,  60  Mo.  235  ;  Finnegan  v.  Finnegan,  3  Tenn.  Ch.  514.  Com- 
pare Fisher  v.  Meister,  24  INIich.  447. 

*  Barrett  v.  Tewksbury,  9  Cal.  15. 
'Caldwell  v.  Head,  17  Mo.  561. 

*  Married  Woman's  Case,  L.  R.  2  C.  P.  510. 
'Bell  V.  Bank,  11  Bush  (Ky.),  34. 

*2  Washb.  Real  Prop.  581. 

'  Merrills  v.  Swift,  18  Conn.  257  ;  Woodward  v.  Camp,  22  Conn.  457  ;  Fisher 
V.  Hall,  41  N.  Y.  416,  423 ;  Everett  v.  Everett,  48  N.  Y.  218 ;  Mather  v.  Cor- 


246  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

Delivery  is  the  final  act  without  which  all  other  formalities 
are  ineffectual.  To  constitute  such  delivery  the  grantor  must 
part  with  the  possession  of  the  deed  or  the  right  to  retain  it.^ 

The  right  to  deliver  the  deed  by  a  third  person  may  be  in- 
ferred. Thus  a  notary  public  with  whom  a  note  and  mortgage 
securing  it  are  left  by  the  mortgagor  whose  acknowledgment 
to  the  mortgage  he  took,  will  be  presumed  to  have  authority 
to  deliver  them  in  the  absence  of  special  instructions  to  the 
contrary,  and  a  delivery  by  him  to  the  mortgagee  is  sufficient.^ 

A  deed  or  mortgage  may  be  delivered  in  many  ways.  It 
may  be  delivered  by  doing  something  and  .saying  nothing,  or 
by  saying  something  and  doing  nothing,  or  it  may  be  by  both.* 
But  by  one  or  both  of  these  it  must  be  made.*  It  is  not  nec- 
essary that  tliere  be  an  actual  handing  over  of  the  instrument 
to  constitute  a  delivery.^  Delivery  is  just  as  necessary  to  the 
completion  of  the  transaction  as  the  signing,  sealing,  or  ac- 
knowledging of  the  mortgage.^ 

Where  two  or  more  persons  enter  into  a  bond  any  one  of 
them  may  deliver  it.  Thus  two  persons  execute  a  joint  and 
several  bond.  Each  has  implied  authority  arising  out  of  the 
nature  of  the  transaction  to  act  for  the  other,  and  where  one 
allows  the  other  to  take  the  bond,  after  both  have  executed  it, 
his  possession  of  the  bond  gives  him  authority  to  make  de- 
livery of  it  and  to  receive  the  consideration  from  the  obligee.^ 

liss,  103  Mass.  568 ;  Thompkins  v.  Wheeler,  16  Pet.  (U.  S.)  106,  109 ;  Henrich- 
sen  V.  Hodgden,  67  111.  179  ;  Buckholder  v.  Capad,  47  Ind.  418 ;  Ely  v.  Stan- 
nard,  44  Conn.  528 ;  Church  v.  Oilman,  15  Wend.  (N.  Y.)  661  ;  Stillwell  v. 
Hubbard,  20  Wend.  (N.  Y.)  44 ;  Tibbals  v.  Jacobs,  31  Conn.  428  ;  Berry  v.  An- 
derson, 22  Ind.  36,  39 ;  Parmelee  v.  Simpson,  5  Wall.  (U.  S.)  81. 

'  Fisher  v.  Hall,  41  N.  Y.  416. 

*  Adams  v.  Adams,  70  Iowa,  253. 

3  Flint  V.  Phipps,  16  Ore.  437  ;  Shep.  Touchstone,  57. 

*Jackson?'.  Phipps,  12  Johns.  (N.  Y.)  418,  421;  Byers  v.  McClanahan,  6 
Gill  &  J.  (Md.)  256 ;  Stewart  v.  Redditt,  3  Md.  67. 

^Fain  v.  Smith,  14  Ore.  82  ;  58  Am.  Rep.  281. 

« Goodwin  v.  Owen,  55  Ind.  243;  Dole  v.  Bodman,  3  Met.  (Mass.)  139; 
Jackson  v.  Phipps,  12  Johns.  (N.  Y.  )  418 ;  Freeman  v.  Peay,  23  Ark.  439 ; 
Chauncey  v.  Arnold,  24  N.  Y.  330 ;  Fain  v.  Smith,  14  Ore.  82 ;  58  Am.  Rep. 
281  ;  1  Dev.  on  Deeds,  sect.  260 ;  Shirley  v.  Burch,  16  Ore.  83. 

■^  Wolf  r.  Driggs,  44  N.  J.  Eq.  363. 


REQUISITES    AND    VALIDITY.  247 

If  a  bond  is  delivered  conditionally,  the  condition  must  be 
performed  before  the  delivery  is  binding.  Thus  if  a  bond  be 
delivered  by  one  surety  thereon  to  the  obligor  upon  condition, 
such  delivery  is  not  effectual  unless  the  condition  be  per- 
formed/ 

When  the  person  named  as  payee  in  a  note,  and  accom- 
panying mortgage  never  had  any  interest  in  the  same  and 
knew  nothing  of  the  transaction,  and  the  said  papers  were  not 
delivered  to  him  but  were  delivered  to  another,  it  was  held 
that  there  was  no  delivery.^  But  a  delivery  to  a  mortgagee 
who  is  called  by  the  wrong  name  in  the  mortgage,  identifies 
the  intended  person  to  be  secured,  and  the  delivery  is  suffi- 
cient.^    A  delivery  to  the  mortgagee's  agent  is  sufficient.* 

Both  delivery  by  the  grantor  and  acceptance  by  the  grantee 
are  necessary  because  both  are  essential  to  show  union  of  mind.' 

The  object  of  the  delivery  is  to  indicate  the  grantor's  in- 
tention to  give  the  deed  effect  as  a  conveyance.^ 

A  delivery  to  the  register  of  deeds  without  the  mortgagee's 
knowledge  or  consent,  but  who  afterward  accepts  the  deed 
from  the  mortgagor's  administrator  is  sufficient.'^ 

The  fact  that  a  deed  absolute  claimed  to  be  a  mortgage  is 
dated  eleven  days  and  received  ten  days  before  the  date  of  the 
separate  defeasance,  only  raises  the  presumption  that  it  was 

^King  V.  Smith,  2  Leigh  (Va.),  157;  Pawling  v.  United  States,  4  Cranch 
(U.  S.),  219 ;  People  v.  Bostwick,  43  Barb.  (N.  Y.)  9  ;  32  N.  Y.  445 ;  United 
States  V.  Hammond,  4  Biss.  C.  C.  283  ;  Bibb  v.  Reid,  3  Ala.  88 ;  Wight  v. 
Shelby  R.  R.  Co.,  16  B.  Men.  (Ky.)  5 ;  State  v.  Chrisman,  2  Ind.  1 26.  Compare 
Deardorff  t).  Foresman,  24  Ind.  481 ;  Taylor  v.  Craig,  2  J.  J.  Marsh  (Ky.),  462  ; 
Bank  v.  Curry,  2  Dana  (Ky.),  142;  Smith  v.  Moberly,  10  B.  Mon.  (Ky.)  266; 
Millett  V.  Parker,  2  Mete.  (Ky.)  608 ;  Nash  v.  Fugate,  24  Gratt.  (Va.)  202. 

2  Shirley  v.  Burch,  16  Ore.  83. 

'Fisher  v.  Milmine,  94  111.  328 ;  Beaver  v.  Slanker,  94  111.  175. 

*  Patterson  v.  Ball,  19  Wis.  243  ;  Freeman  v.  McCollum,  20  Wis.  360. 

*  Hendricks  v.  Rasson,  53  Mich.  575;  Watson  r.  Hillman,  57  Mich.  609; 
Wiggins  V.  Lusk,  12  111.  132  ;  Hadlock  v.  Hadlock,  22  111.  384  ;  Wilsey  v.  Den- 
nis, 44  Barb.  (N.  Y.)  359 ;  Fonda  v.  Sage,  46  Barb.  (N.  Y.)  123. 

«3  Washb.  Real  Prop.  (5th  ed.)  300;  Maynard  v.  Maynard,  10  Mass.  456; 
Hatch  V.  Hatch,  9  Mass.  307  ;  Woodbury  v.  Fisher,  20  Ind.  387  ;  Utterbach  v. 
Binns,  1  McLean,  C.  C.  242. 

'  Lee  V.  Fletcher,  46  Minn.  49. 


248  NATURE    AND    REQUISITES    OF   THE    CONTRACT. 

delivered  before  recording.'  But  when  an  administrator  exe- 
cuted a  mortgage  and  note  to  secure  his  indebtedness  to  the 
estate,  and  the  note  and  mortgage  are  afterward  found  among 
his  papers  by  his  successor  in  trust,  there  is  no  deUvery.^ 

The  mortgagor  cannot  complain  that  the  mortgage  is  not 
accepted  if  the  mortgagee  has  performed  acts  showing  an  ac- 
ceptance.^ 

§  222.  Presumption  of  Delivery. — The  question  of  delivery 
is  more  a  question  of  fact  than  of  law.  No  particular  form  of 
words  is  necessary  to  constitute  a  delivery.^  The  legal  pre- 
sumption is,  where  the  deed  is  properly  executed,  that  such 
deed,  found  in  the  possession  of  the  grantee,  was  delivered  by 
the  grantor,  and  accepted  by  the  grantee,  in  absence  of  proof 
to  the  contrary.^ 

It  is  the  general  rule  that  a  party  will  accept  a  deed  because 
it  is  beneficial  to  him;  the  assent  of  the  grantee  to  accept 
the  conveyance  being  presumed  from  the  fact  that  the  convey- 
ance is  beneficial  to  him.^ 

But  the  presumption  that  the  party  will  accept  a  deed  because 
it  is  beneficial  to  him  will  never  be  carried  so  far  as  to  assume 
that  he  has  accepted  it.^ 

^  Kraemer  v.  Adelsberger,  122  N.  Y.  467. 

"Gorham  v.  Meacham,  63  Vt.  231. 

3 Citizens'  Bank  v.  Webre  (La.),  10  South  Rep.  728. 

*  Nazro  v.  Ware,  38  Minn.  443 ;  Flint  v.  Phipps,  16  Ore.  437. 

*  Wolverton  v.  Collins,  34  Iowa,  238  ;  Souverbye  v.  Arden,  1  Johns.  Ch.  (N. 
Y.)  240 ;  3  Washb.  Real  Prop.  (5th  ed.)  p.  312,  sect.  31 ;  Adams  v.  Frye,  3 
Met.  (Mass.)  103 ;  Chandler  v.  Temple,  4  Cush.  (Mass.)  285 ;  Scrugham  v. 
"Wood,  15  Wend.  (N.  Y.)  545  ;  30  Am.  Dec.  75  ;  Jaques  v.  Trustees,  17  Johns. 
(N.  Y.)  548 ;  Games  v.  Stiles,  14  Pet.  (U.  S.)  322. 

^Munoz  V.  Wilson,  111  N.  Y.  295,  303;  Church  v.  Gilman,  15  Wend.  (N. 
Y.)  656 ;  GiflFord  v.  Corrigan,  105  N.  Y.  223. 

''  Thompson  v.  Jackson,  10  Bush  (Ky.),  424 ;  Tuttle  v.  Turner,  28  Tex.  759. 

In  regard  to  the  extent  allowed  to  the  presumption  that  a  party  will  ac- 
cept a  deed  because  it  is  beneficial  to  him  is  a  question  upon  which  there  is 
a  conflict  of  authority.  But  the  weight  of  authority  is  as  stated  in  the  text . 
Prutsman  r.  Baker,  30  Wis.  644 ;  Townsend  v.  Tickell,  3  Barn.  &  Aid.  36 ; 
Younge  i).  Guibeau,  3  Wall.  (U.  S.)  636;  Jackson  v.  Phipps,  12  Johns.  (N.  Y.) 
418  ;  Rogers  v.  Carey,  47  Mo.  232 ;  Fonda  v.  Sage,  46  Barb.  (N.  Y.)  109  ;  Hulick 
V.  Scovil,  9  111.  159.    Compare  Myrover  v.  French,  73  N.  Car.  609. 


REQUISITES   AND   VALIDITY.  249 

The  fact  of  acknowledgment  or  proof  of  a  mortgage  does  not 
raise  the  conclusive  presumption  that  it  has  been  delivered/ 
yet  it  has  been  held  as  presumptive  evidence.^  Proceedings 
by  the  mortgagee  to  enforce  the  title,  or  his  release  of  it,  are 
conclusive  of  his  acceptance.^ 

If  the  mortgage  be  disposed  of  so  as  to  clearly  indicate  the 
intention  of  the  j^arties  that  it  should  take  effect  as  such,  the 
delivery  is  sufficient.^ 

§  223,  Illustrations. — Evidence  that  a  daughter  handed  a 
mortgage,  running  to  her  father,  to  her  mother  who  occupied 
rooms  in  her  house  with  her  father,  which  deed  she  afterward 
saw  in  a  bureau  drawer  in  their  rooms,  shows  that  she  in- 
tended the  mortgage  for  the  father,  and  the  transaction  was  a 
sufficient  delivery.* 

So  where  a  mortgage  runs  to  several  creditors  and  has 
been  delivered  to  one  for  the  benefit  of  all,  none  of  whom 
has  ever  repudiated  it,  an  acceptance  by  each  need  not  be 
shown.^ 

The  fact  that  the  grantor  retains  actual  possession  of  a  deed 
is  evidence  of  the  non-delivery,  but  there  may  be  a  delivery, 
though  he  retain  such  possession.  Thus,  a  son  executed  a 
mortgage  for  $8,000  to  his  father  and  duly  acknowledged  de- 
livery, before  a  master  in  chancery,  and  four  months  thereafter 
caused  it  to  be  registered.  After  his  father's  death,  being  ex- 
ecutor of  his  father's  estate,  he  admitted  that  he  owed  the 
estate,  among  other  moneys,  the  sum  of  $8,000.  Four  years 
thereafter,  while  the  estate  remained  unsettled,  he  wrote  upon 
the  mortgage  that  he,  as  executor,  had  received  payment  in  full 
of  both  principal  and  interest,  and  then  caused  the  registry  of 
the  mortgage  to  be  cancelled.     These  circumstances  show  a  de- 

^Bell  V.  Bank,  11  Bush  (Ky.),34;  Freeman  v.  Schroeder,  43  Barb  (N.  Y.) 
618 ;  29  How.  Pr.  263 ;  Jackson  v.  Richards,  6  Cow.  (N.  Y.)  617. 

nVyckoff  r.  Remsen,  11  Paige  (N.  Y.),  564. 

'Ely  V.  Stannard,  44  Conn.  528;  Crocker  v.  Lowenthal,83  111.  579;  Aldrich 
V.  Willis,  55  Cal.  81. 

*Nazro  v.  AVare,  38  Minn.  443. 

*Ray  V.  Hallenbeck,  42  Fed.  Rep.  381. 

^Shelden  v.  Erskine,  78  Mich.  627. 


250  NATURE    AND   REQUISITES   OP   THE    CONTRACT. 

livery.^  It  is  not  necessary,  to  constitute  complete  delivery,  that 
the  instrument  should  leave  the  actual  possession  of  the  grantor.^ 

If  a  deed  or  mortgage  be  so  disposed  of  or  treated  as  to 
evince  clearly  the  intention  of  the  parties  that  it  should  take 
effect  as  such,  it  is  a  sufficient  delivery. 

Thus,  the  grantor  sold  land  for  $700,  and  the  grantee  gave 
him  a  note  for  $431.48  balance  of  the  purchase-money,  with  a 
verbal  agreement  that  in  a  short  time  he  would  secure  this 
note  by  a  mortgage  back  on  the  land.  The  mortgage  was 
duly  executed  on  June  20,  1873,  but  dated  September  17, 
1872,  and  on  the  same  da}^  deposited  with  the  register  of 
deeds  by  the  grantee,  with  instructions  to  record  it  upon  the 
happening  of  a  certain  contingency,  which  never  happened ; 
but  contrary  to  these  instructions,  the  register  recorded  it  on 
the  same  day,  and  then  returned  it  to  the  mortgagor.  Subse- 
quently the  mortgagor  notified  the  mortgagee  by  letter  that  he 
had  secured  the  debt  by  mortgage,  in  compliance  with  the 
provisions  of  the  oral  agreement,  he  still  holding  the  instru- 
ment from  1873  to  1885  when  it  was  delivered  to  the  mort- 
gagee. This  conduct  of  the  mortgagor  clearly  evinced  an  in- 
tention that  the  mortgage  should  take  effect.^ 

To  show  delivery  there  must  be  proof  of  that  which  evinces 
an  intention  on  the  part  of  the  grantor  or  mortgagor  to  part 
with  the  investment,  and,  of  course,  to  pass  the  title.  This  inten- 
tion may  be  made  to  appear,  either  from  the  circumstances  of 
the  transaction^  or  from  the  acts  or  words  of  the  grantor.'* 

The  certificate  of  the  proper  officer,  made  under  the  statute, 
that  the  grantor  signed,  sealed,  and  delivered  the  deed  or  mort- 
gage as  his  voluntary  act  and  deed,  is  cogent  evidence  of  de- 
livery.^ 

1  Terhune  v.  Oldis,  44  N.  J.  Eq.  146. 

2  Folly  V.  Vantuyl,  4  Hal.  (N.  J.)  153 ;  Crawford  v.  Bertholf,  Sax.  (N.  J.) 
458  ;  Cannon  v.  Cannon,  26  N.  J.  Eq.  316 ;  Ruckman  v.  Ruckman,  33  N.  J. 
Eq.  354. 

3  Nazro  v.  Ware,  38  Minn.  443. 

*  Crawford  v.  Bertholf,  Sax.  (N.  J.)  458 ;  Ruckman  v.  Ruckman,  33  N.  J. 
Eq.  354. 
^Farlee  v.  Farlee,  1  Zab.  (N.  J.)  279. 


\ik 


REQUISITES    AND    VALIDITY.  251 

§  224.  Subsequent  Acceptance  by  Mortgagee. — A  mort- 
gagee may  accept  the  mortgage  which  has  been  made  in  his 
favor  unknown  to  him,  if  the  rights  of  creditors,  purchasers, 
or  incumbrancers  have  not  intervened.  The  mortgagee  or  his 
representative  may  assent  to  and  ratify  the  execution  of  such 
mortgage  and  enforce  its  payment.^ 

So  deed  or  mortgage  may  be  delivered  to  a  stranger  for  the 
grantee  named  therein  without  any  special  authority  from  the 
grantee  to  receive  it  for  him.  And  if  the  grantee  assents  to  it 
afterward  the  instrument  is  valid  from  the  time  of  the  original 
delivery.^ 

A  son  executed  a  deed  to  his  father,  of  his  own  volition  and 
without  the  knowledge  of  the  latter,  and  delivered  it  to  the  regis- 
ter. This  was  a  perfect  delivery  and  upon  acceptance  by  the 
grantee,  the  deed  took  effect  from  the  time  of  such  delivery, 
no  interests  of  third  parties  intervening.^ 

A  mortgage  after  being  drafted  under  the  mortgagee's  in- 
structions, was  by  his  direction  taken  to  the  mortgagor's  home 
and  there  executed  and  acknowledged  in  the  mortgagee's  ab- 
sence before  a  justice  of  the  peace,  whereupon  it  was  given  to 
the  justice  for  record.  It  was  held,  that  in  the  absence 
of  any  objection  afterward,  the  facts  warranted  the  finding 
that  the  mortgage  was  given  to  the  justice  as  an  agent 
of  the  mortgagee,  and  that  there  had  been  an  effectual 
delivery.* 

Every  subsequent  ratification  has  a  retrospective  effect,  and 
is  equivalent  to  a  prior  command.^  A  subsequent  acceptance 
of  the  mortgage  by  the  mortgagee  ratifies  the  making  and  re- 
cording of  it.^     If  a  mortgage  is  filed  for  record  by  the  mort- 

1  Munoz  r.  Wilson,  111  N.  Y.  295. 

*Tho  Lady  Superior  r.  McNamara,  3  Barb.  (N.  Y.)  Ch.  378;  Goodsell  v. 
Stinnon,  7  Blackf.  (Ind.)  437 ;  Moody  v.  Dryden,  72  Iowa,  461. 

« Rathbun  v.  Rathbun,  6  Barb.  (N.  Y.)  102 ;  Jackson  v.  Goodell,  20  Johns. 
(N.  Y.)  187. 

*  Greene  v.  Conant,  151  Mass.  223. 

*Co.  Litt.  207,  a ;  Kingsbury  v.  Burnside,  58  111.  310. 

*Carnall  v.  Duval,  22  Ark.  1.36.  See,  also,  Bank  r.  Drury,  38  Vt.  426; 
Warner  r.  Winslow,  1  Sandf.  Ch.  (N.  Y.)  430 ;  Foster  v.  Scj-the  Co.,  47  Barb. 
(N.  Y.)  505. 


252  NATURE   AND    REQUISITES   OF    THE    CONTRACT. 

gagor  and  afterward  found  in  the  possession  of  the  mortgagee, 
this  is  sufficient  proof  of  its  delivery.' 

When  a  mortgagor  makes  a  mortgage  and  tenders  it  to  the 
mortgagee  in  compliance  with  prior  instructions,  but  the  mort- 
gagee refuses  to  receive  it,  the  mortgagee  cannot  afterward 
accept  the  mortgage  without  the  mortgagor's  consent.^ 

The  ratification  may  be  indicated  by  any  words  or  acts  of 
the  grantee  or  mortgagee  which  show  a  clear  intention  on  his 
part  that  the  instrument  shall  be  considered  as  having  been 
properly  executed  and  delivered,  and  as  conveying  the  title  to 
or  a  lien  on  the  property.^ 

§225.  Registration  of  Mortgage  is  Prima  Facie  Evi- 
dence OF  Delivery. — The  registration  of  a  deed  or  mortgage 
is  prima  facie  evidence  of  its  delivery.*  Hence  in  the  absence 
of  any  evidence  to  the  contrary,  the  fact  that  the  instrument 
is  found  upon  the  records  duly  acknowledged  or  attested  is 
prima  facie  evidence  of  its  delivery.^ 

But  the  registration  itse  If  does  not  act  as  a  delivery,^  and 
cannot  supply  the  place  of  delivery.^  Where  a  mortgage  is 
executed  in  the  absence  of  the  mortgagee  and  placed  upon 
record  by  the  mortgagor  and  permitted  to  remain  of  record 
as  a  mortgage  and  assumed  to  be  such  by  all  the  parties 
in  interest,  want  of  manual  delivery  is  of  no  importance, 
as   this   is   a   sufficient   delivery.^      And   such   recording   in 

1  Haskill  V.  Sevier,  25  Ark.  152. 

"Adams  r.  Johnson,  41  Miss.  258. 

3  Tucker  v.  Allen,  IG  Kan.  312 ;  Gould  v.  Day,  94  U.  S.  405. 

*  Dev.  on  Deeds,  sect.  292. 

5  Lawrence  v.  Farley,  24  Hun  (N.  Y.),  293  ;  Kille  v.  Ege,  79  Pa.  St.  15  ;  Jack- 
son V.  Perkins,  2  Wend.  (N.  Y.)  308  ;  Munoz  v.  Wilson,  111  N.  Y.  295. 

« Foley  V.  Howard,  8  Iowa,  56 ;  Hawkes  v.  Pike,  105  Mass.  560 ;  Houfes  v. 
Schultze,  2  111.  App.  196  ;  96  111.  335  ;  Parker  v.  Hill,  8  Met.  (Mass.)  447. 

'Berkshire  Ins.  Co.  v.  Sturgis,  13  Gray  (Mass.),  177 ;  Jones  v.  Busb,4  Harr. 
(Del.)  1  ;  Hadlock  v.  Hadlock,  22  111.  384  ;  Patterson  v.  Snell,  67  Me.  559; 
Maynard  v.  Maynard,  10  Mass.  456  ;  Hatch  v.  Hatch,  9  Mass.  307  ;  Gilbert  v. 
Ins.  Co.,  23  Wend.  (N.  Y.)  43 ;  Hendricks  v.  Rasson,  53  Mich.  575  ;  Watson  v. 
Hillman,  57  Mich.  609 ;  Wiggins  v.  Lusk,  12  111.  132 ;  Hedge  v.  Drew,  12  Pick. 
(Mass.)  141. 

^Jackson  v.  Cleveland,  15  Mich.  94. 


I 


REQUISITES    AND    VALIDITY.  253 

the  absence  of  evidence  to  the  contrary  is  presumptively  a 
deHvery.^ 

Especially  is  the  recording  of  a  deed  considered  presump- 
tively a  delivery  of  it  as  between  the  grantor  and  grantee, 
when  the  object  of  the  record  is  to  defraud,  hinder,  or  delay 
creditors.^ 

The  delivery  of  a  mortgage  may  be  inferred  from  its  regis- 
tration, and  the  delivery  of  the  bond  secured  by  it  will  also  be 
presumed  from  the  fact  that  it  is  referred  to  in  the  mortgage 
as  a  subsisting  obligation.^  And  an  execution  and  recording 
of  a  mortgage  pursuant  to  a  previous  oral  agreement  to  that 
effect  constitute  a  sufficient  delivery/ 

Where  the  grantor  records  the  deed,  his  acts  are  presump- 
tive evidence  of  his  intention  to  part  with  the  title  thereby 
conveyed,'^  and  the  grantee  can  hold  the  land  as  against  the 
grantor.^ 

§  226.  Delivery  of  Deed  in  Escrow. — A  deed  delivered  to 
a  third  person  in  escrow  cannot  be  revoked  by  the  grantor. 
The  depositary  of  the  deed  is  the  agent  of  both  parties,  and  is 
bound  to  deliver  the  deed  on  performance  of  the  conditions 
provided  for  in  the  contract.'^ 

The  depositary  is  the  agent  of  both  parties,  and  as 
such  is  bound  to  deliver  the  instrument  on  performance  of 
the  condition  provided  for  in  the  contract  under  which  he 
holds  it.^ 

The  making  of  a  deed  in  escrow  presupposes  a  contract, 

'  Sessions  r.  Sherwood,  78  Mich.  23-1 ;  Patrick  v.  Howard,  47  Mich.  40,  45 ; 
Stevens  v.  Castel,  6.3  Mich.  116,  117 ;  Gage  v.  Gage,  36  Mich.  229. 

2  Moore  ?'.  Giles,  49  Conn.  .570  ;  Sessions  v.  Sherwood,  78  Mich.  234,242; 
Gage  V.  Gage,  36  Mich.  229. 

^Geissman  v.  Wolf,  46  Hun  (X.  Y.),  289. 

*Reid  V.  Abernethy,  77  Iowa,  438  ;  Day  v.  Griffith,  15  Iowa,  104  ;  Deere  v. 
Nelson,  73  Iowa,  187. 

*Kerr  v.  Birnie,  25  Ark.  225;  Hammell  v.  Hammell,  19  Ohio,  17;  Board- 
man  V.  Dean,  .34  Pa.  St.  252. 

®Kerr  r.  Birnie,  25  Ark.  225. 

'McDonald  v.  Huflf.  77  Cal.  279;  Cannon  v.  Handley,  72  Cal.  133,  140; 
Schmidt  v.  Deegan,  69  Wis.  .300. 

*  Shirley  v.  Ayres,  14  Ohio,  307  ;  Schmidt  v.  Deegan,  69  Wis.  300. 


254  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

which  will  not  be  revoked  so  long  as  there  is  no  breach  of 
condition  ;  '  it  is  irrevocable." 

The  fact  that  the  depositary  is  the  agent  of  the  mortgagee, 
or  where  he  is  a  director  in  a  corporation  which  is  the  mort- 
gagee, does  not  disqualify  him  for  a  depositary.^ 

If  the  depositary  delivers  the  mortgage  before  the  time  des- 
ignated, without  waiting  for  the  event,  it  is  invalid.*  But  the 
mortgagor  can  waive  his  rights  under  such  circumstances. 
Thus,  notes  secured  by  a  mortgage  were  placed  in  escrow,  to 
be  delivered  on  performance  of  certain  conditions  which  were 
never  performed ;  but  the  mortgagor  recognized  the  notes  as 
valid  in  an  agreement  with  the  assignee  of  the  mortgage  for 
their  payment  and  paid  part  of  them.  It  was  held  that  the 
mortgagor  had  waived  the  provisions  of  the  escrow  agreement, 
and  that  the  notes  were  a  valid  claim  against  the  land  as  to 
him  and  his  assigns.^ 

A  mortgage  without  consideration  in  the  hands  of  the  de- 
positary to  await  the  performance  of  a  condition  which  would 
make  a  consideration  for  it,  cannot  be  made  operative  by  a 
fraudulent  delivery  before  the  performance  of  the  delivery, 
and  without  the  mortgagor's  consent.® 

'  Stanton  t'.  Miller,  58  N.  Y.  202 ;  Hooper  v.  Ramsbotton,  6  Taunt.  11. 

2  Cannon  v.  Handley,  72  Cal.  134 ;  Bowles  v.  Woodson,  6  Gratt.  (Va.)  78. 

3  Andrews  v.  Thayer,  30  Wis.  228. 

*  Chipman  v.  Tucker,  38  Wis.  43 ;  20  Am.  Rep.  1. 
^Dooley  t).  Potter,  146  Mass.  148. 
6  Powell  V.  Conant,  33  Mich.  396. 


CHAPTER  VII. 

correction  and  reformation. 

Article  1. 

Filling  Blanks  After  Execution. 

§  227.  English  Doctrine.  §  243.  Minn,esota. 

I  228.  American  Doctrine.  §  244.  Mississippi. 

^  229.  Alabama.  \  245.  Missouri. 

\  230.  Arkansas.  I  246.  Nebraska. 

I  231.  California.  |  247.  New  Hampshire. 

I  232.  Delaware.  \  248.  New  York. 

I  233.  Georgia.  g  249.  North  Carolina. 

§  234.  Illinois.  §  250.  Ohio. 

§  235.  Indiana.  §  251.  Oregon. 

I  236.  Iowa.  §  252.  Pennsylvania. 

I  237.  Kansas.  §  253.  South  Carolina. 

i  238.  Kentucky.  l  254.  Tennessee. 

§  239.  Maine.  §  255.  Texas. 

\  240.  Maryland.  §  256.  Virginia. 

I  241.  Massachusetts.  §  257.  Wisconsin. 

?  242.  Michigan. 

§  227.  English  Doctrine. — The  ancient  law  is  that  "  Every 
deed  well  made  must  be  written — i.  e.,  the  agreement  must  be 
all  written  before  the  sealing  and  delivery  of  it,  for  if  a  man 
seal  and  deliver  an  empty  piece  of  paper  or  parchment,  albeit 
he  do  therewithal  give  commandment  that  an  obligation  or 
other  matter  shall  be  written  in  it,  and  this  be  done  accord- 
ingly, yet  this  is  no  good  deed." ' 

Hence,  a  deed  executed  by  the  grantor,  with  the  name  of 
the  grantee  in  blank,  and  then  the  name  filled  in  after  the 
sale  by  a  third  party  who  made  the  contract,  is  void.^  So, 
when  the  instrument  has  nothing  to  operate  upon  it  is  void. 
Thus,  when  it  refers  to  a  schedule  as  annexed  which  was  not 
annexed   at   the   time   of   execution,    a   subsequent   annexa- 

'Shep.  Touch.,  p.  54,68. 

^  Hibblewhite  v.  M'Morine,  6  Mees.  &  Wels.  200. 

255 


256  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

tion,  in  the  absence  of  one  of  the  parties,  does  not  give  it  oper- 
ation as  part  of  the  deed.' 

So,  where  a  bail  bond  was  executed,  and  a  condition  after- 
ward inserted,  it  was  held  bad  as  a  bail  bond.^ 

The  law  is  that  a  material  alteration  in  a  deed,  whether 
made  by  a  party  or  a  stranger,  is  fatal  to  its  validity.^ 

But  a  blank  in  part  material,  which  is  filled  up  in  the  pres- 
ence of  the  party,  and  ratified  by  him,  is  a  redelivery,  and 
hence  the  instrument  is  valid/ 

So  a  complete  bond  is  not  rendered  void  by  the  subsequent 
addition  of  another  obligor  with  the  assent  of  all  parties.^  It 
is  certain  that  if  an  instrument  be  signed,  sealed,  and  de- 
livered in  blank,  and  afterward  filled  up,  it  is  no  deed.'' 

But  it  was  held  that  a  blank  for  the  Christian  name  of  one 
appointed  an  attorney  by  deed,  might  be  filled  up  when  there 
was  evidence  that  such  was  the  intention  of  the  party  execut- 
ing the  deed.^ 

§  228.  American  Doctrine. — A  deed  or  mortgage,  or  any 
other  instrument,  affecting  real  estate,  where  the  name  of  the 
grantee,  mortgagee,  or  vendee  is  left  blank,  is  void,  so  long  as 
the  blank  remains.  Some  of  the  American  courts  hold  that 
if  the  instrument  is  afterward  filled  up  in  accordance  with  the 
direction  of  the  maker,  it  is  valid,  whether  it  is  filled  up  in  his 
presence  or  absence,  whether  before  or  after  delivery,  whether 
such  directions  are  in  writing  or  only  in  parol,  and  whether 
with  or  without  the  knowledge  of  the  party  holding  under  the 
instrument ;  but  other  courts  hold  otherwise.  But  if  the  in- 
strument is  filled  up  contrary  to  the  directions  of  the  maker, 
and  to  his  injury,  and  with  full  knowledge  on  the  part  of  the 

^  Weeks  v.  Maillardet,  14  East.  568. 
'^Powell  V.  Duff,  3  Camp.  181 ;  and  see  Bull.  N.  P.  267. 
2  Davidson  v.  Cooper,  11  Mees.  &  Wels.  778,  802;  Powell  v.  Divett,  15  East. 
29. 
*  Hudson  V.  Revett,  5  Bing.  368. 
^Matson  v.  Booth,  5  Maule  &  Sel.  223. 
«  Davidson  v.  Cooper,  11  Mees.  &  Wels.  778,  793. 
'  Eagleton  v.  Gutteridge,  11  Mees.  &  Wels.  465. 


CORRECTION    AND   REFORMATION.  257 

party  who  takes  and  holds  under  it,  the  instrument  is  abso- 
lutely null  and  void  as  to  him.^ 

It  is  generally  held,  however,  that  if  the  instrument  is  filled 
up  in  accordance  with  the  instructions,  written  or  oral,  of  the 
maker,  in  his  presence  or  absence,  before  or  after  delivery,  and 
under  it  the  property  at  that  time  or  afterward  comes  into  the 
hands  of  some  innocent  and  bona  fide  holder  for  value,  the  in- 
strument will  be  held  valid.^ 

The  rule  in  this  country  is  not  uniform.  The  English  rule 
seems  to  be  modified.  Justice  Nelson  says  that  it  is  competent 
to  convey  real  estate  by  signing  and  acknowledging  the  deed 
in  blank,  and  delivering  the  same  to  an  agent,  with  an  express 
or  implied  authority  to  fill  up  the  blank  and  perfect  the  con- 
veyance, that  the  validity  of  such  a  deed  cannot  well  be  con- 
troverted. "  Although  it  was  at  one  time  doubted  whether  a 
parol  authority  was  adequate  to  authorize  an  alteration  or 
addition  to  a  sealed  instrument,  the  better  opinion,  at  this  day, 
is  that  the  power  is  sufficient."  ^ 

Thus,  bonds  issued  by  a  railroad  company  in  Massachusetts, 
payable  in  blank,  no  payee  being  inserted,  and  issued  to  a 
citizen  of  Massachusetts,  which  had  passed  through  several 
intervening  holders,  can  be  filled  up  by  a  citizen  of  New 
Hampshire,  payable  to  himself  or  order,  and  then  suit  can 
be  maintained  upon  them  in  the  Circuit  Court  of  the  United 
States  for  Massachusetts.* 

§  229.  Alabama. — In  this  State  the  rule  is  varied.  If  the 
obligor  gives  a  bond  to  an  agent  with  a  blank  for  the  payee's 
name,  with  an  agreement  that  the  payee's  name  may  be  in- 

^  Ayres  v.  Probasco,  14  Kan.  175 ;  Schintz  v.  McManamy,  33  Wis.  299 ;  Upton 
V.  Archer,  41  Cal.  85. 

-Pence  r.  Arbuckle,  22  Minn.  417  ;  Knaggs  v.  Mastin,  9  Kan.  532;  Chap- 
man V.  Veach,  32  Kan.  167  ;  McClain  v.  McClain,  52  Iowa,  272 ;  Field  r.  Stapg, 
52  Mo.  534  ;  Ragsdale  v.  Robingon,  48  Tex.  380  ;  Van  Etta  v.  Evenson,  28  Wis. 
33 ;  Schintz  r.  McManamy,  33  Wis.  299 ;  State  r.  Matthews,  44  Kan.  596 ; 
Bridgeport  Bank  v.  Railroad  Co.,  30  Conn.  231,  274. 

'Drury  v.  Foster,  2  Wall.  (U.  S.)  24,  33 ;  State  r.  IMatthews,  44  Kan.  596. 

♦  Walker  v.  Smith,  21  How.  (U.  S.)  579 ;  United  States  v.  Nelson,  2  Brock.  C. 
C.  64  ;  Camden  Bank  v.  Hall,  14  N.  J.  L.  583  ;  Redfield  on  Railroads,  35. 
VOL.  I. — 17 


258  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

serted,  the  agent  may  accordingly  insert  the  name,  and  such 
authority  need  not  be  under  seal  nor  in  writing.  Parol  evi- 
(dence  of  this  arrangement  is  sufficient,  and  even  such  consent 
may  be  implied  from  the  nature  of  the  alteration.^ 

1 230.  Arkansas. — The  Arkansas  courts  hold  according  to 
(the  general  rule,  and  a  writing  purporting  to  be  a  bond,  signed 
and  sealed  by  a  party  with  a  blank  left  which  is  material, 
which  is  afterward  filled  and  the  instrument  delivered  by  one 
not  authorized  under  seal,  is  not  a  deed  of  the  party  signing 
and  sealing.  However,  the  rule  is  otherwise  as  to  promissory 
notes  and  bills  of  exchange.  But  one  cannot  bind  another  by 
deed,  without  authority  under  seal.^ 

§  231.  California. — A  deed  in  due  form,  signed  and  ac- 
knowledged by  the  grantor,  does  not  become  his  deed  until  the 
name  of  the  grantee  is  inserted  therein ;  and  an  agent  of  the 
grantor  cannot  insert  the  name  of  the  grantee  in  the  absence 
of  the  grantor,  unless  his  authority  is  in  writing.^ 

§232.  Delaware. — A  bond  executed  in  blank  cannot  be 
filled  up  without  special  authority  of  the  obligor.  A  bond  in 
blank  is  not  a  negotiable  instrument ;  it  is  a  deed  which  has 
effect  only  on  delivery,  and  no  delivery  can  be  without  express 
authority  and  assent  of  the  obligor.  That  authority  must  be 
proved  or  the  bond  is  a  nullity.  The  execution  of  a  bond  in 
blank  does  not  impart  an  authority  in  the  holder  to  fill  it  up 
and  deliver  it  at  pleasure.  On  the  contrary,  this  circumstance 
is  enough  to  put  every  one  on  his  guard  against  taking  it, 
without  express  reference  to  the  obligor.* 

§  233.  Georgia. — An  instrument  purporting  to  be  a  deed, 
which  when  made,  is  incapable  of  having  any  legal  operation, 
cannot  become  afterward   a  valid  deed   by  being  completed 

» Boardman  v.  Gore,  1  Stewart,  517  ;  Gibbs  v.  Frost,  4  Ala.  720. 

*  Cross  V.  State  Bank,  5  Ark.  525. 
3  Upton  V.  Archer,  41  Cal.  85. 

*  Clendaniel  v.  Hastings,  5  Harr.  408. 


CORRECTION    AND    REFORMATION.  259 

and  delivered  by  a  stranger,  in  the  absence  of  the  parties  act- 
ing under  parol  authority  ;  it  can  only  be  completed  by  a 
third  person  acting  under  written  authority  under  seal.  Thus, 
a  deed,  signed,  sealed,  and  attested,  but  without  any  grantee^s 
name,  and  without  the  amount  of  the  purchase-money — these 
being  left  blank — is  inoperative  as  a  muniment  of  title,  and 
cannot  be  completed  by  a  third  person  in  the  absence  of  the 
grantor,  without  authority  under  seal.  Such  instrument  is 
admissible,  however,  in  evidence  to  show  color  of  title  in  the 
party  claiming  under  it.' 

§  234.  Illinois. — A  party  executing  a  bond  knowing  that 
there  are  blanks  in  it  to  be  filled  up  by  inserting  particular 
names  or  things  necessary  to  make  it  a  perfect  instrument, 
must  be  considered  as  agreeing  that  the  blanks  may  be  thus 
filled  after  he  has  executed  the  bond.  If  the  party  signing  the 
paper  shall  insert  in  the  appropriate  places  the  amount  of  the 
penalty,  or  the  names  of  the  sureties,  or  any  other  thing  he 
may  deem  of  importance  as  affecting  his  interest,  he  may  in 
that  way  protect  himself  against  being  bound  otherwise  than 
as  he  shall  thus  specify.  But  if,  relying  upon  the  good  faith 
of  the  principal,  the  surety  shall  permit  him  to  have  possession 
of  the  bond  signed  in  blank,  the  surety  will  have  clothed  the 
principal  with  an  apparent  authority  to  fill  up  the  blanks  at 
his  discretion,  in  any  appropriate  manner  consistent  with  the 
nature  of  the  obligation  proposed  to  be  given,  so  that,  as  against 
the  obligee  receiving  the  bond  without  notice,  or  negligence 
and  in  good  faith,  the  surety  will  be  estopped  to  allege  that  he 
executed  the  paper  with  a  reservation  or  upon  a  condition  in 
respect  of  the  filling  of  such  blanks,  and  this,  whether  the 
blanks  to  be  filled  have  reference  to  the  penalty  of  the  bond, 
the  names  of  sureties,  or  other  things. 

The  apparent  authority  of  the  principal  in  an  obligation 
which  has  been  executed  in  blank  by  others  as  sureties,  to  fiU 
in  the  blanks  in  an  appropriate  manner,  may  be  implied  from 
the  facts  and  circumstances  attending  the  transaction,  and  may 

^Ingram  r.  Little,  14  Ga.  173, 


260  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

be  shown  by  parol ;  and  this  rule  applies  to  instruments  under 
seal  as  well  as  to  those  which  are  not  under  seal/ 

But  if  the  blanks  are  tilled  without  authority,  the  deed  will 
be  void.  Thus,  if  a  deed  has  no  description  of  any  land,  or 
the  name  of  any  grantee,  but  is  in  blank,  except  the  names  of 
the  grantors,  and  the  blanks  are  afterward  filled  so  as  to  show 
a  grantee  and  a  description  of  land,  it  will  be  void.^  However, 
a  deed  executed  in  blank  is  good  if  delivered  after  grantee's 
name  is  inserted  by  agent  of  grantor.  An  objection  to  a  deed, 
that  at  the  time  it  left  the  grantor's  hands  there  was  no  grantee's 
name  in  it,  is  obviated  by  proof  that  the  officer  who  took  the 
acknov/ledgment  of  the  deed,  acting  as  the  agent  of  the  grantor, 
inserted  the  name  of  the  grantee  therein,  and  then  delivered 
it  to  the  grantee.^ 

§  235.  Indiana. — An  alteration  in  a  bond  or  deed,  made 
after  its  execution  in  a  material  part,  without  the  consent  of 
the  parties,  vitiates  the  instrument.  But  if  the  alteration  is 
made  with  the  consent  of  the  parties  the  instrument  is  valid.* 
So  a  surety  signing  and  delivering  to  the  principal  obligor  a 
bond,  the  names  of  the  sureties  having  been  inserted  in  the 
body  of  the  instrument,  will  be  held  as  agreeing  that  the 
blanks  in  such  names  may  be  filled  after  he  had  executed  it.* 

§  236.  Iowa. — Where  sureties  sign  an  official  bond  of  their 
principal,  leaving  certain  blanks  as  to  amount,  date,  and  the 
like,  which  they  expect  to  be  properly  filled,  and  which  the 
principal  does  fill  accordingly,  they  are  estopped  from  claiming 
their  liability  is  affected  thereby.  By  their  signing  and  de- 
livering the  instrument,  expecting  and  knowing  that  he  would 
fill  the  blanks  in  a  certain  manner,  fully  empowers  him  to  do 
so  as  agreed  or  understood." 

^  Chicago  V.  Gage,  95  111.  593,  overruling  People  v.  Organ,  27  111.  27. 

*  Wilson  V.  Commissions,  70  111.  46. 

nicNab  V.  Young,  81  111.  11.  And  see  Whitaker  v.  Miller,  83  111. 
381. 

*  Richmond  Manufg.  Co.  r.  Davis,  7  Black.  (Ind.)  412. 

*  State  r.  Pepper,  31  Ind.  70. 

«  Wright  V.  Harris,  31  Iowa,  272,    See,  also,  Simms  v.  Hervey,  19  Iowa,  273 ; 


CORRECTION    AND    REFORMATION.  261 

§  237.  Kansas. — Where  a  part}-  signs  and  acknowledges  a 
blank  mortgage,  another  person  acting  as  agent  of  such  party 
cannot  afterward,  in  the  absence  of  his  principal,  fill  up  the 
blanks  in  such  mortgage  so  as  to  make  it  the  mortgage  of  his 
principal,  and  then  deliver  the  same  to  the  intended  mortgagee, 
unless  he  has  authority  so  to  do  by  his  principal  in  writing.^ 

§  238.  Kentucky. — An  agent  without  authority  under  seal, 
cannot  bind  his  principal  by  an  instrument  under  seal.  Thus, 
one  partner  cannot,  by  mere  authority  resulting  from  a  partner- 
ship, bind  his  copartner  by  a  writing  under  seal,  but  additional 
authority  under  seal  is  necessarj'^,  to  authorize  such  an  act.^ 

§  239.  Maine. — A  party  executing  a  deed,  bond,  or  other 
instrument,  and  delivering  the  same  to  another,  as  his  deed, 
knowing  that  there  are  blanks  in  it  to  be  filled,  necessary  to 
make  it  a  perfect  instrument,  must  be  considered  as  agreeing 
that  the  blanks  may  be  thus  filled  after  he  has  executed  it. 

The  court  held  that,  practically,  there  is  no  real  distinction 
in  this  matter  between  bonds  and  simple  contracts.  There  is 
no  more  danger  of  fraud  or  injury  or  wrong  in  allowing  in- 
sertions in  a  bond  than  there  is  in  allowing  them  in  a  promis- 
sory note  or  bill  of  exchange.  Both  are  agreements  or  con- 
tracts, and  in  neither  can  unauthorized  alterations  be  made 
with  impunity.  Considering  that  the  assumed  difference  rests 
on  a  mere  technical  rule  of  the  common  law,  this  rule  should 
not  be  extended  beyond  its  necessary  limits — that  is,  a  sealed 
instrument  cannot  be  executed  by  another,  so  far  as  its  dis- 
tinguishing characteristics  as  a  sealed  instrument  are  in  ques- 
tion, unless  by  authority  under  seal.  Hence,  this  principle 
includes  the  insertion  of  the  penal  sum  of  a  collector's  bond.^ 

Swartz  V.  Ballou,  47  Iowa,  188 ;  McClain  v.  McClain,  52  Iowa,  272 ;  Allen  r. 
Withrow,  110  U.  S.  119. 

^Ayres  v.  Probasco,  14  Kan.  175.  See,  also,  Knaggs  v.  Mastin,  9  Kan. 
532 ;  State  r.  Matthews,  44  Kan.  596. 

*  Cummins  v.  Cassily,  5  B.  Mon.  74.  See,  also,  Trimble  v.  Coons,  2  A.  K. 
Marsh.  375 ;  Doniphan  v.  Gill,  1  B.  Mon.  199. 

3 South  Ben^nck  v.  TTnntress,  53  Me.  89.  See,  also,  Coolbroth  v.  Purinton, 
29  Me.  469 ;  Green  v.  Walker,  37  Me.  27. 


262  NATURE    AND    REQUISITES    OF   THE   CONTRACT. 

§  240.  Maryland. — The  law  is  well  settled  by  the  earliest 
writers  that  the  signature  and  seal  attached  to  a  blank  piece 
of  paper  for  the  purpose  of  having  a  bond  thereafter  written 
upon  it,  will  not  bind  a  party  as  an  obligor  in  such  bond. 
This  is  the  doctrine  of  this  State.  Thus,  a  signature  and  seal 
attached  to  a  blank  piece  of  paper  for  the  purpose  of  having  a 
bond  thereafter  written  upon  it  will  not  bind  the  party  as  an 
obligor  in  such  bond  ;  but  if  the  party  so  signing  and  sealing 
after  the  bond  is  filled  up  adopts  it  as  his  bond,  it  is  sufficient.^ 

§  241.  Massachusetts. — A  party  executing  a  bond,  knowing 
that  there  are  blanks  in  it,  to  be  filled  up  by  inserting  particu- 
lar names  or  things,  must  be  considered  as  agreeing  that  the 
blanks  may  be  thus  filled,  after  he  has  executed  the  bond. 
Thus,  a  collector's  bond,  in  which,  after  the  surety  had  signed, 
a  blank  had  been  filled,  was  not  so  altered  as  would  avoid 
the  bond,  if  the  party  executing  the  bond  agrees  that  it  may 
be  afterward  filled  up.^ 

Filling  up  a  blank  form  of  a  deed  by  parol  authority  of  one 
who  has  signed  and  sealed  it  will  not  make  it  a  valid  convey- 
ance of  land  unless  the  instrument  is  redelivered  after  being 
completed  in  form.^ 

Where  an  instrument  was  signed  by  several  parties  and 
afterward  altered  by  the  addition  of  a  seal  and  interlineation 
of  the  words  "jointly  and  severally,"  a  party  to  the  instrument 
who  was  present  and  consented  to  the  alteration  would  be 
bound  by  it  though  the  others  would  not  be  bound.*  But  it  is 
held  that  the  signing  in  blank  does  not  authorize  anything  to 
be  written  over  it  beyond  a  simple  contract,  and  that  authority 
to  affix  the  seal  requires  a  power  of  attorney  under  seal.^ 

But  a  deed  signed  for  the  grantor  in  his  presence  and  at  his 
request  is  good  without  a  power  of  attorney.  There  is  a  dis- 
tinction between  acts  done  in  the  presence  and  by  the  direc- 

^Byers  v.  McClanahan,  6  Gill.  &  J.  250. 

^  Smith  ?'.  Crooker,  5  Mass.  538. 

'Burns  v.  Lynde,  0  Allen,  305.  • 

*  Warring  v.  Williams,  8  Pick.  (Mass.)  322. 

*  Warring  v.  Williams,  8  Pick.  (Mass.)  326. 


CORRECTION    AND    REFORMATION.  263 

tion  of  the  principal  and  acts  done  in  his  absence.  The  former 
are  regarded  as  done  by  the  principal  himself,  and  the  instru- 
ment need  not  purport  to  be  executed  by  attorney,  while  the 
latter  must  be  done  under  a  power,  and  must  purport  to  be  so 
done.  According  to  this  distinction,  where  a  deed  is  delivered 
containing  blanks  to  be  filled  up,  they  may  be  afterward 
filled  in  the  presence  and  by  the  direction  of  the  grantor,  and 
the  deed  is  valid.  This  is  on  the  ground  that  such  acts  are 
equivalent  to  a  redelivery  of  the  deed  in  the  perfect  state  by 
the  grantor.  The  filling  the  blanks  in  his  presence  and  by 
his  consent  is  equivalent  to  filling  by  his  own  hand ;  the  deed 
is  then  under  his  own  control,  and  may  be  delivered  as  a  per- 
fect deed,' 

§  242.  Michigan. — It  is  intimated  that  under  the  statutes 
of  Michigan,  and  the  weight  of  authority,  that  parol  authority 
is  not  sufficient  to  authorize  a  mortgagee  to  insert  terms  in  a 
mortgage  left  blank  for  such  purpose  ;  that  such  a  mortgage  is 
void,  because  an  essential  addition  has  been  made  by  the 
mortgagee  in  his  favor  after  execution  and  without  authority 
of  the  mortgagor.  The  court  says  that  "  we  think  "  that  parol 
authority  to  fill  blanks  is  not  sufficient.^ 

§  243.  Minnesota. — At  the  present  day  the  distinction  be- 
tween sealed  and  unsealed  instruments  is  arbitrarily  meaning- 
less and  unsustained  by  reason.  "  The  courts  have  for  nearly  a 
century  been  gradually  doing  away  with  the  formal  distinc- 
tions between  these  two  classes  of  instruments,  and  if  they 
have  not  yet  wholly  disappeared,  it  simply  proves  the  difficulty 
of  disturbing  a  rule  established  by  long  usage,  even  after  the 
reason  for  the  rule  has  wholly  ceased  to  exist."  Therefore, 
parol  authority  is  sufficient  to  authorize  the  filling  of  a  blank 
in  a  sealed  instrument,  and  such  authority  may  be  in  any  way 
by  which  it  might  be  given  in  cases  of  an  unsealed  instru- 
ment. 

Such  authority  mdy  be  either  express  or  implied  from  cir- 

^ Gardner  v.  Gardner,  5  Gush.  483. 
.'Stebbins  v.  Watson,  71  Mich.  467. 


264  NATURE   AND   REQUISITES    OF    THE    CONTRACT. 

cumstances.     It  will  be  implied  from  circumstances  whenever 
these,  fairly  considered,  will  justify  the  inference/ 

§  244.  Mississippi. — A  bond  delivered  with  the  penalty  and 
amount  of  the  execution  in  blank  is  void.  A  valid  deed  can- 
not be  made  by  writing  over  a  signature  and  by  placing  upon 
such  blank  sheet  a  seal.  The  delivery  of  a  deed  by  an  agent 
authorized  to  do  so  by  the  obligor  is  not  equivalent  to  a  de- 
livery by  the  principal,  if  such  authority  is  by  parol.^ 

§  245.  Missouri. — A  deed  regularly  executed  in  other  re- 
spects, with  a  blank  left  therein  for  the  name  of  the  grantee, 
and  placed  in  that  condition  in  the  hands  of  a  third  person 
with  verbal  authority,  but  not  authority  under  seal,  from  the 
person  executing  it,  to  fill  up  the  blanks  in  his  absence  and 
deliver  the  deed  to  the  person  whose  name  is  inserted  as 
grantee,  when  so  filled  out  and  delivered  is  a  valid  deed.^ 

§  246.  Nebraska. — If  the  owner  of  land  deliver  to  his  agent 
a  deed  thereof,  executed  in  blank  as  to  the  grantee,  with  ex- 
press or  implied  authority  to  insert  the  name  of  the  grantee 
and  perfect  the  conveyance,  and  the  agent  does  so  in  good 
faith,  the  title  will  be  conveyed  and  the  deed  valid.^ 

§  247.  New  Hampshire. — It  is  well-settled  law  that  the  al- 
teration of  a  note  or  other  instrument  by  one  party  without 
the  assent  of  the  other  will  render  void  the  instrument.  There 
may  be  some  question  as  to  the  fact  of  consent,  without  any- 
thing further  in  the  alteration  of  a  deed.  In  all  cases  the 
party  consenting  makes  the  other  his  agent  to  do  the  act  of 
altering  the  instrument,  or  in  effect  his  agent  to  make  a  new 
instrument  in  his  name,  for  that  is  the  effect  of  the  operation. 
"  How  far  the  technical  rule  that  an  attorney  to  execute  and 
seal   an   instrument   must   be   authorized  by  an  instrument 

1  State  V.  Young,  23  Minn.  551,  557.    See,  also,  McClung  v.  Steen,  32  Fed. 
Rep.  373  ;  Pence  v.  Arbuckle,  22  Minn.  417. 

*  Williams  w.  Crutcher,  5  How.  71. 

» Field  r.  Stagg,  52  Mo.  534.    See,  also,  Burnside  v.  Wayman,  49  Mo.  356. 

*  Garland  v.  Wells,  15  Neb.  298. 


CORRECTION    AND    REFORMATION.  265 

under  seal  would  apply  in  such  cases  may  be  a  matter  of 
some  doubt."  But  this  difficulty  does  not  arise  in  the  cases 
of  simple  contracts,  and  the  rule  is  well  settled  that  an  altera- 
tion of  an  instrument  not  under  seal  by  one  party  with  the 
assent  of  the  other,  will  not  render  void  the  instrument/ 

§  248.  New  York. — A  bond  executed  in  blank  as  to  a  ma- 
terial part  with  parol  authority  to  an  agent  to  fill  up  the  blank 
and  to  deliver  it,  is  valid.^ 

So  an  alteration  made  in  a  sealed  instrument  after  execu- 
tion under  parol  authority  does  not  avoid  the  instrument.^ 

But  in  case  no  grantee  is  named  in  the  body  of  the  instru- 
ment, it  is  indispensable  to  prove  the  delivery  in  fact  with  the 
parol  authority  to  fill  the  blank  with  the  name  of  the  grantee. 
The  mere  possession  of  the  mortgage  does  not  imply  a  delivery 
to  a  party  who  inserts  his  own  name  as  grantee.  This  rule 
has  never  been  applied  to  deeds  or  instruments  under  seal.* 

§  249.  North  Carolina. — A  paper  writing  purporting  to  be 
a  bond,  signed  and  sealed  b}'  a  party,  in  which  a  blank  is  left 
for  the  sum  to  be  afterward  inserted,  which  blank  is  after- 
ward filled  up,  and  the  paper  delivered  not  in  the  presence 
of  the  party  signing  and  sealing,  nor  by  any  person  having 
authority  from  him  under  seal,  is  not  a  bond  of  the  party  so 
signing  and  sealing.  He  who  attempts  to  execute  a  deed 
whether  for  money  or  other  property,  as  agent  for  another, 
must  be  armed  with  authority  under  seal.* 

§  250.  Ohio. — A  valid  deed  cannot  be  made  by  writing  it  over 
a  signature  and  seal,  made  upon  a  blank  or  an  empty  sheet  of 
paper.     The  court  says  :  "  We  know  of  no  decision  by  which 

'  Humphreys  v.  Guillow,  13  N.  H.  385. 

*  Ex  parte  Kerwin,  8  Cow.  117,  following  Texira  v.  Evans.  1  Anstr.  228 ; 
WooUey  v.  Constant,  4  Johns.  54,  60. 

'  Knapp  V.  Maltby,  13  Wend.  587  ;  Waring  v.  Smyth,  2  Barb.  Ch.  119. 

*  Chauncey  v.  Arnold,  24  N.  Y.  330,  335.  See,  also,  Woolley  v.  Constant,  4 
Johns.  (N.  Y.)  54 ;  Ex  parte  Decker,  6  Cow.  60. 

^  Graham  v.  Holt,  3  Ired.  L.  300 ;  M'Kee  v.  Hicks,  2  Dev.  379 ;  Davenport  v. 
Sleight,  2  Dev.  &  Brat.  381. 


266  NATURE    AND    REQUISITES    OP    THE    CONTRACT, 

this  ancient  doctrine  is  overruled.  The  cases  cited  by  the 
plaintiff 's  counsel  are  all  promissory  notes  not  under  seal,  and 
of  deeds  where  all  the  material  parts  were  written  at  the  time 
of  making  the  signature  and  seal.  They  are  not  analogous. 
The  authority  to  fill  one  particular  blank  falls  far  short  of 
authority  to  make  an  entire  deed.  While  the  distinction  be- 
tween contracts  under  seal  and  parol  contracts  is  preserved  by 
our  legislation  and  by  our  courts,  the  different  modes  of  exe- 
cuting them  must  be  preserved."  ^ 

§  251.  Oregon. — An  instrument  purporting  to  be  a  mort- 
gage, but  containing  the  name  of  no  mortgagee,  cannot  be 
rendered  valid  by  filling  in  the  name  of  a  mortgagee  by  an 
agent,  to  whom  the  mortgagor  had  delivered  the  paper  with 
instructions  to  fill  the  blank  and  obtain  the  money  from  whom- 
soever would  take  it  and  advance  the  money  thereon.^  But 
parol  authority  is  sufficient  to  authorize  the  filling  of  a  blank 
by  the  insertion  of  the  name  of  the  grantee  in  a  deed,  after  its 
execution,  but  before  delivery.^ 

§  252,  Pennsylvania, — The  early  cases  decided  in  Pennsyl- 
vania were  decided  in  accordance  with  Texira  v.  Evans,  Anstr, 
228,  cited  by  Justice  Wilson  in  Master  v.  Miller,  4  Term  Pep. 
331.*     But  this  doctrine  does  not  seem  to  be  the  rule  now. 

Chief  Justice  Gibson  says  that  the  doctrine  of  deeds  stands 
on  the  principles  of  the  common  law  ;  the  doctrine  of  commer- 
cial instruments  stands  on  the  principles  of  the  law  merchant. 
"  A  deed  is  a  solemn  and  a  formal  act ;  a  commercial  instru- 
ment is  neither  solemn  nor  formal. 

"  A  deed  is  not  intended  for  circulation  or  to  be  subject  to 
alteration  by  the  exigencies  of  trade ;  but  a  promissory  note 
or  a  bill  of  exchange  may  induce  new  responsibilities  while  it 
flits  from  hand  to  hand  as  if  it  were  a  part  of  the  general 

'  Ayres  v.  Harness,  1  Ohio,  .368. 

^  Shirley  v.  Burch,  16  Ore.  83.    See,  also,  Kelley  v.  Bourne,  15  Ore.  476, 
3  Cribben  v.  Deal,  27  Pac.  Rep.  1046. 

♦Wiley  V.  Moor,  17  S.  &  R.  438 ;  Sigfried  v.  Levan,  6  S.  &  R.  308 ;  Stahl  v. 
Berger,  10  S.  &  R.  170. 


CORRECTION    AND    REFORMATION.  267 

currency.  It  is  not  strange,  therefore,  that  a  commercial  and 
a  common-law  security  should  have  different  consequences  in 
respect  of  responsibilities  to  third  persons.  ...  A  decision  in 
the  case  of  a  commercial  instrument,  therefore,  cannot  be  a 
precedent,  for  a  case  like  the  present,"  the  fraudulent  alteration 
of  a  deed.  The  Chief  Justice  says  further  in  regard  to  Texira  v. 
Evans :  "  Mr.  Preston,  the  learned  editor  of  Shepherd's  Touchstone, 
at  page  139,  expresses  a  proper  doubt  of  the  solidity  of  that 
decision,  inasmuch  as  it  is  founded  on  an  assumption  that  a 
man  may  be  bound  by  a  deed  executed  in  his  name  by  an 
attorney  not  constituted  by  deed,  contrary  to  a  fundamental 
rule  of  the  common  law.  That  case  can  be  sustained,  if  at  all, 
only  on  the  ground  that  the  obligor  had  estopped  himself  by 
an  act  in  pais."  ^ 

This  language  clearly  indicates  that  the  doctrine  of  Texira  v. 
Evans  has  been  discarded. 

§  253.  South  Carolina. — The  general  rule  is  that  if  a  blank 
piece  of  paper  be  signed,  sealed,  and  delivered,  and  afterward 
filled  up,  it  is  no  deed,  as  there  is  nothing  of  substance  in  it. 
But  a  deed  executed  with  a  blank  and  afterward  filled  up  and 
delivered  by  the  agent  of  the  party  is  good.^ 

§  254.  Tennessee. — A  paper  signed  and  sealed  in  blank  with 
verbal  authority,  given  at  the  time,  to  fill  up  a  bond,  which  is 
afterward  done,  is  void  as  to  the  party  so  signing  and  sealing, 
unless  redelivered  or  acknowledged  after  it  has  been  filled  up.^ 

>  Wallace  V.  Harmstad,  15  Pa.  St.  462. 

This  point  came  before  the  Court  of  King's  Bench,  in  Texira  v.  Evans, 
cited  and  relied  on  in  Master  v.  Miller,  1  Anst.  228.  The  case  occurred  before 
Lord  Mansfield,  and  was  this :  Evans  wanted  to  borrow  £400,  or  so  much  of 
it  as  his  credit  should  be  able  to  raise  ;  for  this  purpose  he  executed  a  bond, 
with  blanks  for  the  name  and  sum,  and  sent  ani  agent  to  raise  money  on  the 
bonds.  Texira  lent  £200  on  it,  and  the  agent  accordingly  filled  up  the  blanks 
with  that  sum  and  Texira's  name,  and  delivered  the  bond  to  him.  On  non 
eKt  factum  pleaded,  Lord  Mansfield  held  it  a  good  deed  and  valid.  The  early 
decisions  of  the  Pennsylvania  courts  were  in  conformity  to  the  case  of  Texira 
V.  Evans. 

''Duncan  v.  Hodges,  4  McCord,  239 ;  Gourdin  v.  Commander,  6  Rich.  497. 

^Gilbert  v.  Anthony,  1  Yerg.  69. 


268  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

The  authority  to  make  a  deed  cannot  be  verbally  conferred, 
but  must  be  created  by  an  instrument  of  equal  dignity. 

Thus,  an  instrument  under  seal  for  the  payment  of  money, 
which  was  delivered  with  a  blank  to  be  filled  for  the  amount 
thereof  upon  verbal  authority  by  the  obligor  to  another  to  fill 
said  blank — which  was  afterward  done — is  void,  without 
redelivery  or  other  valid  ratification.^  To  authorize  the  execu- 
tion of  a  deed  in  the  name  of  another,  the  authority  must  be 
by  deed,  and  no  previous  verbal  assent,  or  subsequent  adoption, 
will  bind  the  party,  unless  the  deed  is  acknowledged,  ratified, 
and  redelivered.^ 

§  255.  Texas. — When  a  party  delivers  a  deed  duly  executed, 
with  parol  authority  to  fill  the  blanks,  and  this  is  done,  he 
is  estopped  from  denying  its  validity  against  a  subsequent 
purchaser  for  value,  without  notice  of  the  manner  in  which 
the  deed  was  executed.^ 

§  256.  Virginia. — Bills  of  exchange  and  promissory  notes 
are  not  deeds.  Authority  to  execute  them  may  be  given  by 
parol,  or  even  inferred  from  circumstances ;  but  a  deed  cannot 
take  effect  without  delivery,  and  that  delivery  can  only  be 
made  by  the  party  himself,  or  some  attorney  legally  authorized 
by  deed  for  that  purpose.* 

A  paper  perfect  as  a  bond,  except  that  there  is  a  blank  for 
the  name  of  the  obligee,  signed  and  sealed  by  the  obligor,  and 
put  into  the  hands  of  a  third  party  for  the  purpose  of  borrow- 
ing money  upon  it,  and  filled  up  by  the  party  holding  it  with 
the  name  of  one  loaning  the  money  upon  it,  is  not  the  bond 
of  the  obligor.^ 

§  257.  Wisconsin. — Where  a  note  and  mortgage,  otherwise 
fully  executed,  except  that  a  blank  is  left  for  the  name  of  the 

1  Mosby  V.  State,  4  Sneed,  324. 

^  Smith  V.  Dickinson,  6  Humph.  261.     See,  also,  Turbeville  v.  Ryan,  1 
Humph.  113. 
'Ragsdale  v.  Robinson,  48  Tex.  379. 
*  Harrison  v.  Tiernans,  4  Rand.  177. 
»  Preston  v.  Hull,  23  Gratt.  600. 


CORRECTION    AND    REFORMATION.  269 

payee  and  mortgagee,  are  delivered  to  an  agent  who  is  to  pro- 
cure, from  whomsoever  he  can,  a  loan  of  money  thereon  for  the 
maker,  it  shows  an  intention  that  the  agent  should  fill  the 
blanks,  and  when  so  filled  the  instruments  are  valid  without 
a  new  execution  and  delivery.^ 

Article  2. 
Alterations. 

I  258.  Material  Alterations.  I  262.  Alteration  by  a  Stranger. 

^  259.  IMaterial    Alteration    of    Note,  I  263.  Estoppel. 

Without    Fraudulent  Intent,  I  264.  The    Terms  of    a    INIortgage 
Does  Not  Affect  the  Mortgage.  May  be  Varied  by  a  Contem- 

§  260.  Immaterial  Alterations.  poraneous  Written  Agree- 

§  261.  Erasure      and      Addition      of  ment. 

Names. 

§  258.  Material  Alterations. — A  material  alteration  of  a 
mortgage  after  its  execution  will  avoid  it  as  to  the  party  who 
does  not  consent  to  such  alteration.^  Thus  an  alteration  of  a 
written  agreement  which  enlarges  the  liability  of  the  maker,  is 
a  material  alteration  which  avoids  the  instrument."  So  the 
unauthorized  and  material  alteration  of  a  mortgage  by  the 
mortgagee,  or  with  his  privity  after  execution,  unexplained,  is 
presumptively  fraudulent,  and  vitiates  the  instrument.  It  re- 
mains executory  until  foreclosure,  and,  like  other  contracts, 
may  be  defeated  by  such  alterations.* 

The  general  rule  is  that  a  recovery  is  not  permitted  in  any 
form  of  action  where  the  holder  of  a  written  security  or  evi- 
dence of  debt,  has  altered  or  changed  the  instrument  in  a  ma- 
terial part  to  his  own  advantage  and  with  intent  to  defraud 
his  debtor.     Thus,  when  a  holder  of  a  bill  or  note  fraudulently 

'  Van  Etta  v.  Evenson,  28  Wis.  33  ;  Vliet  v.  Camp,  13  Wis.  198 ;  Schintz  v. 
McManamy,  33  Wis.  299. 

''  Walton  Plow  Co.  v.  Campbell  (Nebr.),  52  N.  W.  Rep.  883  ;  Coles  r.  Yorks, 
28  Minn.  464. 

^  White  V.  Johns,  24  Minn.  387. 

*  Waring  v.  Smyth,  2  Barb.  Ch.  (N.  Y.)  119;  Marcy  v.  Dunlap,  5  Lans. 
(N.  Y.)  365 ;  Meyer  v.  Huneke,  55  N.  Y.  412 ;  Osgood  v.  Stevenson,  143  Mass. 
399 ;  Russell  v.  Reed,  36  Minn.  376. 


270  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

alters  its  legal  effect,  he  not  only  destroys  the  instrument  by 
thus  destroying  its  legal  identity,  but  he  also  extinguishes  the 
debt  for  which  it  was  executed  and  delivered.^  And,  indeed, 
it  has. been  held  that  where  the  alteration  was  a  material  one, 
not  only  was  the  instrument  avoided,  but  the  original  consid- 
eration forfeited,  without  inquiry  as  to  the  intent.^ 

The  holder  of  a  note  or  bill  which  has  been  altered  in  a 
material  part  must  be  required  to  show  that  the  change  was 
made  innocently,  or  for  a  proper  purpose,  or  by  a  stranger. 
The  party  in  default,  and  who  ordinarily  must  have  knowledge 
of  all  the  circumstances  attending  the  alteration,  must  bear  the 
burden  of  explaining  it  and  of  extricating  himself  from  his 
position.^  So  the  unauthorized  and  material  alteration  of  a 
mortgage  by  the  mortgagee,  or  with  his  privity  after  execution, 
unexplained,  is  presumptively  fraudulent,  and  vitiates  the  in- 
strument.* 

An  unauthorized  alteration  of  a  non-negotiable  promis- 
sory note  by  the  payee,  after  the  execution  thereof,  by  the 
insertion  of  the  word  "  bearer  "  after  the  name  of  the  payee, 
is  a  material  alteration  which  will  nullify  the  instrument,  and 
such  fraudulent  alteration  of  a  note  secured  by  a  mortgage, 
cancels  the  debt  which  it  evidenced  and  discharges  the 
mortgage.^ 

The  mortgagee  or  payee  not  only  loses  his  right  of  action  on 
the  note,  but  on  the  mortgage  also ;  ^  however,  if  the  alteration, 

'  Daniel  on  Neg.  Inst.,  sect.  1410  a;  Rand.  Com.  Paper.,  sect.  1763  ;  Chalm. 
Dig.  Bills  and  Notes,  art.  249 ;  Chitty  on  Bills,  100  q.  Compare  Matteson  v. 
Ellsworth,  33  Wis.  488. 

'^  Daniel  on  Neg.  Inst.,  sect.  1411,  and  cases  cited. 

3  Daniel  on  Neg.  Inst.,  sects.  1412, 1413  ;  Rand.  Com.  Paper,  sect.  1785  ;  Mil- 
bery  v.  Storer,  75  Me.  69  ;  Croswell  v.  Labree,  81  Me.  44 ;  Robinson  v.  Reed, 
46  Iowa,  219. 

*  Russell  V.  Reed,  36  Minn.  376. 

*  Walton  Plow  Co.  v.  Campbell  (Nebr.),  52  N.  W.  Rep.  883.  See,  also,  Booth 
V.  Powers,  56  N.  Y.,  22  ;  Croswell  v.  Labree,  81  Me.  44  ;  McCauley  r.  Gordon, 
64  Ga.  221 ;  Morehead  v.  Bank,  5  W.  Va.  74 ;  Needles  v.  Shaffer,  60  Iowa, 
65 ;  Union  Nat.  Bank  v.  Roberts,  45  Wis.  373. 

8  Sherman  v.  Sherman,  3  Ind.  337;  Tate  ?>.  Fletcher,  77  Ind.  102.  Com- 
pare Gillett  V.  Powell,  Speers  Eq.  (S.  Car.)  144 ;  Plyler  v.  Elliott,  19  S.  Car. 
257  ;  Smith  v.  Smith,  27  S.  Car.  166. 


I 


CORRECTION    AND    REFORMATION.  271 

although  material,  is  not  made  with  a  fraudulent  purpose,  it 
will  not  have  this  effect/ 

§  259.  Material  Alteration  of  Note,  Without  a  Fraud- 
ulent Intent,  Does  Not  Affect  the  Mortgage. — The  altera- 
tion of  a  note  in  a  material  part  without  a  fraudulent  intent, 
by  increasing  the  rate  of  interest,  and  making  it  joint  or 
several  makes  the  note  void ;  but  the  mortgage  securing  the 
note  is  not  thereby  avoided,  and  may  be  enforced.^'  Thus, 
when  one  executes  a  mortgage  which  makes  no  mention  of  the 
bond  which  was  given,  and  had  been  altered,  it  was  held, 
although  the  alteration  in  the  bond  rendered  it  void,  yet  this 
did  not  affect  the  mortgage  which  must  be  taken  as  evidence 
of  the  debt.^ 

§260.  Immaterial  Alterations. — An  immaterial  altera- 
tion of  a  mortgage,  or  other  instrument,  that  does  not  affect 
the  legal  sense  of  the  instrument,  does  not  avoid  it.*  Thus,  a 
mortgage  executed  by  husband  and  wife  of  her  land,  for  the 
accommodation  of  a  partnership  of  which  the  husband  is  a 
member,  and  as  security  for  the  payment  of  a  negotiable 
promissory  note  made  by  the  husband  to  his  partner,  and  in- 
dorsed by  the  partner  for  the  same  purpose,  and  to  which  note 
the  partner,  before  negotiating   it,  adds  the  wife's  name   as 

» Vofrle  V.  Ripper,  34  111.  100 ;  Elliott  v.  Blcair,  47  111.  342.  See,  also,  New- 
ell V.  Mayberry,  3  Leigh  (Va.),  250;  Martcndale  v.  Follet,  1  N.  H.  95; 
Smith  V.  Mace,  44  N.  H.  553  ;  Bigelow  r.  Stilphen,  35  Vt.  521 ;  Whitmer  v. 
Frye,  10  Mo.  349 ;  Waring  v.  Smyth,  2  Barb.  Ch.  (N.  Y.)  135 ;  Warder  v. 
Willyard,  46  Minn.  531. 

*  Heath  v.  Blake,  28  S.  Car.  406. 

'Gillett  V.  Powell,  Speers  Eq.  (S.  Car.)  144.  See,  also,  Plyler  v.  ElHott,  19 
S.  Car.  264 ;  Smith  v.  Smith,  27  S.  Car.  166 ;  Ford  v.  Grey,  1  Salk.  286 ;  Price 
V.  Copner,  1  Sim.  &  St.  347 ;  Hoddle  v.  Healy,  6  Mod.  181 ;  Daly  v.  Kelly,  4 
Dow.  435.  In  connection  with  this  consult  Mersman  v.  Werges,  112  U.  S. 
139 ;  Kennedy  v.  Ross,  25  Pa.  St.  256. 

*Burlingame  v.  Brewster,  79  111.  415;  State  r.  Riebe,  27  Minn.  315;  Robert- 
son V.  Hay,  91  Pa.  St.  242 ;  Nickerson  ?•.  Swett,  135  Mass.  514  ;  Harvester  Co. 
V.  McLean,  57  Wis.  258 ;  Kline  v.  Raymond.  70  Ind.  271 ;  Black  v.  Cobb,  64 
Ala.  127  ;  Littlefield  v.  Coombs,  71  Me.  110 ;  Murray  v.  Graham,  29  Iowa,  520 ; 
McRaven  v.  Crisler,  53  Misa.  542  ;  McIMichael  v.  Bankston,  24  La.  Ann.  451 ; 
AVhite  V.  Fox,  29  Conn.  570. 


272  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

maker,  without  the  coDsent  or  knowledge  of  herself  or  her 
husband,  is  not  thereby  avoided  as  against  one  who,  in  igno- 
rance of  the  note  having  been  so  altered,  lends  money  to  the 
partnership  upon  the  security  of  the  note  and  mortgage. 

Justice  Gray  says  that  the  note,  though  in  form  made  by  the 
husband  to  his  partner,  and  indorsed  by  the  partner,  was  with- 
out consideration  as  between  them,  and  was  in  ftict  signed  by 
both  of  them  for  the  benefit  of  the  partnership.  The  mortgage 
of  the  wife's  land  was  executed  and  delivered  by  her  and  her 
husband  to  the  partner  for  the  same  purpose.  The  name  of 
the  wife  was  signed  to  the  note  by  the  partner,  or  by  his  pro- 
curement, before  it  was  negotiated  for  value.  The  plaintiff 
received  the  note  and  mortgage  from  the  partner,  and  advanced 
his  money  upon  the  security  thereof,  in  good  faith,  and  in 
ignorance  that  the  note  had  been  altered.  If  the  wife  had 
herself  signed  the  note,  she  would  have  been  an  accommoda- 
tion maker,  and,  in  equity  at  least,  a  security  for  the  other 
signers ;  and  neither  the  liability  of  the  husband  as  maker  of 
the  note,  nor  the  effect  of  the  mortgage  executed  by  the  wife, 
as  well  as  by  the  husband,  to  secure  the  payment  of  that  note 
would  have  been  materially  altered  by  the  addition  of  his 
signature.  Therefore,  the  plaintiff,  as  indorsee  of  the  note, 
seeking  no  decree  against  the  wife  personally,  should  enforce 
the  note  against  the  husband,  and  the  mortgage  against  the 
land  of  the  wife.^ 

A  material  alteration  of  a  note,  before  its  deliveryto  the 
payee,  by  one  of  two  joint  makers,  without  the  consent  of  the 
other,  makes  it  void  as  to  him  ;  and  any  change  which  alters 
the  defendant's  contract,  whether  increasing  or  diminishing 
his  liability,  is  material,  and  therefore  the  substitution  of  a  later 
date,  delaying  the  time  of  payment,  is  a  material  alteration.^ 

§  261.  Erasure  and  Addition  of  Names. — An  erasure  of 
the  name  of  one  of  several  obligors  is  a  material  alteration  of 

^  Mersmann  v.  Werges,  112  U.  S.  139. 

''Wood  V.  Steele,  6  Wall.  (U.  S.)  80.  See,  also,  Greenfield  Savings  Bank  v. 
Stowell,  123  Mass.  196. 


CORRECTION    AND    REFORMATION.  273 

the  contract  of  the  others,  because  it  increases  the  amount 
which  eacli  of  them  may  be  held  to  contribute.'  The  addi- 
tion of  a  new  person  as  a  principal  maker  of  a  promissory  note 
is  held  by  some  authorities  to  be  a  material  alteration.^ 

The  American  authorities  hold  with  great  unanimity  that 
the  addition  of  the  name  of  a  surety,  whether  before  or  after 
the  first  negotiation  of  the  note,  is  not  such  an  alteration  as 
discharges  the  makor.^ 

On  the  other  hand,  an  English  decision  holds  a  different 
view,  and  it  was  held  that  the  signing  of  a  note  by  an  addi- 
tional surety,  without  the  consent  of  the  original  makers,  pre- 
vented the  maintenance  of  an  action  on  the  note  against  them.* 
But  an  earlier  decision  held  that  in  such  a  case  the  addition 
did  not  avoid  the  note  or  prevent  the  original  surety,  on  pay- 
ing the  note,  from  recovering  of  the  principal  maker  the 
amount  paid.^ 

So,  when  a  person  executes  a  bond  as  surety,  and  leaves  it 
with  his  principal  for  delivery  to  the  obligee,  and,  before  do- 
ing so,  the  former  procures  a  person  to  attest  the  signature  of 
the  surety  who  is  not  authorized  to  do  so,  such  attestation  is  not 
an  alteration  of  the  instrument  that  impairs  or  affects  its  value 
as  an  instrument  of  evidence  in  the  hands  of  the  obligee,  be- 
cause it  was  made  before  delivery.^ 

It  has  been  held  by  some  courts  that  an  immaterial  altera- 
tion, with  fraudulent  intent  even,  will  not  avoid  the  instru- 
ment.^    But  this  is  not  in  accord  with  other  courts.^ 

'  Martin  v.  Thomas,  2-i  How.  (U.  S.)  315  ;  Smith  v.  United  States,  2  Wall. 
(U.  S.)  219. 

=  Shipp  V.  Snggett,  9  B.  Mon.  (Ky.)  5  ;  Henry  r-.  Coats,  17  Ind.  161 ;  Wallace 
v.  Jewell,  21  Ohio  St.  163 ;  Hamilton  r.  Hooper,  46  Iowa,  515. 

=*  Miller  v.  Flnley,  26  Mich.  249 ;  Wallace  v.  Jewell,  21  Ohio  St.  163,  172  ; 
Montgomery  Eailroad  v.  Hurst,  9  Ala.  513  ;  Stone  v.  White,  8  Gray  (Mass.), 
589;  Brownell  v.  Winnie,  29  N.  Y.  400  ;  McCaughey  v.  Smith,  27  N.  Y.  39. 

*  Gardner  v.  Walsh,  5  El.  &  Bl.  83. 

^Catton  r.  Simpson,  8  Ad.  &  El.  136 ;  Ex  parte  Yates,  2  DeG.  &  J.  191. 

«Hall  V.  Weaver,  34  Fed.  Rep.  104. 

'Booth  V.  Powers,  56  N.  Y.  22. 

^Morrison  v.  Garth,  78  Mo.  4.34  ;  Turner  v.  Billagram,  2  Cal.  523  ;  German 
Bank  V.  Dunn,  62  Mo.  79. 

VOL.  I.— 18 


274  NATURE    AND    REQUISlfES    OF    THE    CONTRACT. 

§  262.  Alteration  by  a  Stranger. — An  alteration  by  a 
anere  stranger  without  the  knowledge  or  consent  of  the  holder, 
;and  while  out  of  his  custody  does  not  destroy  or  annul  the  in- 
istrument.^ 

This  is  the  rule,  that  if  the  alteration,  although  material,  is 
made  hy  a  stranger  to  the  contract,  it  will  not  have  the  effect 
of  invalidating  the  instrument,  as  between  the  parties  to  it." 

§  263.  Estoppel. — Any  one  invoking  the  aid  of  estoppel 
must  show  that  he  has  not  been  negligent  in  the  performance 
of  his  duty,  and  has  used  diligence  in  protecting  his  own  rights 
and  has  perpetrated  no  fraud. 

Where  a  mortgage  was  executed  in  blank  by  a  husband  and 
wife,  and  then  changed  without  the  knowledge  or  consent  of 
the  wife,  and  the  husband  received  the  money  loaned,  and 
with  it  paid  a  prior  mortgage  on  the  land  attempted  to  be 
mortgaged  by  such  second  mortgage,  and  the  mortgagee, 
through  his  agent,  was  fully  cognizant,  at  the  time  he  parted 
with  his  money  and  received  the  mortgage,  of  the  manner  in 
which  the  mortgage  was  executed,  the  wife  is  not  estopped 
from  claiming  that  the  mortgage  is  not  her  mortgage,  and  the 
mortgage  is  void  as  to  her.  Because  she  receives  an  involun- 
tary benefit,  which  is  received  with  her  knowledge  or  procur- 
ation, she  is  not  estopped  from  denying  the  validity  or  legality 
of  the  mortgage  as  to  herself.^ 

But  where  a  mortgagor  conveyed  premises  by  way  of  mort- 
gage, and  the  premises  were  afterward  sold  under  execution 
issued  on  a  judgment,  which  became  a  lien  prior  to  such  mort- 

*  Marcy  v.  Dunlap,  5  Lans.  (N.  Y.)  365. 

2  Hunt  V.  Gray,  35  N.  J.  L.  227  ;  Cochran  v.  Nebeker,  48  Ind.  459 ;  Bellows 
V.  Weeks,  41  Vt.  590 ;  Crockett  v.  Thomason,  5  Sneed  (Tenn.),  342,  344 ;  Nich- 
ols V.  Johnson,  10  Conn.  192  ;  Murray  v.  Graham,  29  Iowa,  520 ;  Ford  v.  Ford,  17 
Pick.  (Mass.)  418;  Union  Nat.  Bank  v.  Roberts,  45  Wis.  373;  NefFr.  Horner, 
63  Pa.  St.  327 ;  Bridges  v.  Winters,  42  Miss.  135  ;  Bigelow  v.  Stilphen,  35  Yt. 
521. 

A  stranger  signing  a  note  as  a  witnes.s  is  an  immaterial  alteration  :  Church 
V.  Towle,  142  Mass.  12.  An  alteration  of  an  instrument  by  an  officer  who 
is  merely  the  custodian  of  it,  will  not  invalidate  it :  State  v.  Berg,  84  Ind.  183. 

'  Ayres  v.  Probasco,  14  Kan.  175. 


CORRECTION    AND    REFORMATION,  275 

gage,  and  afterward  the  mortgagor  receives  title  to  the  mort- 
gaged premises,  through  the  title  created  by  the  sale  under 
execution,  he  is  estopped  by  the  covenants  in  his  mortgage 
deed  from  claiming  any  interest  in  the  premises  as  against  the 
mortgage.^ 

So  if  a  mortgagee  in  possession,  under  an  unrecorded  mort- 
gage, willfully  refuses  information  honestly  and  properl}-  asked 
of  him  in  regard  to  his  interest,  he  will  be  estopped  from  set- 
ting up  his  mortgage  to  the  injury  of  him  to  whom  he  refused 
information.^ 

Objection  that  a  deed  was  executed  in  blank,  and  the  gran- 
tee's name  inserted  after  delivery,  can  only  be  taken  by  the 
grantor,  or  by  some  one  claiming  through  him  or  in  his  right.^ 

§  264.  The  Terms  of  a  Mortgage  may  be  Varied  by  a 
Contemporaneous  Written  Agreement. — The  terms  of  the 
mortgage  may  be  varied  by  a  contemporaneous  written  agree- 
ment. Thus,  a  trustor  executed  a  deed  of  trust  to  a  trustee, 
conveying  lands  to  secure  the  payment  of  a  debt  of  $300,  with 
interest  from  the  date.  The  deed  of  trust  provided  that  if  the 
debts  therein  named  were  not  paid  within  one  year,  that  the 
trustee  should  sell  the  land  at  public  auction  to  pay  the  debt. 
On  the  same  day  the  deed  of  trust  was  executed,  the  beneficiary 
executed  to  the  trustor  a  writing,  agreeing  that,  if  he  did  not 
succeed  in  performing  a  certain  dut}^  for  the  trustor,  then  the 
note  embraced  in  the  trust  deed  was  to  be  void  and  of  no  ac- 
count ;  or,  if  he  succeeded  in  performing  part  of  the  work 
specified,  then  the  trust  deed  was  to  be  void  as  to  half  of  the 
amount.  It  was  held  that  this  written  agreement  and  the 
trust  deed  must  be  construed  together.* 

But  the  terms  of  a  mortgage  cannot  be  varied  by  a  verbal 
agreement,  because  a  contract  cannot  rest  partly  in  writing 
and  partly  in  parol.  Thus,  a  stipulation  by  which  a  mort- 
gagor's equity  of  redemption  was  to  be  cut  off  upon  failure  to 

■  "Wells  V.  Somers,  4  111.  App.  297. 

'Riley  v.  Qnipley,  50  111.  .304. 

'McNab  V.  Young,  81  111,  11, 

^  Pitzer  V.  Bums,  7  W,  Va.  68,  opinion  by  Haymond,  President. 


276  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

perform  a  condition  by  a  particular  time  is  void.  Oral  evi- 
dence of  what  occurred  and  of  what  was  said  at  or  even  before 
the  execution  of  the  mortgage  is  inadmissible  in  evidence.^ 

So,  an  objection  to  the  terms  of  a  mortgage  by  the  mort- 
gagor before  signing  that  it  included  property  which  he  desired 
to  reserve  and  use  in  paying  a  debt  to  another,  cannot  vary  the 
legal  effect  of  the  mortgage.^ 

Article  3. 

Reforming  the  Mortgage. 

I  265.    What   Mistakes  can  be    Cor-  §  268.  Innocent  Purchasers. 

rected — In  General.  §  269.  Lost  Mortgage. 

?  266.    Description.  §  270.  Evidence. 
I  267.    Parties  to  the  Conveyance. 

§  265.  What  Mistakes  can  be  Corrected — In  General. 
— Courts  of  equity  have  jurisdiction  to  correct  mistakes  in 
mortgages  when  the  rights  of  third  parties  have  not  intervened. 
Where  a  mortgage  is  drawn  and  executed,  which  is  intended 
to  carry  into  execution  a  previous  agreement,  but  which  by 
mistake  of  the  draughtsman,  either  as  to  law  or  fact,  does  not 
fulfill  that  intention,  or  violates  it,  equity  will  correct  the  mis- 
take so  as  to  conform  to  the  intention  between  the  parties.  So 
where  a  mortgage  is  not  technical  to  express  the  intention,  but 
there  is  no  difficulty  in  reforming  the  instrument  to  conform 
to  the  intention  of  the  parties,  as  it  is  apparent  on  the  face  of 
the  deed,  supported  by  the  parol  proof  of  the  agreement  and 

'  QuartermouH  v.  Kennedy,  29  Ark.  544. 

2  Patterson  v.  Taylor,  15  Fla.  336. 

In  Qiiartermous  v.  Kennedy,  29  Ark.  544,  it  is  rightly  held  that  a  verbal 
contract  cannot  vary  a  written  one.  As  to  releasing  the  equity  of  redemp- 
tion, neither  a  verbal  or  written  contract  is  sufficient  to  discharge  the  mort- 
gagor's right  of  redemption,  M'hen  such  right  exists.  "  So  inseparable,  in- 
deed, is  the  equity  of  redemption  from  the  mortgage  that  it  cannot  be  dis- 
annexed  even  by  an  express  agreement  of  the  parties.  If,  therefore,  it  should 
be  expressly  stipulated  that  unless  the  money  should  be  paid  at  a  particular 
day,  or  by  or  to  a  particular  person,  the  estate  should  be  irredeemable,  the 
stipulation  would  be  utterly  void."  2  Story  Eq.  Jur.  1019.  This  is  the  law 
as  uniformly  held  by  all  the  courts. 


CORRECTION    AND    REFORMATION.  277 

understanding  of  the  parties,  the  necessary  correction  will  be 
made.  But  such  reformation  will  not  be  made  where  it  would 
prejudice  a  subsequent  judgment  creditor  or  other  third  party.^ 

Thus,  where  a  draughtsman  in  drawing  a  mortgage  on  land 
of  a  corporation,  made  it  to  the  mortgagee  and  his  "  succes- 
sors," it  was  reformed  to  his  "  heirs."  ^  So  when  part  of  the 
lands  agreed  to  be  mortgaged  is  omitted  from  the  de- 
scription in  the  mortgage.^  Or  if  land  is  included  not  owned 
by  the  mortgagor.*  Or  a  mistake  in  the  condition  of  the 
mortgage.^ 

If  the  deed  is  valid  as  it  stands,  the  court  will  not  correct  a 
mere  error  of  statement  as  to  the  origin  of  the  mortgagor's 
title.^  Where  the  omission  of  the  name  of  the  mortgagee  is  a 
mere  oversight,  a  court  will  reform  the  mortgage  by  inserting 
the  name.^ 

When  two  minds  come  together  and  agree  on  the  terms  of 
a  contract,  and  a  mistake  is  made,  not  in  the  terms  agreed,  but 
in  their  expression,  or  the  memorial  made  and  kept  to  furnish 
evidence  of  the  contract,  chancery,  as  a  rule,  will  reform  the 
memorial  or  evidence  so  as  to  make  it  express  their  general 
agreement.     This  is  the  general  rule.^ 

Courts  of  chancery  will  lend  their  aid,  for  the  correction  of 
mistakes  in  writen  instruments,  to  the  original  parties  thereto, 
and  to  all  those  claiming  under  them  in  privity.* 

Where  a  deed,  in  describing  a  mortgage  assumed  by  the 

'  Wheeler  v.  Kirtland.  23  N.  J.  Eq.  13 ;  24  N.  J.  Eq.  552. 

*  McMillan  v.  N.  Y.  Water  Proof  Paper  Co.,  29  N.  J.  Eq.  610.  See,  also, 
Huyler  t;.  Atwood,  26  N.  J.  Eq.  504 ;  Slsson  v.  Donnelly,  26  N.  J.  Eq.,  432 ; 
Anderson  v.  Baughman,  7  Mich.  69 ;  Mendenhall  v.  Steckel,  47  Md.  453 ; 
Loomis  V.  Hudson,  18  Iowa,  416. 

'Blodgett  V.  Hobart,  18  Vt.  414;  Hunt  v.  Hunt,  38  Mich.  161. 

*  Ruhling  V.  Hackett,  1  Nev.  360. 

'Wooden  v.  Haviland,  18  Conn.  101  ;  Manatt  v.  Starr,  72  Iowa,  677. 

*  Hathaway  v.  Juneau,  15  Wis.  262. 

'  Parlin  i:  Stone,  1  INIcCrary,  C.  C.  443. 

*  Alexander  v.  Caldwell,  55  Ala.  517  ;  Berry  r.  Webb,  77  Ala.  507  ;  Houston 
I'.  Faul,  86  Ala.  232;  1  Story's  Eq.  Jur.,  sect.  16-5;  Pom.  Eq.  852  et  seq.; 
Graham  v.  Berryman,  19  N.  J.  Eq.  29  ;  Conover  v.  Wardell,  22  N.  J.  Eq.  492  ; 
Rowley  v.  Flannelly,  30  N.  J.  Eq.  612. 

"East  V.  Peden,  108  Ind.  92  ;  Keister?;.  Myers,  115  Ind.  312. 


278  NATURE    AND    KECiUISITES    OF    THE    CONTRACT. 

grantee,  gives  the  date  and  the  amount,  but  recites  that  it  was 
executed  by  the  grantor,  whereas  it  was  by  the  grantor's 
grantor,  and  there  is  no  other  mortgage  of  like  amount  and 
date,  parol  evidence  is  admissible  to  apply  the  covenants  of 
■the  mortgage,  and  a  reformation  of  the  covenants  is  not  neces- 
sary/ 

Where  the  certificate  of  acknowledgment  of  an  instrument  ^ 
identifies  the  party  as  known  to  the  officer  to  be  the  person 
who  executed  the  same,  a  variance  in  spelling  the  name  of 
such  party  as  appearing  in  the  instrument,  in  the  certificate 
will  be  presumed  to  be  a  clerical  error  merely,  and  will  not . 
vitiate  the  acknowledgment.^ 

§  266.  Description. — On  the  same  principle,  courts  of  equity 
will  lend  their  aid  to  correct  descriptions  in  a  mortgage  deed. 
So  a  mortgage  duly  executed  may  be  reformed  as  to  the  de- 
scription of  the  property  conveyed.^  Thus,  a  description  of  an 
undivided  one-third  of  a  tract  of  land  may  be  corrected  so  as 
to  include  the  whole  tract,  when  this  was  the  agreement  of  the 
parties  to  the  instrument.*  So  when  lands  are  incorrectly  de- 
scribed in  a  conveyance  through  the  mistake  on  the  part  of 
the  draughtsman,  both  of  the  parties  knowing  the  particular 
tract  intended  to  be  conveyed,  the  correction  will  be  made  of 
this  mistake.^  So  where  it  is  shown  that  the  description  was 
copied  from  the  deed  of  a  mortgagor,  but  by  mistake  the  ex- 
cepted lands  were  described  instead  of  those  granted,  the  mort- 
gage deed  will  be  reformed.^ 

The  mistake  to  be  corrected  must  be  such  that  the  deed  fails 
to  express  what  was  intended  and  agreed  upon  by  both  par- 
ties.^    The  court,  however,  in  reforming  a  mortgage  will  not 

>  New  York  Life  Ins.  Co.  v.  Aitkin,  125  N.  Y.  G60. 

2Rodes  V.  St.  Anthony,  etc.,  Co.  (Minn.),  52  N.  W.  Rep.  27.    See,  also, 
Rogers  v.  Manley,  47  Minn.  403. 
'Snellv.Snell,  123  111.  403. 

*  Keister  v.  Myers,  115  Ind.  312. 

*  Houston  V.  Faul,  86  Ala.  232.     See,  also,  Witherington  v.  Mason,  80  Ala. 
345. 

«Tichenor  v.  Yankey,  89  Ky.  508. 

'  Barker  v.  Harlan,  3  Lea  (Tenn.),  505. 


i 


CORRECTION    AND    REFORMATION.  279 

make  a  contract  for  the  parties.^  When  the  terms  used  in  the 
description  contained  in  a  deed  or  mortgage  are  clear  and  in- 
telligible, the  court  will  put  a  construction  on  the  terms,  and 
parol  evidence  is  not  admissible  to  control  the  legal  effect  of 
such  description.^  But  when  the  description  is  uncertain  and 
ambiguous,  parol  evidence  will  be  admissible  to  fit  the  descrip- 
tion to  the  thing  described,  but  not  to  add  to  or  change  the 
words  of  the  description.^ 

§  267.  Parties  to  the  Conveyance. — It  is  settled  by  uni- 
form current  of  decisions  that,  as  between  the  parties,  mistakes 
in  a  mortgage  may  be  reformed ;  *  and  on  general  principles  of 
jurisprudence,  courts  of  equity  will  interfere  to  correct  mis- 
takes, not  only  between  the  original  parties,  but  also  those 
claiming  under  them  in  privity,  as  heirs,  legatees,  devisees,  as- 
signees, voluntary  grantees,  judgment  creditors,  or  purchasers 
from  them,  with  notice  of  the  facts.^  Because  there  is  a  clear 
equity  in  favor  of  the  vendee  or  mortgagee,  as  the  case  may 
be,  as  against  his  mortgagor  or  vendor,  on  the  ground  of 
which  a  court  of  equity  will  interfere  to  correct  the  mistake  ; 
because  a  judgment  or  execution  creditor  of  such  vendor  or  mort- 
gagor, with  notice  of  such  equity,  or  a  purchaser  at  a  sale 
under  execution,  with  like  notice,  stands  in  the  shoes  of  the 
vendor  or  mortgagor,  and  so  can  have  no  better  right  or  higher 
claim  than  the  debtor  himself  would  be  permitted  to  assert.® 
Though  the  parties  understood  what  language  was  contained 
in  the  deed,  if  they  believe  the  description  corresponded  with 
the  actual  boundaries  of  the  land  intended  to  be  conveyed  and 
were  mistaken,  a  cause  for  reformation  is  made  out.^     The 

'  Marcy  v.  Dunlap,  5  'Lam.  (N.  Y.)  365,  370. 

'Waterman  v.  Johnson,  13  Pick.  (Mass.)  261 ;  Bond  v.  Fav,12  Allen  (Mass.), 
86. 
•■•  Radford  v.  Edwards,  88  N.  Car.  .347  ;  Meier  v.  Kelly,  20  Ore.  86. 

*  Davenport  r.  Sovill,  6  Ohio  St.  459. 

*  Strang  v.  Beach,  11  Ohio  St.  283;  Simmons  v.  North,  3  Sm.  &  M.  (Miss.) 
67 ;  Wall  r.  Arrington,  13  Ga.  88  ;  ^Vhite  v.  Wilson,  6  Blakcf.  (Ind.)  448. 

*  Strang  r.  Beach,  11  Ohio  St.  283,  289 ;  East  v.  Peden,  108  Ind.  92. 

'  Baker  r.  Pyatt,  108  Ind.  61,  70;  Bush  v.  Hicks,  60  N.  Y.  298;  Burr  v. 
Hutchinson,  61  Me.  514. 


280  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

mortgagor  cannot  ask  for  relief  in  correcting  a  mistake  in 
answer  to  a  bill  to  foreclose.  He  must  file  a  cross-bill  for  that 
purpose.^ 

The  mortgagee  may  have  a  mistake  corrected  after  sale,  he 
having  purchased  the  land.^ 

Judge  Fenner  says  when  parties  reduce  their  contracts  to 
writing,  and  when  the  terms  of  the  writing  exhibit  no  uncer- 
tainty or  ambiguity  as  to  the  nature,  the  object,  and  the  extent 
of  the  engagement,  it  is  presumed  that  the  writing  expresses 
the  true,  full,  and  complete  undertaking  of  the  parties.  Equity 
may  reform  and  correct  a  mortgage  unambiguous  on  its  face 
on  clear  proof  that  through  fraud  or  error,  the  mortgage 
deed  has  been  made  to  express  a  different  purpose  from  that 
which  the  parties  had  agreed  on  and  had  intended  to  embody 
therein ;  but  to  support  relief  there  must  be  clear  proof  of  the 
antecedent  contract  and  of  the  error  in  committing  it  to  writing.^ 

Where  a  deed  of  trust  omits  lands  accidentally,  which  were  to 
be  mortgaged,  the  mortgagee  is  entitled  to  have  it  reformed  as 
against  the  widow  and  heir  of  the  grantor,  and  a  subsequent 
purchaser  of  the  land  with  notice  of  the  mortgagee's  rights.* 
A  mistake  in  the  mortgage  of  a  married  woman  as  to  the  de- 
scription of  the  lands  merely  may  be  reformed.^ 

When  the  language  is  equivocal  or  ambiguous,  it  is  con- 
strued most  strongly  against  the  mortgagor,  and  in  a  manner 
to  make  the  mortgage  a  valid  and  binding  security,  because 
the  mortgagor  is  supposed  to  make  his  own  selection  of  words 
and  terms  in  drawing  the  mortgage.^ 

"  There  is  no  doubt  that  the  intention  is  the  object  to  be 
sought  for  in  construction.  And  to  get  at  that,  the  situation 
of  the  parties  and  the  nature  and  object  of  tlieir  transactions 
may  be  looked  at.     But  it  must  be  borne  in  mind  that  it  is 

» French  v.  Griffin,  18  N.  J.  Eq.  279. 

'  Davenport  v.  Sovil,  6  Ohio  St.  459.    See,  also,  Alexander  v.  Eea,  50  Ala. 
450 ;  Greeley  v.  Decottes,  24  Fla.  475 ;  Miller  v.  Kolb,  47  Ind.  220. 
'  Ker  V.  Evershed,  41  La.  Ann.  15. 
*Brinson  v.  Berry  (Miss.),  7  S.  Eep.  322. 

*  Carper  v.  Munger,  62  Ind.  481.     Compare  Petesch  v.  Hambach,  48  Wis.  443. 
"Jerome  v.  Hopkins,  2  Mich.  9G,  100;  Stuart  v.  "Worden,  42  Mich.  154. 


CORRECTION    AND    REFORMATION,  281 

not  the  business  of  construction  to  look  outside  of  the  instru- 
ment to  get  at  the  intention  of  the  parties,  and  then  carry  out 
that  intention  whether  the  instrument  contains  language  suffi- 
cient to  express  it  or  not ;  but  the  sole  duty  of  construction  is  to 
find  out  what  was  meant  by  the  language  of  the  instrument.^ 
Equity  regards  substance  rather  than  form,  and  enforces 
the  actual  intent  if  lawful  and  just.^ 

§  268.  Innocent  Purchasers. — A  mortgage  cannot  be  re- 
formed as  against  an  innocent  purchaser.  But  a  deed  or 
mortgage  may  be  reformed  against  a  subsequent  purchaser  or 
mortgagee  who  acquires  his  rights  with  notice  of  the  equities 
of  the  party  seeking  reformation.^ 

The  general  rule  is  that  against  a  bona  fide  purchaser  a 
mortgage  will  not  be  reformed,  in  its  description  so  as  to  in- 
clude lands  intended  to  be  mortgaged.*  So  a  bill  which  seeks 
to  relieve  a  party  must  allege  that  the  purchaser  took  the  land 
with  notice  of  the  mistake,  'because,  if  he  is  a  bona  fide  pur- 
chaser, no  relief  can  be  obtained.^  A  purchaser  with  notice 
takes  the  rights  of  the  mortgagor,  and  is  in  no  better  position.^ 
A  mortgage  may  be  reformed  as  against  the  assignee  in  bank- 
ruptcy of  the  mortgagor.'  And  where  a  tract  of  land  is  mis- 
described  in  a  mortgage,  the  equity  of  the  mortgagee  to  have  it 
corrected  is  prior  in  point  of  time  to  that  of  a  subsequent  judg- 
ment creditor.^ 

^  Farmers'  Loan  &  Tnist  Co.  v.  Commercial  Bank,  15  "Wis.  424,  438. 

'Stuart  V.  Worden,  42  Mich.  154.  See,  also.  Carter  v.  Champion,  8  Conn. 
549 ;  Beardsley  v.  Knight,  10  Vt.  185 ;  Kennard  v.  George,  44  N.  H.  441 ; 
Baker  v.  Morton,  12  Wall.  (U.  S.)  150. 

'Gale  V.  Morris,  29  N.  J.  Eq.  222. 

♦McLouth  V.  Hurt,  51  Tex.  115. 

*  Fitch  V.  Boyer,  51  Tex.  336  ;  Sickman  v.  Wood,  69  111.  329 ;  Easter  v.  Sev- 
erin,  64  Ind.  375. 

*  Gale  V.  Morris,  29  N.  J.  Eq.  222  ;  Ruhling  v.  Hackett,  1  Nev.  360  ;  Strang 
V.  Beach,  11  Ohio  St.  283  ;  Hunt  v.  Hunt,  38  Mich.  161 ;  Fielder  v.  Varner, 
45  Ala.  429 ;  Rutger.s  v.  Kingsland,  3  Halst.  Eq.  (N.  J.)  178,  658.  Compare 
Goodman  v.  Randall,  44  Conn.  321 ;  Manatt  v.  Starr,  72  Iowa,  677. 

'Schulze  V.  Bolting,  8  Biss.  C.  C.  174. 

8  Brewster  v.  Clamfit,  33  Ark.  72.  See,  also,  Sample  v.  Rowe,  24  Ind.  208  ; 
Flanders  v.  O'Brien,  36  Ind.  284. 


282  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

But  the  Ohio  rule  is  different,  because  a  mortgage  defect- 
ively executed  is  not  entitled  to  record,  under  the  registry 
laws.  So,  a  defective  mortgage,  when  reformed,  will  not  affect 
the  lien  of  a  judgment  intervening  between  the  dates  of  the 
execution  and  the  reformation  of  the  mortgage.^  The  Ohio 
rule  appears  to  turn  on  the  point  that  a  defective  mortgage  is 
not  allowed  to  be  recorded  by  statute ;  but,  if  recorded,  it  is 
not  thereby  valid,  and  a  judgment  creditor's  lien  prior  to  the 
reformation  of  a  defect  is  paramount. 

The  reformation  of  a  mortgage  relates  back  to  the  date  of  its 
execution,  as  against  the  mortgagor's  wife,  who  became  such 
after  the  making  of  the  mortgage.^ 

§  269.  Lost  Mortgage. — When  an  instrument  on  which  a 
title  is  founded  is  lost,  a  court  of  equity  will  interfere  to  remedy 
the  defect  occasioned  by  such  accident.^ 

In  the  case  of  the  destruction  or  withholding  by  the  grantor 
of  a  deed  of  land  which  has  been  duly  delivered,  or  a  mistake 
in  the  description  of  the  land,  or  the  mode  of  execution,  and 
in  the  case  of  a  contract  to  convey  real  estate,  there  is  no 
doubt  of  the  power  of  the  court  of  equity  to  decree  proper 
conveyance.* 

Accordingl}^,  when  a  mortgage,  which  has  not  been  recorded 
under  -a  registration  law,  and  the  possession  is  not  in  the 
mortgagee,  is  lost,  the  mortgagor  denying  the  execution  of  said 
mortgage,  upon  proper  proof,  the  court  will  decree  the  making 
of  a  new  mortgage  in  substance  like  the  one  lost.^ 

§  270.  Evidence. — To  justify  a  court  of  equity  in  exercising 
its  power  to  reform  a  written  instrument  on  the  ground  of 

1  Hood  V.  Brown,  2  Ohio,  366  ;  Mayham  v.  Coombs,  14  Ohio,  428 ;  White  v. 
Denman,  16  Ohio,  59  ;  1  Ohio  St.  110  ;  Fosdick  v.  Barr,  3  Ohio  St.  471 ;  Holi- 
day V.  Franklin  Bank,  16  Ohio,  533 ;  Van  Thorniley  v.  Peters,  26  Ohio  St. 
471. 

>*  Hawkins  v.  Pearson  (xlla.),  11  South.  Rep.  304. 

^  Shehnardine  v.  Harrop,  6  Mad.  33. 

*  Warren  v.  Swett,  31  N.  H.  332;  Sumner  v.  Rhodes,  14  Conn.  135;  Smith 
V.  Chapman,  4  Conn.  344 ;  Busby  v.  Littlefield,  33  N.  H.  76. 

*  Lawrence  v.  Lawrence,  42  N.  H.  109 ;  Griffin  v.  Fries,  23  Fla.  173. 


CORRECTION    AND    REFORMATION.  283 

mistake,  the  proof  in  demonstration  of  the  mistake  must  be 
clear  and  satisfactory. 

That  is :  1.  It  must  be  proof  that  the  written  instrument 
did  not,  at  the  time  of  its  execution,  set  forth  the  intent  of  the 
parties ;  2.  That  the  failure  to  make  the  instrument  express 
such  intention  arose  through  mistake  or  oversight  in  draft- 
ing it/ 

That  is,  the  evidence  must  be  clear  and  convincing,  making 
out  a  mistake  to  the  entire  satisfaction  of  the  court.  It  must 
not  be  loose,  equivocal,  or  contradictory,  so  as  to  leave  the 
mistake  open  to  doubt." 

Thus,  upon  application  to  have  a  personal  covenant  inserted 
in  a  mortgage,  alleged  to  have  been  omitted  by  mistake  of  the 
draughtsman,  the  proof  must  be  of  such  character  as  to  leave 
no  doubt  whatever  in  the  mind  of  the  court  that  the  mistake 
has  intervened  and  the  instrument  is  variant  from  actual  con- 
tract of  the  parties.  It  is  not  enough  to  show  the  intention  of 
one  of  the  parties  to  the  instrument,  but  of  both ;  the  proof 
must  be  established  incontrovertibly  that  the  error  or  mistake 
alleged  was  that  of  both  parties.^  And  more  especially  is  this 
so  in  cases  where  considerable  time  has  elapsed,  and  the  parties 
of  the  original  transaction  have  died  before  application  is  made 
for  relief.*  And  this  is  especially  so  if  the  mortgage  is  to  be 
reformed  by  parol  testimony  alone,  in  which  case  the  court 
must  be  satisfied  beyond  a  reasonable  doubt  of  a  mutual 
mistake  of  both  parties  to  the  mortgage,  and  that  they  both 
intended  to  and  believed  they  had  correctly  described  in  the 
mortgage  the  land  in  controversy.^ 

It  is  a  very  material  rule  that  the  court  will  not  offer  its  aid, 
or  allow  a  written  instrument  to  be  affected  by  parol  or  other 
extrinsic  evidence,  unless  the  mistake  is  made  out  according 

'  Fritzler  v.  Robinson,  70  Iowa,  500. 
'Lestrade  v.  Barth,  19  Cal.  660. 
'Stiles  V.  Willis,  66  Md.  552. 

*  Showman  v.  Miller,  6  Md.  485;  Gillespie  v.  Moon,  2  Johns.  Ch.  (N.  Y.) 
585. 

'Bodwell  V.  Heaton,  40  Kan.  36.  See,  also,  Ker  v.  Evershed,  41  La.  Ann. 
15. 


284  NATUKE   AND   REQUISITES   OF   THE   CONTRACT. 

to  the  understanding  of  both  parties,  by  proof  that  is  exact 
and  satisfactory/ 

The  plirase,  "  mutual  mistake,"  as  used  in  equity,  means  a 
mistake  common  to  all  parties  to  the  written  instrument,  and 
it  relates  to  a  mistake  concerning  the  contents  or  the  legal  effect 
of  the  instrument." 

In  a  suit  to  reform  a  deed  or  mortgage  on  the  ground  of 
mistake,  the  plaintiff  must  allege  distinctly  what  the  original 
agreement  was,  and  point  out  with  clearness  wherein  there 
was  a  mistake,  and  that  it  did  not  arise  from  gross  negligence 
of  the  plaintiff.^ 

^Sawyer  v.  Hovey,  3  Allen  (Mass.),  331 ;  Andrews  v.  Essex  Ins.  Co.,  3  Mas. 
C.  C.  10. 

'^  Kilmer  v.  Smith,  77  N.  Y.  226  ;  Moxey  v.  Bigwood,  4  De  G.,  F.  &  J.  351 ; 
Fowler  v.  Fowler,  4  DeG.  &  J.  250 ;  Bentley  v.  Mackay,  31  Beav.  143 ;  Kyle  v. 
Kavanaugh,  103  Mass.  356 ;  Young  v.  McGown,  62  Me.  56 ;  Diman  v.  Railway 
Co.,  5  R.  I.  130 ;  Barfield  v.  Price,  40  Cal.  535 ;  Page  v.  Higgins,  150  Mass.  27. 

*  Meier  v.  Kelly,  20  Ore,  86;  Hyland  v.  Hyland,  19  Ore.  51;  Lewis  v. 
Lewis,  5  Ore.  169 ;  Ramsey  v.  Loomis,  6  Ore.  367. 


CHAPTER  VIIL 

equitable  mortgages. 

Article  1. 

General  Statement. 

I  271.  Definition. 

§  271.  Definition. — An  equitable  mortgage  is  one  which  by 
want  of  some  proper  formality  can  only  be  given  effect  as 
a  mortgage  in  equity.  Or  it  may  be  defined  as  a  mortgage 
in  which  the  mortgagor  does  not  actually  convey  the  prop- 
erty, but  does  some  act  by  which  he  manifests  his  determina- 
tion to  bind  the  same  as  a  security.  Or  it  may  be  said  to  be 
a  lien  upon  real  estate  of  such  a  character,  that  it  is  recognized 
in  equity  as  a  security  for  the  payment  of  money  and  is 
treated  as  a  mortgage.  Such  a  mortgage  may  arise  by  the 
deposit  of  title-deeds  to  an  estate/  by  an  absolute  conveyance 
intended  as  a  mortgage,^  by  a  vendor's  lien/^  and  by  informal 
mortgages  and  agreements.  Informal  mortgages,  are  those 
instruments  intended  as  mortgages,  but  which  by  reason  of 
some  defect  cannot  have  such  operation  without  the  aid  of 
equity ;  and  also  a  great  variety  of  transactions  and  docu- 
ments to  which  equity  attaches  such  character  without  re- 
gard to  the  intention  of  the  parties. 

The  term  also  includes  mortgages  of  an  equitable  estate  or 
interest.* 

An  equitable  mortgage  may  be  constituted  by  any  writing 
from  which  the  intention  to  create  it  may  be  gathered.'^ 

Thus  a  written  agreement  for  security  on  certain  property 
for  the  payment  of  a  debt  is  in  equity  a  mortgage,  and  will  be 

'  Storj-'s  Eq.  Jur.,  sect.  1020. 

*  See  Chapter  III,  Article  2. 

"See  Chapter  IX. 

*6  Am.  &  Enp.  Ency.  Law,  675. 

V*  Chase  v.  Peck,  21  N.  Y.  581 ;  Payne  v.  Wilson,  74  N.  Y.  348. 

285 


286  NATURE    AND    REQUISITES    OF    THE   CONTRACT. 

enforced  as  such  against  all  parties  to  the  agreement  and  to 
those  who  have  notice.^ 

So  an  agreement  by  which  the  owner  of  land,  over  his  hand 
and  seal,  for  a  sufficient  consideration  promises  to  pay  a  mort- 
gage given  by  his  predecessor  in  possession,  a  tenant  for  life, 
and  covenants  that  the  same  shall  be  a  lien  thereon  as  against 
himself  and  heirs,  is  an  equitable  lien.^ 

An  agreement  that  a  deed  absolute  shall  be  considered  a 
mortgage  is  valid.  And  an  agreement  that  the  non-payment 
of  the  loan  within  the  time  specified  should  convert  the  mort- 
gage into  an  absolute  deed  does  not  have  that  effect.  The 
agreement  to  turn  a  mortgage  into  an  absolute  deed  in  case  of 
default  is  one  that  finds  no  favor  in  equity.  The  maxim, 
"  Once  a  mortgage  always  a  mortgage,"  governs  in  such  cases.'* 
Such  deed  is  in  eff'ect  a  mortgage,  though  the  grantor  does 
not  expressly  covenant  to  repay  the  money .^ 

Article  2. 
By  the  Deposit  of  Title-Deeds. 

I  272.  The  English  Doctrine.  by  Some  of  the  States  in 

I  273.  Parol  Agreement  not  Sufficient.  this  Country. 

§  274.  Actual  Deposit  of  Title-Deeds  ^  276.  Lex    Loci    Contractus    Gov- 

Necessary.  erns. 

§  275.  The  English  Doctrine  Adopted  ?  277.  Contrary  Doctrine. 

§  272.  The  English  Doctrine. — In  England  it  is  generally 
recognized  and  a  thoroughly  established  doctrine,  that  an 
equitable  mortgage  may  be  created  by  a  deposit  of  the  title- 
deeds  as  security  for  a  debt.^ 

1  Gest  V.  Packwood,  39  Fed.  Rep.  525. 

*  Watkins  v.  Vrooman,  51  Hun  (N.  Y.),  175. 

3  Horn  V.  Keteltas,  46  N.  Y.  605  ;  Carr  v.  Carr,  52  N.  Y.  251 ;  Morris  v. 
Nixon,  1  How.  (U.  S.)  118 ;  Villa  v.  Rodriguez,  12  Wall.  (U.  S.)  323. 

*  Macauley  v.  Smith  (N.  Y.),  30  N.  E.  Rep.  997. 

*  Russel  V.  Russel,  1  Bro.  C.  C.  269 ;  Whitehead  v.  Jordan,  1  Younge  &  C. 
303 ;  Pye  v.  Danbuz,  2  Dick.  759  ;  Lacon  v.  Allen,  3  Drew.  579,  582  ;  Ex  parte 
Whitbread,  19  Ves.  209 ;  Ex  parte  Langston,  17  Ves.  230 ;  Doe  v.  Hawke,  2 
East.  481 ;  Ex  parte  Coombe,  4  Mad.  249  ;  Lucas  v.  Dorrien,  7  Taunt.  279 ; 
Ex  parte  Coming,  9  Ves.  117 ;  Birch  v.  Ellames,  2  Anst.  429. 


I 


EQUITABLE    MORTGAGES.  287 

At  one  time  the  doctrine  that  the  deposit  of  a  title-deed  was 
an  equitable  mortgage  was  much  doubted.  The  doctrine  has 
been  violently  attacked  and  denounced  as  pernicious  by  emi- 
nent English  judges,  and  especially  by  Lord  Eldon  and  Sir 
William  Grant,  yet  it  is  now  well  settled  and  firmly  established 
in  England.^ 

If  the  debtor  deposits  his  title-deeds  with  a  creditor,  it  is 
evidence  of  a  valid  agreement  for  a  mortgage,  and  amounts  to 
an  equitable  mortgage,  which  is  not  within  the  statute  of 
frauds.^ 

But  a  deposit  of  title-deeds  as  collateral  for  money  advanced 
on  a  promissory  note  on  demand,  and  a  subsequent  verbal 
agreement  to  execute  a  mortgage  of  the  property  comprised  in 
such  title-deeds,  are  insufficient  to  create  a  security  by  way  of  a 
mortgage.^ 

So  a  deposit  of  title-deeds  by  a  bond  creditor  is  not  of  itself 
sufficient  evidence  of  a  deposit  by  way  of  equitable  mortgage.* 

An  actual  deposit  of  the  title-deeds  of  the  property  to  be 
mortgaged  is  not  necessary  to  establish  an  equitable  mortgage 
in  a  court  of  equity  ;  an  intention  to  deposit  the  deeds  and  to 
show  a  charge  upon  the  premises  is  sufficient.^ 

If  there  be  no  registry,  it  is  the  settled  English  doctrine  that 
the  mere  circumstance  of  leaving  the  title-deeds  with  the 
mortgagor  is  not  of  itself,  in  a  case  free  from  fraud,  sufficient 
to  postpone  the  first  mortgagee  to  a  second,  who  takes  the  title- 
deeds  with  his  mortgage,  and  without  notice  of  the  first  mort- 
gage.* 

§  273.  Parol  Agreement  Not  Sufficient. — The  English 
courts  have  manifested  a  determination  to  keep  within  the 
letter  of  the  precedents,  and  not  to  give  the  doctrine  furtlier 
extension.     Accordingly  they   have  held  that  a  mere  parol 

'  See  Ex  parte  Hooper,  1  Meriv.  9  ;  19  Ves.  477 ;  Norris  v.  AVilkinson,  12 
Ves.  192. 
"Rupsel  V.  Russel,  1  Bro.  C.  C.  269 ;  Birch  r.  Ellames,  2  Anst.  427. 
3  James  v.  Rice,  23  Eng.  L.  &  Eq.  567  ;  27  Eng.  L.  &  Eq.  342. 
*  Chapman  v.  Chapman,  3  Eng.  L.  &  Eq.  70. 
*Ex  parte  Edwards,  1  Deac.  611. 
f  Berry  v.  Mutual  Ins.  Co.,  2  Johns.  Ch.  (N.  Y.)  603. 


288  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

agreement  to  make  a  mortgage  or  to  deposit  a  deed  for  that 
purpose  will  not  give  any  title  in  equity.  There  must  be  an 
actual  bona  fide  deposit  of  the  title-deeds  with  the  mortgagee 
himself  in  order  to  create  the  lien.  This  doctrine  is  found  in 
many  cases.  ^ 

§  274.  Actual  Deposit  of  Title-Deeds  Necessary. — To 
give  effect  of  a  lien  to  the  possession  of  title-deeds  it  must  be 
shown  affirmatively  that  they  were  deposited  as  a  bona  fide, 
present,  immediate  security.  If  left,  for  instance,  with  an 
attorney  for  the  purpose  of  his  drawing  a  mortgage  which  had 
been  agreed  upon  by  the  parties,  it  will  not  be  sufficient ;  ^ 
otherwise  if  deposited  expressly  as  a  security  for  a  debt.^  The 
legal  effect  of  a  deposit  is  that  the  mortgagor  shall  be  liable 
for  the  debt,*  and  that  whatever  interest  he  has  in  the  property 
is  bound  by  the  agreement.^ 

Such  a  deposit  may  be  made  to  cover  subsequent  advances 
by  a  subsequent  parol  agreement  without  the  return  of  the 
deeds.  Lord  Eldon  says,  "  In  the  cases  alluded  to  I  w^ent  the 
length  of  stating  that  where  the  deposit  originally  was  for  a 
particular  purpose,  that  purpose  may  be  enlarged  by  a  subse- 
quent parol  agreement,  and  this  distinction  appeared  to  me 
to  be  too  thin,  that  you  should  not  have  the  benefit  of  such 
an  agreement  unless  you  added  to  the  terms  of  that  agreement 
the  fact  that  the  deeds  were  put  back  into  the  hands  of  the 
owner,  and  a  redelivery  of  them  required  ;  on  which  fact  there 
is  no  doubt  that  the  deposit  would  amount  to  an  equitable 
lien  within  the  principle  of  these  cases."  ^  It  seems  that  his 
Lordship  w^ould  not  go  so  far  again  in  a  similar  case,  and  ob- 
serves that  at  all  events  the  doctrine  is  not  to  be  further  en- 
larged.'' 

» Ex  parte  Whitbread,  19  Ves.  209 ;  Ex  parte  Langston,  17  Ves.  230 ;  Ex 
parte  Cominj;,  9  Ves.  il7. 

2  2  Wash.  Eeal  Prop.  89. 

3  Ex  parte  Bulteel,  2  Cox,  243. 

*  Pryce  v.  Bury,  2  Drew.  41,  42. 

^Ex  parte  Bisdee,  1  Mont.,  Dea.  &  De  G.  333. 

®  Ex  parte  Kensington,  2  Ves.  &  B.  84. 

^  Ex  parte  Hooper,  1  Meriv.  9. 


EQUITABLE    MORTGAGES.  289 

The  deposit  of  deeds  entitles  the  holder  to  have  a  mortgage 
and  to  have  his  lien  effectuated,  although  there  was  no  special 
agreement  to  assign ;  the  deposit  affords  a  presumption  that 
such  was  the  intent.^ 

§  275. — The  English  Doctrine  Adopted  by  Some  of 
THE  States  in  this  Country. — The  adoption  of  the  English 
doctrine  in  the  United  States  would  seem  to  be  in  conflict,  both 
with  the  general  established  system  of  registration  of  mort- 
gages and  the  statute  of  frauds,  yet  some  of  the  States  have 
accepted  the  doctrine  of  the  English  courts,  at  least  to  the  ex- 
tent that  where  title-deeds  are  deposited  as  a  present  security, 
and  with  the  intent  thereby  to  give  a  lien  upon  the  land,  such 
deposit  shall  operate  as  an  ecjuitable  mortgage,  notwithstand- 
ing the  statute  of  frauds. 

Thus,  when  the  title-deeds  are  actually  deposited  by  the 
debtor  with  his  creditor  upon  an  advance  of  money,  and  for 
an  antecedent  debt  as  a  security,  the  transaction  will  constitute 
an  equitable  mortgage,  the  deposit  standing  in  the  place  of  an 
actual  mortgage  and  dispensing  with  the  necessity  of  the  exe- 
cution of  such  mortgage.^  It  must  be  shown  affirmatively  that 
the  title-deeds  were  deposited  as  a  bona  fide,  present,  immedi- 
ate security.  If  left  with  the  attorney  for  the  purpose  of  his 
drawing  a  mortgage  which  had  been  agreed  upon  by  the  par- 
ties, it  will  not  be  sufficient.  "  Mere  possession,  even  by  a 
creditor,  is  not  enough ;"  ^  otherwise  in  England,  if  deposited 
expressly  as  a  security  for  a  debt.* 

This  deposit  will  constitute  an  equitable  mortgage.^  And 
in  the  absence  of  other  proof  evidence  of  an  advance    of 

'  Birch  r.  Ellames,  2  Anst.  427  ;  Card  v.  Jeffray,  2  Scho.  &  Lefr.  374  ;  Ex 
parte  Wetherell,  11  Ves.  398 ;  Pain  v.  Smith,  2  Mylne  &  Keene,  417 ;  Keys  v. 
WiUiams,  3  Younge  &  Coll.  55  ;  Edge  v.  Worthington,  1  Cox,  211  ;  Lucas  v. 
Dorrien,  7  Taunt.  279.  See,  also,  Ex  parte  Coming,  9  Ves.  115 ;  Ex  parte 
"Warner,  19  Ves.  202  ;  Ex  parte  Langston,  17  Ves.  227. 

'  Hutzler  v.  Phillips,  26  S.  Car.  136,  147. 

*  2  Wash.  Real  Prop.  89. 

*Ex  parte  Bulteel,  2  Cox,  243. 

^Gale  V.  Morris,  29  N.  J.  Eq.  222.  See,  also,  Hackett  r.  Reynolds,  4  R.  I. 
512. 

VOL.  I. — 19 


290  NATURE    AND    EEQUISITES    OP    THE    CONTRACT. 

money  and  the  finding  of  title-deeds  of  the  borrower  in  pos- 
session of  the  lender  establish  an  equitable  mortgage.^  But 
such  lien  of  an  equitable  mortgage  cannot  be  set  up  at  law  as  a 
legal  estate.^ 

An  assignment  by  a  party  of  the  certificate  of  purchase  by 
way  of  security,  operates  as  an  equitable  mortgage  of  the  inter- 
est in  the  land.^ 

A  foreclosure  of  an  equitable  mortgage  by  deposit  of  title- 
deeds,  must  be  by  suit  in  equity  to  establish  the  lien  and  have 
a  sale  in  case  the  principal,  interest,  and  costs  are  not  paid  on 
the  given  date/  The  general  rule  is  that  the  deposit  of  all  the 
deeds  as  a  security  for  a  debt  created  at  the  time  the  deposit  is 
made,  constitutes  an  equitable  mortgage.^ 

In  Georgia  the  deposit  of  title-deeds  does  not  constitute  an 
equitable  mortgage." 

§  276.  Lex  Loci  Contractus  Governs. — The  law  of  the 
place  of  the  contract  governs.  Thus,  the  court  will  not  com- 
pel the  creditor  to  deliver  up  the  deeds,  when  he  resides  or  is 
found  in  a  State  with  deeds  in  his  possession  for  lands  in 
another  State  so  deposited  in  that  State.  He  can  hold  them 
until  the  deed  to  the  lands  in  the  other  State  is  redeemed,  if  both 
States  recognize  this  doctrine  of  equitable  mortgages,  or  if  this 
doctrine  is  recognized  in  the  State  where  the  land  is  situated.^ 

In  England  it  is  held  that  when  a  citizen  of  a  foreign 
country,  by  the  laws  of  which  a  lien  cannot  be  created,  being 
in  England,  and  there  makes  a  deposit  of  title-deeds  as  security, 
his  contract  is  governed  by  the  laws  of  England.^ 

1  Rockwell  V.  Hobby,  2  Sandf.  Ch.  (N.  Y.)  9. 

2  Jackson  v.  Parkhurst,  4  Wend.  (N.  Y.)  369  ;  Jackson  v.  Dunlap,  1  Johns. 
Cas.  (N.  Y.)  114. 

'Hill  V.  Eldred,  49  Cal.  398. 

*Jarvisv.  Butcher,  16  Wis.  307. 

^  Williams  v.  Stratton,  10  Sm.  &  M.  (Miss.)  418.  See,  also,  Nat.  Bank  v. 
Caldwell,  4  Dill.  C.  C.  314 ;  Wright  v.  Shumway,  1  Biss.  C.  C.  23 ;  Meador  v. 
Everett,  3  Dill.  C.  C.  214. 

6  Code,  sect.  2138 ;  Davis  v.  Davis  (Ga.),  14  S.  E.  Rep.  194. 

'  Griffin  v.  Griffin,  18  N.  J.  Eq.  104. 

8  Ex  parte  Holthausen,  L.  R.,  9  Ch.  App.  722. 


EQUITABLE   MORTGAGES.  291 

§  277.  Contrary  Doctrine. — Many  of  the  States  have 
adopted  a  different  doctrine,  and  hold  that  an  equitable  mort- 
gage cannot  be  created  by  the  deposit  of  title-deeds.  That  a 
mortgage  by  parol  and  deposit  of  title-deeds  is  not  valid,  be- 
cause such  a  doctrine  would  be  a  judicial  repeal  of  the  statute 
of  frauds  and  perjuries,  making  void  sales,  not  evidenced  by 
writing,  of  lands,  tenements,  and  hereditaments ;  ^  that  there  can 
be  no  such  thing  as  a  valid,  efficacious  parol  mortgage  of 
land,'  because  such  mortgage  is  contrary  to  the  spirit  of  the 
acts  of  the  legislature  in  the  statute  of  frauds,  and  acts  for  the 
registration  of  mortgages  for  public  information.^ 

So  in  Kentucky,  the  doctrine  of  equitable  mortgages,  founded 
on  the  deposit  of  title-deeds  for  an  antecedent  debt,  or  loan  of 
money,  is  not  sanctioned  by  the  courts  of  the  State,  because  it  is 
in  conflict  with  the  statute  of  frauds  and  difficult  to  maintain.* 

But  where  a  written  instrument  is  entered  into,  and  de- 
posited with  the  title-deeds,  stating  the  purpose  of  the  deposit, 
the  objection  is  thus  removed,  and  the  transaction  constitutes 
an  equitable  mortgage.^ 

Article  3. 
Informal  Mortgages. 

I  278.  In  General.  §  283.  Name  of  Grantor  Omitted. 

\  279.  Omission  of  Seal.  §  284.  Agent's  Mortgage. 

I  280.  Mortgages   with   no    Acknowl-  §  285.  Power  of  Attorney  Coupled 

edgment.  with  an  Interest. 

§  281.  Mortgages    Not  Attested  by  a  §  286.  Assignments    of   Eents    and 

Sufficient    Number    of    Wit-  Profits. 

nesses.  I  287.  Stipulation  in  a  Lease, 

I  282.  Name  of  Grantee  Omitted.  §  288.  Holding  as  Trustee. 

§  278.  In  General. — Mortgages,  intended  as  such,  but 
which  lack  some  formality  essential  to  their  validity  at  law, 

1  Meador  v.  Meador,  3  Hiesk.  (Tenn.)  562.    See,  also,  Gothard  v.  Flynn,  25 
Miss.  58. 
^  Bowers  v.  Oyster,  3  P.  &  W.  (Pa.)  239. 

» Shitz  ('.  Dieffenbach,  3  Pa.  St.  233  ;  Spencer  v.  Haynes,  12  Phila.  452. 
*Vanmeter  v.  McFaddin,  8  B.  Mon.  435,  437.    See,  also,  English  v.  Mc- 
Elroy,  62  Ga.413  ;  Bloom  v.  Noggle,4  Ohio  St.  45  ;  Hall  t'.  McDuff,  24  Me.  311. 
'     *  Edwards  v.  Trumbull,  50  Pa.  St.  509  ;  Luch's  Appeal,  44  Pa.  St.  519. 


292  NATURE    AND   REQUISITES   OF   THE   CONTRACT. 

may  generally  be  given  their  intended  effect  in  equity.  A 
mortgage  defectively  executed,  or  an  imperfect  attempt  to 
create  a  mortgage,  or  to  appropriate  property  to  the  discharge 
of  a  particular  debt,  will  create  a  mortgage  in  equity  or  con- 
vey a  lien  on  the  property  so  intended  to  be  mortgaged.^ 

This  is  on  the  principle  that  courts  of  equity  do  not  regard 
the  forms  of  instruments,  but  look  to  the  intention,  and  give 
to  the  acts  of  parties  a  construction  which  is  consistent  with 
the  intention  and  with  equity.^ 

Thus,  an  attempt  to  make  a  legal  mortgage  which  fails  for 
the  want  of  some  solemnity,  is  a  valid  mortgage  in  equity.^ 

So  a  mortgage  or  trust  deed  which  cannot  be  enforced  by  a 
sale  under  the  power  or  by  a  judgment  of  foreclosure,  because 
it  is  defective  in  some  of  the  requisites  of  a  legal  mortgage, 
will,  nevertheless,  be  regarded  as  an  equitable  mortgage,  and, 
therefore,  is  valid  in  equity. 

An  equitable  mortgage  may  be  constituted  by  any  writing 
from  which  the  intention  to  mortgage  may  be  gathered,  and  an 
attempt  to  make  a  legal  mortgage,  which  fails  for  the  want  of 
some  solemnity,  is  a  valid  mortgage  in  equity ;  ^  and  it  has  been 
held  that  an  agreement  for  a  mortgage  is,  in  equity,  a  specific 
lien  upon  the  land ;  '^  and  that  an  equitable  mortgage  thus 
created  is  entitled  to  a  preference  over  subsequent  judgment 
creditors.^  Though  it  has  been  held  that,  save  in  exceptional 
cases,  such  as  accident,  fraud,  or  mistake,  the  agreement  must 
be  in  writing.  Though  an  equitable  lienor  may  have  priority 
over  a  judgment  creditor,  yet  the  right  thereto  rests  upon  consid- 
erations peculiar  to  the  case  of  such  a  creditor.  Those  consid- 
erations are  that  the  lien  of  a  judgment  creditor  is  not  specific 

1  Payne  v.  Wilson,  74  N.  Y.  348 ;  Daggett  v.  Rankin,  31  Cal.  321 ;  Watkins 
V.  Vrooman,  51  Hun  (N.  Y.),  175. 

"  Flagg  V.  Mann,  2  Sum.  C.  C.  486. 

3  Payne  v.  Wilson,  74  N.  Y,  348. 

Judge  Story  says :  "  If  a  transaction  resolves  itself  into  a  security,  what- 
ever may  be  its  form,  and  whatever  name  the  parties  may  choose  to  give  it, 
it  is  in  equity  a  mortgage : "  Flagg  v.  Mann,  2  Sum.  C.  C.  486,  533. 

*Milleron  Eq.  Mort.  1,  2. 

5  In  re  Howe,  1  Paige  (N.  Y.),  125  ;  Chase  v.  Peck,  21  N.  Y.  581. 

6  In  re  Howe,  1  Paige  (N.  Y.),  125  ;  Robinson  v.  Williams,  22  N.  Y.  386. 


EQUITABLE    MORTGAGES.  293 

and  general,  and  that  the  debt  arises  not  on  the  security  of  the 
land,  but  upon  the  general  credit  of  the  debtor  and  his  whole 
estate.^  One  who  buys,  without  notice  of  the  equitable  lien, 
and  pays  the  consideration-money,  or  one  who  makes  a  pres- 
ent loan  and  parts  with  his  money,  relying  upon  the  title  to 
the  land  being  unincumbered,  and  upon  that  alone,  will  be 
protected  against  an  equitable  lien,  though  prior  in  date.^ 

§  279.  Omission  of  Seal. — The  omission  of  the  seal  will 
not  affect  the  validity  of  a  mortgage  in  equity.  As  an  inter- 
est in  land  may  pass  by  a  writing  not  under  seal,  so  a  valid 
mortgage  may  be  created  by  a  written  instrument  not  under 
seal.^  Thus  where  a  grantee  by  a  writing  not  under  seal 
agrees  to  reconvey  the  same  lands  to  the  grantor  upon  the 
repayment  of  the  money  within  a  given  time,  the  transac- 
tion constitutes  an  equitable  mortgage.*  So  a  mortgage, 
though  lacking  a  seal,  is  still  good  as  an  equitable  mortgage, 
and  if  acknowledged  and  recorded  will  be  efficacious  in 
equity.^ 

§  280.  Mortgages  with  no  Acknowledgment. — Though 
a  mortgage  is  imperfectly  acknowledged,  or  not  acknowledged 
at  all,  equity  will  construe  it  as  valid  between  the  parties. 
Thus,  although  an  acknowledgment  of  a  trust  deed  taken  be- 
fore one  who  is  trustee  in  the  instrument  is  worthless  as  to  third 
parties,  yet  the  deed  is  valid  between  the  parties  to  it.^ 

Want  of  a  proper  acknowledgment  does  not  invalidate  a 
deed  but  only  goes  to  the  effect  of  the  record.  If  not  acknowl- 
edged or  proved  its  record  is  not  provided  for  by  law,  and  the 

^  Hurst  V.  Hurst,  2  Wash.  C.  C.  69,  78. 

*  Stafford  V.  Van  Rensselaer,  9  Cow.  (N.  Y.)  316. 

^\tkinson  v.  Miller,  34  W.  Va.  115  ;  Woods  t).  Wallace,  22  Pa.  St.  171 ; 
Harrington  v.  Fortner,  58  Mo.  468 ;  Dunn  v.  Raley,  58  Mo.  134 ;  McClurj?  ik 
Phillips,  49  Mo.  315  ;  Gill  v.  Clark,  54  Mo.  415 ;  Kelleran  v.  Brown,  4  Mas.s. 
443. 

*  Eaton  V.  Green,  22  Pick.  (Mass.)  526. 

^  Harrington  v.  Fortner,  58  Mo.  468  ;  McClurg  v.  Phillips,  49  Mo.  315 ;  At- 
kinson V.  Miller,  34  W.  Va.  115. 
'     ^Blackv.  Gregg,  58Mo.  565. 


294  NATURE    AND    REQUISITES    OP    THE    CONTRACT. 

fact  that  it  may  be  copied  upon  the  books  of  record  will  not 
operate  as  constructive  notice  to  subsequent  purchasers.^ 

The  deed,  however,  is  good  as  between  the  parties  and  should 
prevail  against  subsequent  deeds  of  those  who  had  notice  of 

its  existence.^ 

§  281.  Mortgages  not  Attested  by  a  Sufficient  Number 
OF  Witnesses. — It  is  held  that  though  a  mortgage  is  not  at- 
tested by  a  sufficient  number  of  witnesses,  through  careless- 
ness or  design,  it  is  not,  therefore,  a  legal  mortgage,  but  it  may 
be  enforced  in  equity.^ 

On  the  other  hand,  it  has  been  held  that  when  executed  in 
the  presence  of  only  one  witness,*  when  more  are  required, 
it  is  insufficient  to  pass  any  interest  or  estate  in  the  land 
described,  and  is  not  entitled  to  record.*  That  such  a 
mortgage  is  void  as  a  legal  mortgage  and  though  recorded,  is 
notice  to  no  one.^  But  the  deed  is  legal  and  binding  between 
the  parties  thereto  and  those  claiming  under  them  as  mere 
volunteers ;  ^  such  deed  is  good  between  the  parties  themselves.^ 

§  282.  Name  of  Grantee  Omitted. — When  the  name  of 
the  grantee  is  omitted,  it  may  be  filled  in  by  agreement  of  the 
parties.  Thus,  where  a  name  of  a  trustee  in  a  deed  of  trust 
was  omitted  in  making  out  the  deed,  but  the  grantor  gave  the 
cestui  que  trust  verbal  authority  to  fill  in  the  blank  with  the 
name  of  some  suitable  person,  a  court  of  equity  has  power  to 
reform  the  instrument  and  supply  the  name  of  the  trustee.^ 

§  283.  Name  of  Grantor  Omitted. — When  there  is  no 
grantor,  there  can  be  no  mortgage  or  deed.     So  a  deed  not 

^  Duspaume  v.  Burnett,  5  Iowa,  95 ;  Price  v.  McDonald,  1  Md.  403 ;  Schults 
V.  Moore,  1  McLean,  C.  C.  520. 

*  Stevens  v.  Hampton,  46  Mo.  404. 

3  Lake  v.  Doud,  10  Ohio,  415  ;  Abbott  v.  Godfroy,  1  Mich.  178. 

*  Thompson  v.  Morgan,  6  Minn.  292  ;  Parret  v.  Shaubhut,  5  Minn.  323. 
5  Harper  v.  Barsh,  10  Rich.  Eq.  (S.  Car.)  149. 

^  Johnson  v.  Jones,  87  Ga.  85 ;  Downs  v.  Yonge,  17  Ga.  295 ;  Gardner  v. 
Moore,  51  Ga.  268. 

'  Marable  v.  Mayer,  78  Ga.  60. 

8  Burnside  v.  Wayman,  49  Mo.  356 ;  McQuie  v.  Peay,  58  Mo.  56. 


EQUITABLE    MORTGAGES.  295 

having  been  signed  by  the  grantor  in  any  form,  is  not  merely 
a  defective  conveyance,  but  it  is  wholly  void.  The  fact  that 
the  person  named  therein  as  grantor  acknowledged  it  to  be  his 
deed  is  not  sufficient.  The  compliance  in  this  respect  can 
never  dispense  with  the  manual  act  of  subscribing  by  the 
grantor.^ 

The  fact  that  the  person  named  therein  as  grantor  ac- 
knowledged it  to  be  his  deed  is  not  sufficient.  Courts  of 
equity  will  sometimes  give  effect  to  deeds  that  are  defectively 
executed ;  but  not  to  a  deed  defective  because  it  was  not 
signed  by  the  grantor.  The  principle  upon  which  a  remedy  is 
afforded,  is  that  there  is  a  valid  contract  lying  back  of  the 
deed  which  courts  of  equity  will  lay  hold  of  and  through  it 
give  relief.  And  this  proceeding  is  not  the  reformation  of  a 
deficient  instrument,  but  belongs  rather  to  the  branch  of  equity 
jurisprudence  which  relates  to  the  specific  performance  of  con- 
tracts of  which  the  defective  instrument  is  the  evidence  or 
memorandum.^ 

Therefore,  it  is  obvious  that  no  relief  can  be  granted  which 
will  give  effect  to  such  an  instrument  as  a  valid  mortgage  from 
the  day  of  its  date.  The  decree  will  operate  prosj)ectively  only, 
and  upon  such  title  as  the  party  may  then  have.^ 

§  284.  Agent's  Mortgage. — A  mortgage  on  real  estate  made 
by  an  agent  for  his  principal,  though  inoperative  at  ^law  for 
want  of  formal  execution  in  the  name  of  the  principal,  is  bind- 
ing in  equity  if  the  attorney  had  authority,  and  the  failure  to 
execute  in  the  name  of  the  principal  resulted  from  accident  or 
mistake ;  and  such  mortgage  may  be  enforced  against  the 
principal  and  subsequent  lien  creditors,  and  also  against  sub- 
sequent purchasers  with  notice.* 

It  will  be  sufficient  to  bind  the  principal  if,  upon  the  whole 

'  Goodman  v.  Randall,  44  Conn.  321 ;  Shepherd  v.  Burkhalter,  13  Ga.  443 ; 
Jacobs  V.  Railroad  Co.,  8  Cush.  (Mass.)  223.  Compare  Martin  v.  Nixon,  92 
Mo.  2a. 

*  Dickinson  r.  Glenney,  27  Conn.  112. 
'  Goodman  ?'.  Randall,  44  Conn.  321. 

*  Love  V.  Sierra  Nev.  W.  &  M.  Co.,  32  Cal.  639. 


296  NATURE    AND    REQUISITES    OP    THE    CONTRACT. 

instrument,  it  can  be  gathered  from  the  terms  that  the  party 
described  himself  and  acts  as  agent  and  intended  thereby  to 
bind  his  principal,  and  not  to  bind  himself^ 

Thus,  an  instrument  executed  by  the  president  of  a  corpora- 
tion in  pursuance  of  the  votes  of  the  directors,  although  in- 
tended to  take  effect  as  the  deed  of  the  corporation,  yet  not 
having  been  executed  by  deed  in  the  name  of  the  corporation, 
cannot  operate  as  its  deed.  But  the  transaction  in  a  court  of 
equity  will  be  regarded  as  an  equitable  mortgage.^ 

§  285.  Power  of  Attorney  Coupled  with  an  Interest. — 
An  irrevocable  power  of  attorney  to  collect  rents  given  as  se- 
curity for  money  loaned  is,  between  the  parties,  an  equitable 
mortgage  of  the  rents.  Thus,  such  a  power  of  attorney  exe- 
cuted by  a  married  woman,  and  acknowledged  in  the  statutory 
form  for  a  married  woman's  deed,  is  valid  against  her.^ 

So  it  was  held  that  such  a  power  was  an  equitable  mort- 
gage, and  as  such  binding  on  the  property,  not  only  as  between 
the  parties,  but  also,  under  the  English  and  Irish  rule,  even 
against  subsequent  judgment  creditors.*  In  general,  where  a 
letter  of  attorney  forms  a  part  of  the  contract,  and  is  a  security 
for  money  or  for  the  performance  of  any  act  which  is  deemed 
valuable,  it  is  generally  made  irrevocable  in  terms,  and  if  not 
so  made,  it  is  deemed  irrevocable  in  law.^ 

§  286.  Assignments  of  Rents  and  Profits. — The  assign- 
ment of  rents  and  profits  amounts  to  an  equitable  mortgage, 
and  will  entitle  the  assignee  to  go  into  equity  and  insist  upon 
the  enforcement.^  A  distinction,  however,  must  be  made 
between  covenants  imposing  a  present  and  actual  charge  upon 

'  Haskell  v.  Cornish,  13  Cal.  45  ;  McDonald  v.  Bear  Riv.,  etc.,  Co.,  13  Cal.  221. 

^  Miller  v.  Railroad  Co.,  36  Vt.  452. 

^  Joseph  Smith  Co.  v.  McGuinness,  14  R.  I.  59. 

*  Abbott  V.  Stratten,  3  Jones  &  L.  (503  ;  9  Irish  Eq.  233.  See,  also,  Raymond 
V.  Squire,  11  Johns.  (N.  Y.)  47  ;  Whitworth  v.  Gaugain,  3  Hare,  416  ;  Knapp 
V.  Alvord,  10  Paige  (N.  Y.),  205. 

*  Walsh  V.  Whitcomb,  2  Esp.  565 ;  Hunt  v.  Rousmanier,  8  Wheat.  (U.  S.) 
174  ;  Pemberton  v.  Simmons,  100  N.  Car.  316. 

«Ex  parte  Wills,  1  Ves.  Jr.  162. 


EQUITABLE   MORTGAGES.  297 

estates,  and  covenants  that  the  party  will  charge  his  estate  ;  in 
the  former  case  a  specific  lien  attaches ;  in  the  latter  the  cov- 
enant is  personal  only.^  The  intention  to  give  security  must 
be  shown.^ 

A  formal  mortgage  of  a  leasehold  estate  by  metes  and  bounds, 
is  the  assignment  of  rents  for  the  whole  term,  in  those  juris- 
dictions where  foreclosure  cannot  be  effected  by  sale,  but  by 
foreclosure  or  proceedings  of  that  nature.^ 

Where  a  planter  agrees  to  ship  his  crop  to  his  factor,  to  reim- 
burse him  for  advances  and  supplies,  such  a  contract  creates  no 
lien  or  equitable  mortgage  on  the  crop  produced.*  But  if  a 
covenant  can  be  construed  as  an  assignment  of  the  rents,  then 
the  relation  will  be  that  of  trustee  and  cestui  que  trust.  No 
formal  words  are  necessary  to  create  that  relation.  Any  expres- 
sion which  shows  unequivocally  the  intention  of  the  parties  to 
create  a  trust  will  have  that  effect.^ 

An  assignment  of  the  rents  and  profits  of  land  as  a  security  for 
a  debt,  is  a  mode  of  creating  an  equitable  lien  on  the  land  in 
favor  of  the  assignee ;  and  the  assignment  of  a  lease  by  way 
of  security  produces  the  same  effect.® 

Lord  Thurlow  says  it  is  an  odd  way  of  conveying,  but  it 
amounts  to  an  equitable  lien.'^ 

Thus,  a  party  gave  his  notes  in  payment  on  the  purchase  of 
a  mining  ditch  and  grounds,  and  agreed  in  writing  with  the 
vendor  that,  if  such  notes  were  not  paid  when  due,  he  would 
reconvey  the  property  to  the  vendor  as  security  for  his  pay- 
ment. The  notes  not  being  paid,  the  maker  thereof  gave  the 
vendor  a  lease  of  the  property  with  a  right  to  apply  the  net 
profits  and  proceeds  from  year  to  year  on  the  notes.     Such 

^  Falkner  v.  O'Brien,  2  Ball  &  Beat.  223 ;  Williams  v.  Lucas,  2  Cox,  160 ; 
Freemoult  v.  Dedire,  1  P.  Wms.  429. 

^Mandeville  v.  Welch,  5  Wheat.  (U.  S.)  277. 

^  Hulett  V.  Soullard,  26  Vt.  295.  Compare  Allen  v.  Montgomery,  48  Misa. 
101 ;  Alexander  v.  Berry,  54  Miss.  422. 

*  Allen  V.  Montfromery,  48  Miss.  101. 

'Carpenter  v-.  Cushman,  105  Mass.  417. 

*3  Pom.  Eq.  Jur.,  sect.  1237. 
^    ^  Ex  parte  Wills,  1  Ves.  Jr.  162. 


298  NATURE    AND   REQUISITES   OF   THE   CONTRACT. 

agreement,  in  equity,  was  a  mortgage,  and  the  lease,  with  a 
pledge  of  the  rents  and  profits,  was  accepted  as  a  fulfillment 
of  the  agreement,  and  the  agreement  and  lease,  taken  together, 
created  a  continuous  lien  on  the  property  in  favor  of  the  payee 
of  the  notes  or  his  assigns  from  the  date  of  the  agreement ;  the 
assignment  of  the  rents  and  profits  of  the  property  to  the 
lessee  for  the  payment  of  the  notes  created  a  lien  on  the  body 
of  the  property,  which,  in  case  the  rents  and  profits  were  in- 
sufficient to  pay  the  same,  might  be  enforced  in  equity,  and 
during  the  possession  under  this  lease  the  lessee  was  not 
authorized  to  charge  the  property  with  the  expense  of  operat- 
ing or  improving  it,  and,  if  the  expenditures  in  any  one  year 
exceeded  the  receipts,  such  excess  was  the  lessee's  personal  debt.^ 

§  287.  Stipulation  in  a  Lease. — Where  a  lessee  takes  a  lot 
under  a  lease,  agreeing  to  erect  a  house  thereon  and  pay  rent 
monthly,  and  at  the  end  of  the  term  to  have  two-thirds  of  the 
appraised  value  of  the  house  herein,  he  may  insert  a  clause  in 
the  lease  which  will  be  construed  as  a  mortgage.  Thus  in 
this  case  the  lease  contained  the  following :  "And  it  is  further 
agreed  the  same  is  hereby  declared  to  be  a  mortgage  as  se- 
curity for  the  payment  of  the  payments  of  the  monthly  rents 
herein  stipulated."  It  was  held  that  this  was  a  mortgage 
which  might  be  foreclosed  on  the  non-payment  of  the  first  or 
any  month's  rent.^ 

So  where  a  lease  is  assigned  and  a  bond  executed  at  the 
same  time,  stating  that  the  assignment  was  made  to  secure  a 
debt  due  to  the  assignee  and  an  agreement  to  reconvey  the 
lease  on  payment  of  the  money  with  interest,  the  transaction 
is  a  mortgage.^ 

§  288.  Holding  as  Trustee. — Chief  Justice  Shaw  says : 
^^ Prima  facie,  it  would  seem  that  if  a  mortgage  were  made  to  two, 
conditioned  to  secure  the  payment  of  a  debt  to  one  of  them 

1  Gest  V.  Packwood,  39  Fed.  Rep.  525. 

2  Barroilhet  v.  Battelle,  7  Cal.  450.    See,  also,  Smith  v.  Patton,  12  W.  Va. 
541 ;  First  Nat.  Bank  v.  Adam,  138  111.  483. 

^Jackson  v.  Green,  4  Johns.  (N.  Y.)  186. 


EQUITABLE    MORTGAGES.  299 

only,  the  legal  estate  would  vest  in  the  two  as  tenants  in  com- 
mon, but  the  one  having  no  debt  secured  would  be  trustee  to 
the  extent  of  his  moiet}^  and  hold  it  in  trust  to  secure  the  debt 
due  to  the  actual  creditor.  As  between  mortgagor  and  mort- 
gagee, the  execution  and  delivery  of  the  mortgage  deed  trans- 
ferred the  legal  estate  and  vested  it  in  the  mortgagee,  and  the 
interest  of  the  mortgagor  is  a  right  to  redeem."  ^ 

But  in  the  equitable  and  beneficial  estate  the  interests  of  the 
parties  are  unequal  and  varying.  Neither  can  have  a  real 
action  against  the  other,  because  they  are  tenants  in  common, 
and  there  has  been  no  actual  ouster.  They  cannot  have  par- 
tition because  their  equitable  claims  are  unequal,  fluctuating, 
and  unsettled.  The  remedy  for  either  of  them  is  by  bill  in 
equity.^ 

Article  4. 

Agreements  to  Make  Conveyance  of  Land  When  Intended  as  Secur- 
ity for  a  Debt. 

?  289.  Agreement  to  Give  a  Mortgage.  |  294.  Appropriating  Specific  Prop- 
§  290.  The  Property  Must  be  Specific-  erty. 

ally  Described.  §  295.  Omission  of  Land  in  the  De- 
?  291.  Agreement  to  Support.  scription  by  Mistake. 

I  292.  Sufficiency  of  the  Instrument  to  |  296.  A  Deed  of  Land  with  Power 

Constitute  a  Mortgage.  of  Sale. 

§  293.  Part  Performance  of  the  Con-  §  297.  Interpretation  of  the  Agree- 

tract.  ment. 

§  289.  Agreement  to  Give  a  Mortgage. — A  written  in- 
strument given  as  security  for  a  debt,  containing  any  words  of 
conveyance  in  prsesenti,  will  oj)erate  as  an  equitable  mortgage. 
Thus  an  instrument  by  which  a  debtor  agrees  to  convey  to  his 
creditor  land,  the  same  to  be  sold  in  payment  of  the  debt,  and 
excess,  if  any,  to  be  returned  to  the  debtor,  is  in  the  nature  of 
a  mortgage,  and  will  be  so  construed  ;  ^  this  is  on  the  principle 
that  equity  will  treat  that  as  done  which  by  agreement  is  to 

1  Root  V.  Bancroft,  10  Met.  (Mass.)  44. 

'^Ewer  V.  Hobbs,  .5  Met.  (Mass.)  1.  See,  also,  King  v.  McVickar,  3  Sandf. 
Ch.  (N.  Y.)  192  ;  Fox  v.  Fraser,  92  Ind.  265. 

^O'Neal  V.  Seixas,  85  Ala.  80;  Oliva  v.  Bunaforza,  31  N.J.  Eq.  395  ;  Rich- 
'ardson  v.  Hamlett,  33  Ark.  237 ;  Cotterell  v.  Long,  20  Ohio,  464 ;  Delaire  v. 


300  NATURE    AND    REQUISITES    OF    THE   CONTRACT. 

be  done.^  Equity  will  treat  such  transactions  as  to  collateral 
consequences  in  the  same  manner  as  if  the  final  acts  contem- 
plated by  the  parties,  had  been  performed  as  they  ought  to 
have  been  under  the  agreement.^ 

A  party  bought  lands  and  had  them  conveyed  to  his  wife 
for  her  sole  use.  He  gave  his  notes  on  time  for  the  price,  and 
signed  a  written  agreement,  to  which  his  wife  was  not  a  party, 
to  make  with  her  a  mortgage  back  of  the  property  after  a  prior 
mortgage  to  a  bank  had  been  increased  sufficiently  to  raise 
money  to  repair  the  buildings.  Afterward  a  new  note  and 
mortgage  were  executed  by  the  party  and  his  wife  to  the  bank 
for  an  increased  amount,  the  old  note  and  mortgage  being 
settled  in  the  transaction.  Then  the  wife  refused  to  agree  to 
the  second  mortgage  in  accordance  with  her  husband's  agree- 
ment. She  had  accepted  the  deed  when  it  was  given,  but  it 
did  not  appear  that  she  knew  of  the  agreement  to  make  the 
mortgage.  This  transaction  created  an  equitable  mortgage, 
which  the  court  established  by  its  decree.^ 

This  is  upon  the  principle  that  equity  looks  upon  that  as 
done  which  ought  to  have  been  done.  Equity  will  treat  the 
subject-matter  as  to  collateral  consequences  and  incidents  in 
the  same  manner  as  if  the  final  acts,  contemplated  by  the  par- 
ties, had  been  executed  exactly  as  they  ought  to  have  been, 
not  as  the  parties  might  have  executed  them.  The  most  com- 
mon cases  of  the  application  of  the  rule  are  under  agreements. 
All  agreements  are  considered  as  performed,  which  were  made 
for  a  valuable  consideration,  in  favor  of  persons  entitled  to 
insist  on  their  performance.  They  are  to  be  considered  as 
done  at  the  time  when,  according  to  the  tenor  thereof,  they 
ought  to  have  been  done.* 

Keenan,  3  Des.  (S.  Car.)  74  ;  Poland  r.  Lamoille  R.  R.  Co.,  52  Vt.  144 ;  Petrie 
V.  Wright,  6  Sm.  &  M.  (Miss.)  647  ;  Hall  v.  Hall,  50  Conn.  104 ;  McQuie  v. 
Peay,  58  Mo.  56. 

1  Biebinger  v.  Continental  Bank,  99  U.  S.  143  ;  Bank  v.  Carpenter,  7  Ohio, 
21 ;  Morrow  v.  Turney,  35  Ala.  131. 

2  Daggett  V.  Rankin,  31  Cal.  321,  326. 

3  Hall  V.  Hall,  50  Conn.  104. 
*1  Story's  Eq.  Jur.,  sect.  64  g. 


EQUITABLE    MORTGAGES.  301 

If  it  may  be  implied  from  a  written  agreement  that  the  land 
is  to  be  security  for  a  debt,  then  the  instrument  amounts  to 
an  equitable  mortgage.^ 

§  290.  The  Property  must  be  Specifically  Described. — 
The  lien  cannot  be  enforced  and  carried  into  effect  when  the 
agreement  contains  no  specific  description  of  any  property. 
When  the  debt  is  not  charged  upon  any  particular  land,  the 
lien  is  not  enforceable.^ 

Thus,  a  legatee  was  paid  a  certain  amount  of  money  by  the 
administrator,  who  took  a  receipt  in  which  the  legatee  agreed 
that  if  the  amount  was  not  realized  out  of  the  personal  prop- 
erty of  the  estate,  the  same  should  be  a  lien  on  the  real  estate, 
or  his  interest  in  the  same ;  it  was  held  that  this  instrument 
created  no  lien  upon  the  land,  because  the  description  was 
wholly  insufficient,  and,  besides,  it  neither  conveyed  nor  pur- 
ported to  convey  or  mortgage  the  land.^ 

So  a  receipt  in  a  note  for  the  purchase-money  of  land  is 
nugatory,  and  amounts  to  nothing  more  than  a  mere  declara- 
tion of  intention.* 

But  any  agreement  between  the  parties  in  interest  that 
shows  any  intention  to  create  a  lien  on  specific  land  may,  in 
equity,  be  a  mortgage.^ 

Effect  has  been  given  to  this  principle  to  instruments  given 
by  the  maker  of  two  notes  to  his  creditors,  the  notes  reciting 
that  they  were  for  the  purchase  of  specific  land,  and  providing 
that  in  case  the  maker  should  fail  to  pay  them,  then  he  should 
convey  the  said  land  as  said  security.^ 

So  an  agreement  on  the  back  of  a  note  making  a  charge  upon 
particular  land  is  an  equitable  mortgage.     In  this  way  an  agree- 

'  2  Story's  Eq.  Jur.,  sect.  1020 ;  Chase  v.  Peck,  21  N.  Y.  583 ;  In  re  Howe,  1 
Paige  (N.  Y.),  125. 

'Boehl  V.  Wadgymar,  54  Tex.  589.  Compare  Humphreys  v.  Snyder, 
Morris  (Iowa),  263. 

'  Langley  v.  Vaughn,  10  Heisk.  (Tenn.)  553. 

*  Gilliam  v.  Esselman,  5  Sneed  (Tenn.),  86. 

^Daggett  V.  Rankin,  31  Cal.  321. 

« Courtney  v.  Scott,  Litt.  Sel.  Cas.  457 ;  Lyon  v.  Lyon,  67  N.  Y.  250;  Wayt 
'r.  Carwithen,  21  W.  Va.  516. 


302  NATURE    AND    REQUISITES   OF   THE    CONTRACT, 

ment  intended  to  operate  as  a  revival  of  a  mortgage  and  note 
which  had  been  paid,  may  be  rendered  effective  as  an  equitable 
mortgage,  although  ineffectual  to  revive  the  mortgage  lien.^ 

So  an  agreement  in  a  lease  that  the  lessor  "  is  to  have  a 
lien  "  upon  certain  property  for  the  faithful  performance  of  the 
lessee's  obligations  to  pay  rent,  is  in  effect  a  mortgage.^ 

In  general,  a  mortgage  or  trust  deed  which  cannot  be  en- 
forced by  a  sale  under  a  power  or  by  a  judgment  of  foreclosure, 
on  account  of  some  informality  which  is  requisite  to-  a  com- 
plete instrument,  will,  nevertheless,  be  regarded  as  an  equita- 
ble mortgage,  and  the  lien  will  be  enforced  by  proceedings  in 
equity.  If  the  instrument,  by  its  terms,  shows  that  the  parties 
intended  that  it  should  operate  as  a  lien  or  charge  upon  spe- 
cific property,  it  will  constitute  an  equitable  mortgage,  and 
may  be  enforced  in  a  court  of  equity.^ 

Doubtless,  there  must  be  an  identification  of  the  property, 
so  that  the  equitable  mortgagee  may  say,  with  a  reasonable 
degree  of  certainty,  what  it  is  that  is  subject  to  a  lien.*  Thus, 
where  the  agreement  was  not  for  a  mortgage  on  the  whole 
premises,  nor  for  any  part  of  it  with  specific  indication  of  that 
part,  but  for  a  mortgage  on  one  of  the  houses  then  going  up, 
but  without  pointing  out  the  particular  house,  such  a  designa- 
tion of  the  property  to  be  charged,  though  indefinite  to  some 
degree,  is  sufficient  for  an  equitable  mortgage.^ 

§  291.  Agreement  to  Support. — It  has  been  held  by  some 
courts  that  a  written  instrument  under  seal  but  not  acknowl- 
edged, in  wliich  the  signer  agrees  to  maintain  his  father  and 
mother  during  their  natural  lives,  and  as  security  for  the  ful- 
fillment of  the  agreement  conveys  and  grants  to  them  "  each 
and  severally,  a  life  lien  or  dower  or  lien  of  maintenance  for 
life  "  in  real  estate,  is  a  mortgage.^ 

>  Peckham  v.  Haddock,  36  111.  39. 

^  "Whiting  V.  Eichelberger,  16  Iowa,  422. 

'Wayt  V.  Carwithen,  21  W.  Va.  516. 

*  Stewart's  Case,  cited  2  Sch.  &  Lefr.  381. 

s  Payne  v.  Wilson,  74  N.  Y.  348. 

^Gilson  V.  Gilson,  2  Allen  (Mass.),  115. 


EQUITABLE   MORTGAGES.  303 

So  upon  receiving  a  grant  of  land  from  the  grantor  the  grantee 
executed  an  agreement,  not  under  seal,  to  support  and  main- 
tain the  grantor,  pledging  for  that  purpose,  the  produce  of  the 
land,  and  should  that  prove  insufficient,  to  appropriate  the  en- 
tire fee.  It  was  held  that  this  agreement  being  the  considera- 
tion of  the  grant,  the  transaction  was,  in  effect,  an  equitable 
mortgage.'  ^ 

§  292.  Sufficiency  of  the  Instrument  to  Constitute  a 
Mortgage. — To  constitute  a  legal  mortgage  no  particular 
words  are  necessary.  The  words  "  we  mortgage  the  property  " 
when  accompanied  by  a  provision  for  the  sale  of  it,  in  case  the 
money  is  not  paid,  are  clearly  sufficient.^ 

So  a  deed  or  writing  used  by  the  parties  for  the  purpose  of 
pledging  real  property  or  some  interest  therein,  as  security 
for  a  debt  or  obligation  which  is  defective  as  a  common-law 
mortgage,  which  by  its  terms  shows  that  the  parties  intended 
that  it  should  operate  as  a  lien,  or  charge  upon  specific  prop- 
erty, will  constitute  an  equitable  mortgage.^ 

So  any  instrument  pledging  land  for  a  debt  is  an  equitable 
mortgage,  without  regard  to  its  form.* 

Thus,  an  instrument  whereby  a  corporation  "  pledges  the 
real  and  personal  estate  of  said  company  "  for  the  fulfillment 
of  an  agreement,  may  be  enforced  as  a  mortgage.^ 

A  seal  is  not  necessary  to  an  equitable  mortgage.^  A  debtor 
may  mortgage  his  share  under  his  father's  will,  whenever  a 
division  shall  be  made.^ 

^  Chase  v.  Peck,  21  N.  Y.  581. 

*  De  Leon  v.  Higuera,  15  Cal.  483. 
MVayt  V.  Carwithen,  21  W.  Va.  516. 

*  Dunman  v.  Coleman,  59  Tex.  199 ;  Overstreet  v.  Baxter,  30  Kan.  55  ;  Mc- 
Donald V.  Kellogg,  30  Kan.  170 ;  Hicks  v.  Hicks,  5  Gill  &  J.  (Md.)  75  ;  Read 
V.  Gaillard,  2  Des.  (S.  Car.)  552 ;  Mellon  v.  Lemmon,  111  Pa.  St.  56  ;  Batty  v. 
Snook,  5  Mich.  231 ;  Cross  v.  Hepner,  7  Ind.  359  ;  Marshall  v.  Stewart,  17 
Ohio,  356.  See,  also,  Jackson  v.  CarsAvell,  34  Ga.  279  ;  Gale  v.  Morris,  29  X.  J. 
Eq.  222 ;  Stewart  v.  Hutchins,  6  Hill  (N.  Y.),  143 ;  Mitchell  v.  Wade,  39  Ark. 
377. 

*  Railroad  Co.  v.  Talman,  15  Ala.  472. 

« Woods  V.  Wallace,  22  Pa.  St.  171 ;  Spencer  i'.  Haynes,  12  Phil.  (Pa.)  452. 
^  'Lynch  v.  Utica  Ins.  Co.,  18  Wend.  (N.  Y.)  236. 


304  NATURE   AND    REQUISITES   OF    THE    CONTRACT. 

Where  a  woman  repudiates  a  contract  for  the  sale  of  land 
on  the  ground  that  it  was  made  during  coverture,  her  assignee 
of  the  vendee's  notes  for  deferred  payments,  has  an  equitable 
lien  upon  the  land  for  the  entire  amount  of  the  notes,  and  not 
merely  for  the  consideration  paid  by  him  for  them,  since  his 
recourse  against  the  vendee  is  lost  by  her  wrongful  act,^ 

§  293.  Part  Performance  op  the  Contract. — While  a 
parol  agreement  concerning  lands  remains  executory,  it  is 
within  the  statute  of  frauds,  and  so  not  enforceable,  for  the 
reason  that  it  is  not  in  writing;  yet  when  the  promisor 
actually  executes  the  agreement  by  the  delivery  of  a  formal 
mortgage,  the  objection  to  its  validity  on  that  ground  is  re- 
moved, and  the  agreement  becomes  as  effectual  for  all  pur- 
poses as  if  it  had  been  reduced  to  writing  when  the  contract 
and  mortgage  were  made.^ 

And  so,  generally,  a  parol  agreement  in  respect  to  lands 
cannot  be  avoided  in  equity  because  it  is  not  in  writing,  where 
there  has  been  a  part  performance.^  A  fortiori,  it  cannot  be 
avoided  where  it  has  been  fully  executed.* 

So  a  corporation  agreed  to  mortgage  its  interest  in  lands  not 
paid  for,  in  favor  of  some  of  the  members  who  were  about  to 
incur  personal  liabilities  for  the  company — such  agreement  be- 
ing entered  in  the  minutes  of  the  company,  and  afterward  a 
deed  of  trust  made  in  conformity  therewith.  It  was  held  that 
this  deed  of  trust  might  be  viewed  simply  in  the  light  of  a 
deed  in  confirmation  of  the  prior  agreement,  signed  by  the 
party  or  authorized  agent,  and  was  sufficient  to  bind  the  corpo- 
ration.® 

§  294.  Appropriating  Specific  Property.  —  A  written 
agreement  by  the  owner  of  certain  lands  to  pay  the  creditor  a 
given  sum,  conditioned  that  when  the  land  was  sold  to  enable 

1  Newman  v.  Moore  (Ky.),  17  S.  W.  Eep.  740. 

'Siemon  v.  Schurck,  29  N.  Y.  598 ;  White  v.  Carpenter,  2  Paige  (N.Y.),  217. 

'  Freeman  v.  Freeman,  43  N.  Y.  34. 

*Burdick  v.  Jackson,  7  Hun  (N.  Y.),  488. 

5  Miller  v.  Moore,  3  Jones  Eq.  (N.  Car.)  431. 


EQUITABLE    MORTGAGES,  305 

the  owner  to  realize  the  amount,  the  creditor  should  surrender 
his  possession,  and  meantime  giving  the  creditor  the  occupancy 
in  lieu  of  paying  him  interest  on  this  sum,  was  held  to  con- 
stitute an  equitable  mortgage,  and  amounted  to  a  specific  lien 
on  the  land/ 

An  agreement  in  writing  to  give  a  mortgage  or  to  appropri- 
ate specific  property  to  the  discharge  of  a  particular  debt  will 
create  a  mortgage  in  equity,  or  a  special  lien  on  the  property 
so  mortgaged.^  And  an  agreement  in  writing  to  give  a  mort- 
gage will  create  a  lien  upon  the  land  specified  as  against 
general  creditors.^ 

§  295.  Omission  of  Land  in  the  Description  by  Mis- 
take.— When  land  intended  to  be  included  in  a  mortgage  is, 
by  mistake,  omitted,  and  a  judgment  is  subsequently  rendered 
against  the  mortgagor,  the  lien  of  the  judgment  creditor  is 
subject  to  the  equity  of  the  mortgage.* 

And  this  is  the  general  rule  that  when  land  intended  to  be 
included  in  a  mortgage  is  omitted  by  mistake,  a  judgment 
subsequently  recovered  against  the  mortgagor,  is  subordinate 
to  the  equity  of  the  mortgage.^ 

In  all  cases  of  mistakes  in  deeds  courts  of  equity  will  inter- 
fere as  between  the  original  parties,  or  those  claiming  under 
them  in  privity,  such  as  personal  representatives,  heirs,  de- 
visees, legatees,  assignees,  voluntary  creditors,  or  judgment 
creditors,  or  purchasers  from  them  with  notice  of  the  facts.  As 
against  bona  fide  purchasers  for  a  full  consideration  without 
notice,  courts  of  equity  will  grant  no  relief ;  because  they  have, 
at  least,  an  equal  equity  to  the  protection  of  the  courts.®  As 
between  the  immediate  parties  to  the  instrument,  the  correction 

'  Blackburn  v.  Tweedie,  60  Mo.  505.  See,  also,  Chadwick  v.  Clapp,  69  111. 
119. 

'^  Racouillat  v.  Sansevain,  376  Cal.  375 ;  McQuie  v.  Peay,  58  Mo.  58 ;  Black- 
burn V.  Tweedie,  69  Mo.  505. 

'  Carter  v.  Holman,  60  Mo.  498 ;  McQuie  v.  Peay,  58  Mo.  58. 

*  Martin  v.  Nixon,  92  Mo.  26. 

*  Galway  v.  Malchow,  7  Nebr.  285 ;  Swarts  v.  Stees,  2  Kan.  236 ;  Gouvemeur 
V.  Titus,  6  Paige  (N.  Y.),  347 ;  Freeman  on  Judg.,  sect.  357. 

"«  Young  V.  Coleman,  43  Mo.  179. 
VOL,  1,-20 


306  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

is  within  the  jurisdiction  of  the  court,  and  should  be  made. 
But  equity  goes  further  than  this,  and  makes  good,  defects  ex- 
isting in  mortgages  contrary  to  the  intention  of  the  parties, 
even  against  subsequent  judgment  creditors  claiming  under 
the  party  who  is  bound,  in  conscience,  to  correct  the  mistake/ 

§  296.  A  Deed  of  Land  with  Power  of  Sale. — A  deed  of 
land,  with  a  power  of  sale  to  secure  the  payment  of  a  debt, 
whether  made  to  a  creditor  or  a  third  person,  is,  in  equity,  es- 
sentially a  mortgage,  if  there  is  left  a  right  to  redeem  on  pay- 
ment of  such  debt.^ 

So  an  instrument  securing  a  single  creditor  on  property, 
which  by  its  terms  can  be  disposed  of  only  to  pay  the  secured 
debt,  is  an  equitable  mortgage.^ 

It  is  the  settled  doctrine  of  equity  that  a  conveyance  of  land 
for  the  purpose  of  securing  payment  of  a  sum  of  money  is  a 
mortgage,  if  it  leaves  a  right  to  redeem  upon  payment  of  the 
debt.  If  there  is  no  power  of  sale,  the  equity  of  redemption 
remains  until  it  is  foreclosed  by  a  suit  in  chancery,  or  by  some 
other  mode  recognized  by  law.  If  there  is  a  power  of  sale, 
whether  in  the  creditor  or  in  some  other  person  to  whom  the 
conveyance  is  made  for  that  purpose,  it  is  still  in  effect  a  mort- 
gage, though  in  form  a  deed  of  trust,  and  may  by  foreclosed 
by  sale  in  pursuance  of  the  terms  in  which  the  power  is  con- 
ferred, or  by  suit  in  chancery.* 

§  297.  Interpretation  of  the  Agreement. — Whatever  be 
the  form  of  the  contract,  if  it  be  intended  to  secure  a  debt  or 
create  a  security,  it  is  an  equitable  mortgage.  This  is  the 
criterion.  The  terms  of  the  contract  need  not  even  express  a 
security,  because  equity  can  imply  this  from  the  nature  of  the 
whole  transaction.  These  mortgages  are  generally  applied  to 
those  kind  of  instruments  or  contracts  by  which  equity  estab- 
lishes a  lien. 

^  Will,  on  Eq.  Jur.  75 ;  Freem.  on  Judg.,  sect.  359. 
^Shillaber  v.  Robinson,  97  U.  S.  68. 
8Parsell  v.  Thayer,  39  Mich.  467. 
*Shillaber  v.  Robinson,  97  U.  S.  68. 


f 


EQUITABLE    MORTGAGES.  307 

There  are  many  instruments  not  always  intended  as  mort- 
gages, not  having  the  usual  form  of  mortgages,  and  which  are 
not  legal  mortgages,  which  equity  will  construe  as  a  lien,  and, 
hence,  an  equitable  mortgage/ 

In  a  court  of  equity,  a  conveyance  of  land  absolute  and 
unconditional  on  its  face,  will  be  declared  and  established  as 
a  mortgage  on  clear  and  certain  proof  that  the  parties  intended 
it  to  stand  simply  as  a  security  for  a  debt ;  and  this  fact  may 
be  proved  by  parol  evidence,  and  may  be  shown  by  a  separate- 
writing.^ 

A  loan  and  a  deed  given  as  security  therefor,  with  a  contract 
not  under  seal,  showing  clearly  that  the  transaction  was  one  giv- 
ing a  security,  will  be  construed  as  an  equitable  mortgage,^  and 
will  be  enforced  as  such  in  the  hands  of  an  equitable  mortgagee 
or  his  assignee,  taking  the  assignment  with  full  knowledge  of, 
and  subject  to,  all  equities  between  the  original  parties.* 

^Ketchum  v.  St.  Louis,  101  U.  S.  306;  Hall  v.  Railroad  Co.,  58  Ala.  10; 
Newlin  v.  McAfee,  64  Ala.  357 ;  Turner  v.  Wilkinson,  72  Ala.  361 ;  Reming- 
ton r.  Higgins,  54  Cal.  620 ;  Carey  r.  Rawson,  8  Mass.  159 ;  Moors  r.  Albro, 
129  Mass.  9 ;  Bears  v.  Ford,  108  111.  16 ;  Union  Mut.  Life  Ins.  Co.  v.  Slee,  110 
111.  35 ;  Ferris  v.  Wilcox,  51  Mich.  105 ;  AHiet  v.  Young,  34  N.J.  Eq.  15 ;  Starkes 
V.  Redfield,  52  Wis.  349;  Blizzard  v.  Craigmiles,  7  Lea  (Tenn.),  693;  Hoile  v. 
Bailey,  58  Wis.  434  ;  Beatty  v.  Brummett,  94  Ind.  76 ;  Brown  v.  Brown,  103 
Ind.  23 ;  Hall  v.  Hall,  50  Conn.  104  ;  Joseph  Smith  Co.  v.  McGuinness,  14  R. 
I.  59 ;  Stewart  v.  Hutchins,  13  Wend.  (N.  Y.)  485 ;  Scott  v.  Mewhirter,  49 
Iowa,  487  ;  Fisk  r.  Stewart,  24  Minn.  97 ;  Marshall  v.  Stewart,  17  Ohio,  356 ; 
Lewis  V.  Small,  71  Me.  552 ;  Black  v.  Gregg,  58  Mo.  565 ;  Buse  v.  Page,  32 
Minn.  Ill ;  Jackson  v.  Green,  4  Johns.  (N.  Y.)  186;  Parks  v.  Parks,  66  Ala- 
326 ;  Radford  v.  Folsom,  58  Iowa,  473. 

'^Turner  v.  Wilkinson,  72  Ala.  361. 

3  Bank  v.  Stimpson,  21  Me.  195  ;  Rowell  v.  Jewett,  69  Me.  293. 

*  Lewis  V.  Small,  71  Me.  552. 


308  nature  and  requisites  of  the  contract. 

Article  5. 
Assignment  of  Contract  of  Purchase  as  Security. 

§  298.  Assignment  of  Contract  of  est  of  a  Contract  of  Pur- 
Sale,  chase. 

2  299.  Assignment  of  a    Bond    for  a  §  302.  Mortgages    Before  _  Entry  — 

Deed.  Pre-emption. 

§  300.  Assignment    of    Certificate    of  ^  303.  Mortgaging  After  Entry,  but 

Purchase  of  Public  Lands.  Before  Issuance  of  Patent. 

§  301.  Assignment  of  a  Partial  Inter-  ?  304.  After- Acquired  Title. 

§  298.  Assignment  of  Contract  of  Sale. — The  vendee  of 
lands  under  a  contract  of  sale  has  an  interest  capable  of  being 
mortgaged.  And  when  he  conveys  such  interest  to  a  third 
party  to  secure  him  for  money  advanced  to  pay  the  original 
debt,  the  transaction  will  constitute  an  equitable  mort- 
gage.' 

So  when  a  party  has  a  contract  for  the  purchase  of  land,  if 
another  person  pays  the  purchase-money  and  takes  title,  agree- 
ing to  reconvey  to  the  first  party  on  payment  of  the  money, 
the  transaction  is  the  mortgage  of  the  equitable  title.^  Even 
if  such  a  contract  should  be  interpreted  as  an  option  contract, 
it  is  binding  and  enforceable  if  the  option  be  exercised  accord- 
ing to  the  terms.^ 

An  assignment  of  a  land  contract  for  security  to  the  as- 
signee, with  the  condition  that  if  the  debt  is  paid  at  the  time 
stipulated,  the  assignee  shall  re-assign  the  contract,  is,  in  equity, 
a  mortgage,  and  the  assignor  has  the  right  of  redemption.* 

§  299.  Assignment  of  Bond  for  a  Deed. — A  bond  for  a 
deed  may  be  mortgaged  or  the  interest  held  in  the  land  by  the 
obligee.     Thus,  where  a  party  holds  real  estate  under  a  bond 

^Niggeler  v.  Maurin,  34  Minn.  118;  Eoddy  v.  Elam,  12  Rich.  Eq.  (S.  Car.) 
343  ;  Gilkerson  v.  Connor,  24  S.  Car.  321  ;  Shoecraft  v.  Bloxham,  124  U.  S.  7.30, 
73.5  ;  Fitzhugh  v.  Smith,  62  111.  486  ;  Brockway  v.  Wells,  1  Paige  (N.  Y.),  617. 

"Fessler's  Appeal,  75  Pa.  St.  483;  Purdy  v.  Bullard,  41  Cal.  444;  Dwen  v. 
Blake,  44  111.  135. 

3  Kerr  v.  Day,  2  Harris  (Pa.),  112;  Corson  v.  Mulvany,  13  Wright  (Pa.),  88  ; 
Lowry  v.  Mehafty,  10  Watts  (Pa.),  389. 

*  Brockway  v.  Wells,  1  Paige  (N.  Y.),  617. 


EQUITABLE    MORTGAGES.  309 

for  a  deed  from  the  owner  of  the  legal  title,  and  is  in  possession' 
thereof,  he  has  such  interest  as  can  be  mortgaged.^ 

And  it  is  held  by  some  courts  that  the  effect  of  the  bond 
itself  is  that  of  a  mortgage,  the  same  as  though  the  vendor  had' 
conveyed  the  land  by  an  absolute  deed  to  the  purchaser,  and 
taken  a  mortgage  back  to  secure  the  payment  of  the  purchase- 
money.^ 

A  court  of  equity  has  jurisdiction  in  cases  arising  out  of 
contracts  for  the  sale  of  land  to  relieve  against  forfeiture,  and 
to  foreclose  the  equity  of  the  delinquent  vendee ;  the  relation 
of  the  parties  to  title-bonds  or  land  contracts,  is  analogous  to 
that  of  an  equitable  mortgagor  and  mortgagee  for  purchase- 
money.^  Even  if  the  bond  for  title  obligate  the  vendor  to 
make  a  deed  to  the  laud,  so  soon  as  certain  payments  were 
made,  and  certain  notes  given,  and  the  proof  was  that  these- 
conditions  had  been  complied  with,  still  the  land  may  be  sold 
to  pay  the  balance  of  the  purchase-money.* 

§  300.  Assignment  of  Certificate  of  Purchase  of  Pub- 
lic Lands. — The  assignment  of  a  certificate  of  purchase  of 
public  lands  as  security,  will  be  treated  as  a  mortgage.^ 

Thus,  where  the  owner  of  a  certificate  of  entry  of  lands 

^  Jones  V.  Lapham,  15  Kan.  540 ;  Baker  v.  Bishop  Hill  Colony,  45  111.  264 ; 
Bull  V.  Sykes,  7  Wis.  449 ;  Button  v.  Schroyer,  5  Wis.  598  ;  Newhouse  v.  Hill, 
7  Blackf.  (Ind.)  584 ;  Alderson  v.  Ames,  6  Md.  52 ;  Fenno  v.  Say  re,  3  Ala; 
458 ;  Neligh  v.  Michenor,  3  Stock.  (N.  J.)  539 ;  Christy  v.  Dana,  34  Cal.  548. 

2  Lewis  r.  Boskins,  27  Ark.  61;  Smith  v.  Robinson,  13  Ark.  533  ;  Shall  y, 
Biscoe,  18  Ark.  142 ;  Tanner  v.  Hicks,  4  Sm.  &  M.  (Miss.)  294  ;  Smith  «.' 
Moore,  26  111.  392  ;  Smith  v.  Price,  42  111.  399 ;  Scroggins  v.  Hoadley,  56  Ga.- 
165 ;  Relfe  v.  Relfe,  34  Ala.  504 ;  Lingan  v.  Henderson,  1  Bland  Ch.  (Md.) 
236 ;  Irvine  v.  Muse,  10  Heisk.  (Tenn.)  477  ;  Cleveland  v.  Martin,  2  Head 
(Tenn.),  128;  Richards  v.  Fisher,  8  W.  Va.  55;  Merritt  v.  Judd,  14  Cal.  59; 
Purdy  V.  Bullard,  41  Cal.  444 ;  Dukes  v.  Turner,  44  Iowa,  575  ;  Graham  v.  Mc- 
Campbell,  Meigs  (Tenn.),  52  ;  Pintard  v.  Goodloe,  Hemp.  C.  C.  502. 

3  Button  V.  Schroyer,  5  Wis.  598 ;  Bull  v.  Sykes,  7  Wis.  449. 
*Scro^ns  v.  Hoadley,  56  Ga.  165. 

5  Hill  V.  Eldred,  49  Cal.  398  ;  Stover  v.  Bounds,  1  Ohio  St.  107  ;  Case  v.  Mc- 
Cabe,  35  Mich.  100 ;  Hays  v.  Hall,  4  Port.  (Ala.)  374  ;  Ross  v.  Mitchell,  28  Tex. 
150 ;  Mowry  v.  Wood,  12  Wis.  413  ;  .Tarvis  v.  Dutcher,  16  Wis.  307  ;  Dodge  rt 
Silverthorn,  12  Wis.  644;  Jones  r.  Yoakam,  5  Neb.  265;  Wright  v.  Shum- 
way,  1  Biss.  C.  C.  23 ;  Gunderman  v.  Gunnison,  39  Mich.  313. 


310  NATURE   AND   REQUISITES   OF    THE    CONTRACT. 

from  the  United  States,  assigns  said  certificate  as  security  for  a 
debt  with  the  condition  of  defeasance  on  the  payment  of  the 
debt,  such  assignment  creates  an  equitable  mortgage  on  the 
lands  covered  by  such  certificate/ 

Where  the  assignment  of  a  land  certificate  is  intended  for  a 
security,  it  is  a  mortgage  as  between  the  parties.^  The  same 
principle  applies  to  school  land  certificates,  and  the  land  de- 
scribed therein  may  be  mortgaged,  subject,  of  course,  to  the 
claims  of  the  State.^ 

And  this  is  so  although  the  fee  of  the  land  remains  in  the 
State  until  the  amount  of  the  certificate  is  paid  and  the  patent 
issued ;  still  the  purchaser  takes  an  interest  in  real  estate  which 
may  be  sold,  conveyed,  or  mortgaged.* 

These  certificates  are  analogous  to  original  land  contracts 
between  individuals  for  the  sale  and  conveyance  of  real  estate.^ 

So  where  a  claimant  of  land  under  the  United  States  home- 
stead laws  has  made  proof  at  the  proper  time  at  the  land 
office,  and  has  done  everything  required  to  entitle  him  to  a 
patent,  he  can  execute  a  valid  mortgage  on  the  land,  although 
the  patent  be  not  issued.® 

§  301.  Assignment  of  a  Partial  Interest  of  a  Contract 
OF  Purchase. — The  same  principle  applies  to  the  assignment 
of  a  partial  interest  of  a  contract  of  purchase  as  security ;  such 
assignment  will  be  construed  as  an  equitable  mortgage.  The 
holder  of  the  legal  title  may  be  enjoined  from  conveying  the 
property  to  a  third  party,  and  the  mortgagee  may  enforce  his 
rights  in  equity.'^ 

*  Stover  V.  Bounds,  1  Ohio  St.  107. 

^  Gunderman  v.  Gunnison,  39  Mich.  313.  See,  also,  Campbell  v.  Dearborn, 
109  Mass.  130  ;  Odell  v.  Montross,  68  N.  Y.  499 ;  Wilson  v.  Giddings,  28  Ohio 
St.  554 ;  Morgan's  Assignees  v.  Shinn,  15  Wall.  (U.  S.)  105. 

3  Dodge  V.  Silverthorn,  12  Wis.  644. 

*  Bull  V.  Sykes,  7  Wis.  449. 

*  Smith  V.  IMariner,  5  Wis.  551. 

*  Cheney  v.  AVhite,  5  Neb.  261 ;  Jones  v.  Yoakam,  5  Neb.  265  ;  Nycum  v.  Mc- 
Allister, 33  Iowa,  375 ;  Watson  v.  Voorhees,  14  Kan.  328 ;  In  re  Cross,  2  Dill. 
C.  C.  320  ;  Robbing  v.  Bunn,  54  111.  48. 

^Northup  V.  Cross,  Selden's  Notes  (N.  Y.),  111. 


EQUITABLE    MORTGAGES.  311 

§  302,  Mortgaging  Before  Entry — Pre-emption. — A 
mortgage  by  a  pre-emptor  before  entry  is  void/  being  contrary 
to  the  statute  of  the  United  States.^  "  Mortgage  "  is  included 
within  the  words,  "  grants  or  conveys,"  as  used  in  the  United 
States  statute.'  So  all  contracts  in  violation  of  this  important 
.provision  of  the  act  of  Congress  are  void,  and  cannot  be  en- 
forced.* 

On  the  other  hand,  this  doctrine  has  been  denied  in  Minne- 
sota ;  the  court  decides  that  a  mortgage  is  not  included  in  the 
terms  of  the  statute,  because  a  mortgage  is  a  mere  security  and 
does  not  act  as  a  conveyance.^ 

§303.  Mortgaging  After  Entry  But  Before  Issuance 
OF  Patent. — The  pre-emptor  has  an  interest  which  he  may 
mortgage  after  entry  of  the  land  and  before  he  receives  his 
patent  from  the  government,  and  this  question  must  be  settled 
by  the  United  States.  Whenever  a  question  in  any  court, 
State  or  Federal,  is  whether  a  title  to  land  which  had  once 
been  the  property  of  the  United  States  is  passed,  that  question 
must  be  resolved  by  the  laws  of  the  United  States;  but 
whenever  according  to  these  laws  the  title  shall  have  passed, 
then  that  property,  like  all  other  property  in  the  State,  is  sub- 

^  Brewster  v.  Madden,  15  Kan.  2-19 ;  Green  v.  Houston,  22  Kan.  35 ;  Bull  v. 
Shaw,  48  Cal.  455. 

^U.  S.  Rev.  Stat.,  sect.  2262,  Act  of  Sept.  4,  1841,  sect.  13.  This  act  pro- 
vides that  the  pre-emptor  shall  make  oath  that  "  he  has  not  directly  or  indi- 
rectly made  any  agreement  or  contract,  in  any  manner,  with  any  person  or 
persons  whatsoever,  by  which  the  title  which  he  might  acquire  from  the 
Government  of  the  United  States  should  inure  in  whole  or  in  part  to  the  bene- 
fit of  any  person  except  himself."  This  act  also  says  that  "  any  grant  or  con- 
veyance which  he  may  have  made,  except  in  the  hands  of  a  bona  fide  pur- 
chaser, for  valuable  consideration,  shall  be  null  and  void." 

•^  Bass  V.  Bukor,  6  Mont.  442. 

*  Warren  v.  Van  Brunt,  19  Wall.  (U.  S.)  646,  655. 

^. Tones  r.  Tainter,  15  Minn.  512,  overruling  McCue  v.  Smith,  9  Minn.  252, 
and  Woodbury  v.  Dorman,  15  Minn.  341,  on  this  point.  The  groimd  upon 
which  the  Minnesota  court  bases  its  decision  is  not  solid.  It  holds  that  the 
mortgage  contemplated  by  such  contract  or  agreement  is  but  a  security,  and 
its  execution  does  not  have  the  effect  of  making  the  title  acquired  by  the  pre- 
emptor,  to  wit,  the  fee,  inure,  in  whole  or  in  part,  to  the  benefit  of  another. 
'See  a  refutation  of  this  decision  in  Bass  v.  Buker,  6  Mont.  442. 


312  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

ject  to  the  State  legislation  so  far  as  that  legislation  is  con- 
sistent with  the  admission,  that  the  title  passes  and  vests  ac- 
cording to  the  laws  of  the  United  States/ 

This  law  of  the  United  States  provides  that  "  all  assignments 
and  transfers  of  the  right  hereby  secured  prior  to  the  issuing 
of  the  patent,  shall  be  null  and  void."  ^ 

But  it  is  not  supposed  that  Congress,  in  the  absence  of  an 
express  declaration  to  that  effect,  intended  to  tie  up  these 
lands  in  the  hands  of  the  original  owners  until  the  govern- 
ment should  choose  to  issue  the  patent.  Justice  Davis  says  : 
"  If  it  had  been  the  purpose  of  Congress  to  attain  the  object 
contended  for,  it  would  have  declared  the  lands  themselves 
unalienable  until  the  patent  was  granted.  Instead  of  this  the 
legislation  was  directed  against  the  assignment  or  transfer  of 
the  right  secured  by  the  act,  wdiich  was  the  right  of  pre-emp- 
tion, leaving  the  pre-emptor  free  to  sell  his  land  after  the 
entry,  if  at  that  time  he  was  in  good  faith  the  owner  of  the 
land  and  had  done  nothing  inconsistent  with  the  provisions  of 
the  law  on  the  subject."  ^ 

It  is  well  settled  that  such  pre-emptor,  having  made  the 
entry,  paid  his  mone}'",  taken  his  receipt  or  certificate,  and  re- 
corded the  same,  has  the  entire  equitable  title  and  interest 
which  he  may  assign,  transfer,  and  convey,  and  that  the  legal 
title  will  vest  in  the  grantee  upon  the  issuing  of  the  patent.^ 

The  right  of  a  pre-emptor  after  entry  to  mortgage  his  inter- 
est does  not  come  within  the  prohibition  of  the  Federal 
statute.'^ 

1  Irvine  I).  Marshall,  20  How.  (U.  S.)  564  ;  Gibson  v.  Chouteau,  13  Wall.  (U. 
S.)  92.    See,  also,  Seymour  v.  Sanders,  3  Dill.  C.  C.  440. 

*  U.  S.  Rev.  Stat.,  sect.  2263. 

3  Myers  v.  Croft,  13  Wall.  (U.  S.)  291.  See,  also.  Lessee  of  French  v.  Spen- 
cer, 21  How.  (U.  S.)  228 ;  Tredgill  v.  Pintard,  12  How.  (U.  S.)  24  ;  Landes  v. 
Brant,  10  How.  (U.  S.)  348. 

*  Dillingham  v.  Fisher,  5  Wis.  475  ;  Stephenson  v.  Wilson,  37  Wis.  489. 

*  Paige  w.  Peters,  70  Wis.  178  ;  Nycum  v.  McAllister,  83  Iowa,  374 ;  Fuller?;. 
Hunt,  48  Iowa,  163  ;  Kirkaldie  v.  Larrabee,  31  Cal.  456  ;  Orr  v.  Stewart,  67 
Cal.  275 ;  Cheney  v.  White,  5  Neb.  261  ;  Jones  v.  Yoakam,  5  Neb.  265 ;  Spiess 
V.  Neuberg,  71  Wis.  279 ;  Warren  v.  Van  Brunt,  19  Wall.  (U.  S.)  654.  See 
Webster  v.  Bowman,  25  Fed.  Rep.  889 ;  Gile  v.  Hallock,  33  Wis.  523. 


I 


EQUITABLE   MORTGAGES.  313 

§  304.  After-Acquired  Title. — It  is  well  settled  that  when 
a  mortgage  of  land  is  made,  purporting  to  convey  the  land  in 
fee,  any  title  afterward  acquired  by  the  mortgagor  will  feed 
the  mortgage  and  inure  to  the  benefit  of  the  mortgagee ;  ^  and 
this  is  so  though  the  title  when  the  mortgage  was  made  was  in 
the  government  and  afterward  acquired  by  patent  from  the 
government.^  Thus,  a  homesteader,  after  having  mortgaged 
his  right,  title,  and  interest,  and  the  mortgage  was  foreclosed 
and  the  land  bid  in  by  the  mortgagee  who  obtained  thereon  a 
sheriff 's  deed,  commuted  his  homestead  entry  into  a  cash  entry 
and  paid  in  full  the  price,  and  received  a  duplicate  receipt  and 
certificate  of  purchase  therefor;  but  it  was  held  that  such 
after-acquired  title  by  the  mortgagor  fed  the  mortgage,  and 
inured  to  the  benefit  of  the  mortgagee  and  purchaser  at  such 
foreclosure  sale.^  So  where  a  mortgagee  has  purchased  at  a 
foreclosure  sale  and  received  a  deed,  he  will  hold  it  against  the 
mortgagor,  who,  when  occupying  the  land  as  his  tenant,  makes 
a  new  homestead  entry  of  the  land,  commutes  the  same  by 
payment  and  obtains  a  patent.* 

But  if  the  pre-emptor  sells  the  land  to  another  who  obtains 
a  patent  from  the  United  States,  the  mortgagee  will  have  no 
remedy  against  the  property  and  lose  his  lien.^ 

The  title  afterward  acquired  by  the  mortgagor  will  inure  to 
the  benefit  of  the  mortgagee,  because  the  relation  of  the  mort- 
gagor is  one  which  requires  him  to  preserve  the  property  for 
the  purpose  of  the  security  for  which  it  was  originally  pledged. 
He  is  estopped  from  denying  the  existence  of  the  lien  wliich 
he  has  attempted  to  create,  and  from  defeating,  by  his  own 
act,  the  enforcement  of  the  lien  against  the  property  thus 
mortgaged.® 

'  Clark  V.  Baker,  14  Cal.  612 ;  76  Am.  Dec.  449 ;  Sherman  v.  McCarthy,  57 
Cal.  507. 

'Christy  v.  Dana,  42  Cal.  174 ;  Camp  v.  Grider,  62  Cal.  20. 

^Orr  V.  Stewart,  67  Cal.  275.  See,  also.  Hushes  v.  United  States,  4  Wall. 
(U.  S.)  232 ;  Lessee  of  French  r.  Spencer,  21  How.  (U.  S.)  228. 

*  Spiess  V.  Neuburg,  71  Wis.  279. 

*Bull  r.  Shaw,  48  Cal.  455. 

v«  Clark  V.  Baker,  14  Cal.  612;  76  Am.  Dec.  449. 


314         nature  and  requisites  op  the  contract. 

Article  6. 
By  Act  of  the  Legislature. 
I  305.  Liens  Created  by  the  State.  I  306.  Discharging  Such  Liens. 

§  305.  Liens  Created  by  the  State. — The  State  can  create 
liens  by  the  act  of  the  legislature.  Corporations  generally 
have  power  to  mortgage  their  property.  So,  bonds  issued  by 
a  corporation,  pledging  real  estate  and  personal  property  of  the 
company  for  the  payment  of  a  deed  and  interest,  and  contain- 
ing other  corresponding  stipulations,  will  be  treated  by  the 
court  of  ecjuity  as  a  mortgage,  and  enforced  according  to  the 
intent  of  the  parties.^ 

In  construing  contracts,  secret  liens  are  not  favored,  because 
they  are  dangerous  and  unjust,  and  it  is  only  when  some  great 
public  interest  is  involved  that  any  construction  of  a  law  will 
be  made  asserting  or  upholding  them.^ 

Where  a  railroad  corporation  accepts  bonds  issued  under  an 
act  of  the  legislature,  which  declares  that  they  shall  "  consti- 
tute a  first  lien  and  mortgage  upon  the  road  and  property  "  of 
the  company,  the  word  "  property  "  includes  all  lands  of  the 
company,  and  a  valid  lien  on  them  is  created  by  the  act.^ 
And  this  lien  of  the  State  upon  railroad  property  embraces 
lands,  although  outside  of  the  railroad,  not  necessary  to  its 
use.* 

But  when  the  act  authorizes  the  issuance  of  bonds  which 
shall  be  binding  on  the  property  of  such  company,  bonds 
issued  by  the  company  under  such  act,  without  the  execution 
of  any  mortgage  to  secure  them,  do  not,  ipso  facto,  become  a 
lien  upon  the  property  of  the  corporation  so  as  to  be  superior, 
or  even  equal,  in  dignity  to  other  bonds  in  the  nature  of  a 
mortgage.* 

>  White  Water  Valley  Canal  Co.  v.  Vallette,  21  How.  (U.  S.)  414. 
'^  Black  V.  Scott,  2  Brock.  C.  C.  330,  346;  Conard  v.  At.  Ins.  Co.,  1  Pet. 
386. 
3  Wilson  V.  Boyce,  92  TJ.  S.  320. 
*  Whitehead  v.  Vineyard,  50  Mo.  30. 
s  Brunswick  &  Albany  R.  R.  Co.  v.  Huges,  52  Ga.  557. 


EQUITABLE    MORTGAGES.  315 

§  306.  Discharging  Such  Liex. — The  legislature  can  also 
discharge  such  lien  which  it  has  created,  when  not  in  contra- 
vention of  the  constitution,  on  receiving  the  full  value  of  its 
security ;  of  this  value  the  legislature  is  the  judge,  especially 
when  the  statutory  lien  reserved  by  the  State  is  for  its  indem- 
nity, and  is  under  its  control  as  between  it  and  the  bond- 
holders.^ 

The  provision  of  the  constitution  of  Missouri  says,  "  The 
general  assembly  shall  have  no  power  for  any  purpose  what- 
ever to  release  the  lien  held  by  the  State  upon  any  railroad." 
This  provision  has  reference  to  the  statutory  lien  held  by  the 
State  on  different  railroads  for  the  benefit  of  the  State,  lent  to 
them  by  the  issue  of  State  bonds,  the  principal  and  interest  of 
which  the  railroad  companies  were  to  pay,  and  was  not  meant 
in  case  of  failure  by  the  railroad  company  to  prevent  the  State 
from  making  a  compromise  with  any  railroad  company  of  any 
debt  due  it,  or  to  become  due,  and  on  the  compromise  being 
effected  to  release  the  lien.^ 

The  State  can  also  waive  its  lien,  and  can  substitute  a 
county  in  the  place  of  the  State  with  a  lien.^ 

1  Murdock  v.  Woodson,  2  Dill.  C.  C.  188. 

'^Woodson  V.  Murdock,  22  Wall.  (U.  S.)  351.    See,  also,  Darby  v.  Wright,  3 
Blatchf.  C.  C.  170. 
^Ketchum  v.  Pacific  EaHroad  Co.,  4  DiU.  C.  C.  78. 


CHAPTER  IX. 

vendor's  lien. 

Article  1. 

Nature  and  Effect. 

§307. 

Definition. 

§312. 

Right  of  Way. 

?308. 

When   the  Vendor 

9  Lien  At- 

§  313. 

Parties  Entitled  to  this  Lien. 

taches. 

§314. 

Waiving  of  the  Imp] 

ied  Lien. 

^309. 

Payment  in  Services 

or  in  Spe- 

§  315. 

Devolution  of  this  Lien  and 

cific  Articles. 

Securities. 

§  310.  Conveyance  for  Support — Rights 

§316. 

Assignment  of   the 

Implied 

of  a  Vendee  of  an 

Equity. 

Lien. 

?311. 

Selling  Real  Estate  and  Personal 

Property  together  at  a  Gross 
Price. 

§  307.  Definition. — The  vendor  of  real  estate  has  a  lien, 
under  certain  circumstances,  on  the  estate  sold,  for  the  pur- 
chase-money. The  vendee  becomes  a  trustee  to  the  vendor 
for  the  purchase-money,  or  so  much  as  remains  unpaid.  This 
equitable  mortgage  will  bind  the  vendee  and  his  heirs  and 
volunteers,  and  all  purchasers  from  the  vendee,  with  notice  of 
the  existence  of  the  vendor's  equity.  Prima  facie,  the  lien 
exists  without  any  special  agreement  for  that  purpose.^ 

This  principle  is  stated  that  where  a  conveyance  is  made 
prematurely  before  paj'^ment  of  the  price,  the  money  is  a 
charge  on  the  estate  in  the  hands  of  the  vendee.  And  this 
equitable  lien  on  a  sale  of  realty  is  very  different  from  a  lien 
at  law,  for  it  operates  after  the  possession  has  been  changed, 
and  is  available  by  way  of  charge  instead  of  detainer.^ 

This  lien  exists  against  all  the  world,  except  bona  fide  pur- 
chasers without  notice.* 

14  Kent's  Com.  151,152. 
2  Adams'  Eq.  Jur.  127. 

^Garson  v.  Green,  1  Johns.  Ch.  (N.  Y.)  308;  Hughes  v.  Kearney,  1  Sch.  & 
Lefr.  132. 

316 


vendor's  lien.  317 

A  vendor's  lien  proper,  in  equity,  arises  in  cases  where  the 
owner  of  land  conveys  the  same  by  deed,  and  thus  divests 
himself  of  the  legal  title,  and  all  or  some  part  of  the  purchase 
price  remains  unpaid.  The  vendor,  in  case  of  an  executory 
contract  for  the  sale  of  land  before  conveyance,  also  has  a  lien 
for  the  unpaid  price  ;  he  cannot  be  divested  of  his  legal  title 
before  payment.  In  the  former  case,  the  vendee  cannot  do 
anything  to  prejudice  the  vendor's  legal  title,  except  by  pay- 
ing the  price  according  to  the  terms  of  the  contract.  The 
vendor's  lien  in  such  a  case  is  not  a  secret  lien. 

So  it  is  not  necessary,  as  held  by  many  courts,  that  a 
vendor's  lien  shall  be  expressly  reserved  in  a  contract  for  the 
sale  of  land.  It  is  implied  by  the  law,  in  the  absence  of  any- 
thing showing  an  intention  to  waive  it.  When  expressly  re- 
served, it  is  in  the  nature  of  a  mortgage,  and  there  is  nothing 
left  to  implication.  But  the  fact  that  a  vendor  retains  the 
legal  title  in  himself,  and  agrees  to  part  with  it  upon  full  pay- 
ment of  the  purchase-money,  affords  conclusive  evidence  of 
his  intention  to  reserve  his  lien.  When  the  price  is  paid,  the 
vendee  becomes  the  complete  equitable  owner,  and  the  vendor 
is  simply  the  trustee  or  naked  holder  of  the  legal  title  for  the 
vendee.^ 

A  plain  distinction  exists  between  the  lien  of  a  grantor  after 
a  conveyance,  and  the  interest  of  the  vendor  before  convey- 
ance. The  former  is  not  a  legal  estate  but  is  a  mere  equitable 
charge  on  the  land.  In  the  latter,  although  possession  may 
have  been  delivered  to  the  vendee,  and  although,  under  the 
doctrine  of  conversion,  the  vendee  may  have  acquired  an 
equitable  estate,  yet  the  vendor  retains  the  legal  title,  and  the 
vendee  cannot  prejudice  that  legal  title,  or  do  anything  by 
which  it  shall  be  defeated,  except  by  performing  the  very  ob- 
ligation on  his  part  which  the  retention  of  such  legal  title  was 
intended  to  secure,  namely,  by  paying  the  price  according  to 
the  terms  of  the  contract.  To  call  this  complete  legal  title  a 
lien  is  certainly  a  misnomer.  In  case  of  a  conveyance,  the 
grantor  has  a  lien,  but  no  title.     In  case  of  a  contract  for  sale 

^  Robinson  v.  Appleton,  124  111.  276,  opinion  by  Shope,  J. 


318  NATURE    AND    REQUISITES   OF   THE   CONTRACT. 

before  conveyance,  the  vendor  has  the  legal  title,  and  has  no 
need  of  any  lien.  His  title  is  a  more  efficient  security,  since 
the  vendee  cannot  defeat  it  by  any  act  or  transfer,  even  to  or 
with  a  bona  fide  purchaser.^ 

The  vendor  may  have  a  specific  performance  of  a  contract  for 
the  sale  of  land  decreed  against  his  vendee.^  This  remedy 
extends  in  favor  of  the  personal  representatives  of  a  deceased 
vendor,^  and  against  subsequent  purchasers  or  assignees  of 
the  vendee,  taking  with  notice.* 

The  doctrine  of  vendor's  lien  is,  generally  stated,  that  the 
vendor  of  land  who  has  taken  no  security,  although  he  has 
made  an  absolute  conveyance  by  deed,  with  a  formal  acknowl- 
edgment, in  the  deed  or  on  the  back  of  it,  that  the  considera- 
tion has  been  paid,  retains  an  equitable  lien  for  the  purchase- 
money,  unless  there  has  been  an  express  or  implied  waiver  in 
discharge  of  it ;  and  this  lien  will  be  enforced  in  equity 
against  the  vendee,  volunteers,  and  all  others  claiming  under 
him,  with  notice — that  is,  against  all  persons  except  bona  fide 
purchasers  for  a  valuable  consideration,  without  notice.^  So 
this  rule  applies  with  as  much  force  to  the  case  of  a  purchase 
by  a  married  woman  as  to  any  other.^  This  doctrine  is 
adopted  in  many  States  of  the  Union  :  Alabama,^  Arkansas, 

iPom.  Eq.  Jur.,  sect.  1260  ;  Church  v.  Smith,  39  Wis.  492;  Reese  v.  Burts, 
39  Ga.  565  ;  Vail  v.  Drexel,  9  111.  App.  439 ;  McCaslin  v.  State,  44  Ind.  151 ; 
Pitts  V.  Parker,  44  Miss.  247 ;  Driver  v.  Hudspeth,  16  Ala.  348 ;  Sparks  v. 
Hess,  15  Cal.  186.  See,  also,  Mason  v.  Cadwell,  5  Gilm.  (111.)  196 ;  Chrisman 
V.  Miller,  21  111.  227  ;  Story's  Eq.,  sect.  788. 

2  Chambers  v.  Rowe,  36  111.  171. 

3  Burger  v.  Potter,  32  111.  66. 

*  Champion  v.  Brown,  6  Johns.  Ch.  (N.  Y.)  398;  Story's  Eq.  Jur.,  sect.  789. 

^Mackreth  v.  Symmons,  15  Ves.  329  ;  Gordon  v.  Bell,  50  Ala.  213 ;  Holman 
V.  Patterson,  29  Ark.  357;  Burt  v.  Wilson,  28  Cal.  632;  Francis  v.  Wells,  2 
Colo.  660 ;  Johnson  v.  McGrew,  42  Iowa,  555  ;  Walton  r.  Hargroves,  42  Miss. 
18  ;  Richards  v.  Fisher,  8  W.  Va.  55 ;  Stafford  v.  Van  Rensselaer,  9  Cow.  (N. 
Y.)  316;  Ledford  v.  Smith,  6  Bush  (Ky.),  129;  Briscoe  v.  Bronaugh,  1  Tex. 
326 ;  Marsh  v.  Turner,  4  Mo.  253 ;  Ross  v.  Whitson,  6  Yerg.  (Tenn.)  50  ;  Wil- 
liams V.  Roberts,  5  Ohio,  35 ;  Carr  v.  Hobbs,  11  Md.  285  ;  Deibler  v.  Berwick, 
4  Blackf.  (Ind.)  339 ;  Dyer  v.  Martin,  4  Scam.  (111.)  147. 

« Chilton  V.  Braiden,  2  Black  (U.  S.),  458 ;  Armstrong  v.  Ross,  20  N.  J.  Eq. 
109 ;  Pylant  v.  Reeves,  53  Ala.  132. 

'  3  Pom.  Eq.  Jur.,  sect.  1249 ;  Burns  v.  Taylor,  23  Ala.  255 ;  Shall  v.  Biscoe, 


vendor's  lien.  319 

Colorado,  District  of  Columbia,  Florida,  Illinois,  Indiana,  Iowa, 
Kentucky,  Maryland,  Michigan,  Minnesota,  Mississippi,  Mis- 
souri, New  Jersey,  New  Mexico  Territory,  New  York,  North 
Dakota,  Ohio,  Oregon,  South  Dakota,  Tennessee,  Utah  Terri- 
tory, Texas,  and  Wisconsin.  .  Other  States  have  rejected  this 
doctrine:  Connecticut/  Delaware,  Georgia,  Kansas,  Maine, 
Massachusetts,  Nebraska,  New  Hampshire,  North  Carolina, 
Pennsylvania,  Rhode  Island,  South  Carolina,  Vermont,  Vir- 
ginia, and  West  Virginia. 

The  Supreme  Court  of  the  United  States  recognizes  and  en- 
forces the  lien.  This  court  says :  "  When  one  person  has  got 
the  estate  of  another,  he  ought  not,  in  conscience,  to  be  allowed 
to  keep  it  without  paying  the  consideration.  It  is  on  the  prin- 
ciple that  tlie  courts  of  equity  proceed  as  between  vendor  and 
vendee.  The  purchase-money  is  treated  as  a  lien  on  the  land, 
where  the  vendor  has  taken  no  separate  security."  ^ 

Judge  Gray  concludes  that  the  foundation  of  this  doctrine 
was,  that  justice  required  that  the  vendor  should  be  enabled  to 
charge  the  land  in  the  hands  of  the  vendee  as  security  for  the  un- 
paid purchase-money,  and  that  the  restriction  of  it  to  real  estate 

18  Ark.  142 ;  Truebody  v.  Jacobson,  2  Cal.  269 ;  Civil  Code  Cal.,  1872,  sect. 
3046 ;  Francis  v.  Wells,  2  Colo.  660 ;  Ford  v.  Smith,  1  McAr.  (Dis.  Col.)  592 ; 
Bradford  v.  Marfan,  2  Fla.  463 ;  Trustees  v.  Wright,  11  111.  603 ;  McCarty  v. 
Pniett,  4  Ind.  226 ;  Pierson  v.  David,  1  Iowa,  23 ;  Rev.  Stat.  Iowa,  1873,  sect. 
1940  ;  Muir  v.  Cross,  10  B.  Mon.  (Ky.)  277 ;  Gen.  Stat.  Ky.  1873,  p.  589 ;  Carr 
V.  Hobbs,  11  Md.  285 ;  Sears  v.  Smith,  2  Mich.  243 ;  Duke  v.  Balme,  16  Minn. 
306 ;  Trotter  v.  Erwin,  27  Miss.  772 ;  Marsh  v.  Turner,  4  Mo.  253 ;  Corlies  v. 
Rowland,  26  N.  J.  Eq.  311 ;  Bates  v.  Childers,  4  N.  Mex.  347 ;  Stafford  v.  Van 
Eensselaer,  9  Cow.  (N.  Y.)  316 ;  Williams  v.  Roberts,  5  Ohio,  35 ;  Gee  v.  Mc- 
Millan, 14  Ore.  268 ;  Ross  r.  Whitson,  6  Yerg.  (Tenn.)  50 ;  Pinchain  v.  Collard, 
13  Tex.  333;  Charter  Oak  Life  Ins.  Co.  v.  Gisborne,  5  Utah,  319;  Willard  v. 
Reas,  26  Wis.  540. 

'  Atwood  V.  Vincent,  17  Conn.  575 ;  Jones  r.  Janes,  56  Ga.  325 ;  Smith  v. 
Rowland,  13  Kan.  245 ;  Philbrook  v.  Delano,  29  Me.  410 ;  Ahrend  v.  Odiorne, 
118  Mass.  261 ;  Arlin  v.  Brown,  44  N.  H.  102 ;  Cameron  v.  Mason,  7  Ired.  Eq. 
(N.  Car.)  180  ;  Stephen's  Appeal,  38  Pa.  St.  9 ;  Perry  v.  Grant,  10  R.  I.  334 ; 
Wragg  V.  Compt.  Gen.,  2  Desau.  (S.  Car.)  509 ;  Gen.  St.  Vt.  1862,  ch.  65,  sect. 
33 ;  Code  Ya.,  1873,  ch.  115,  sect.  1 ;  Code  W.  Va.,  1870,  ch.  75,  sect.  1. 

''Chilton  V.  Braiden,  2  Black  (U.  S.),  458;  Peters  t-.  Bowman,  98  U.  S.  56; 
Tredgill  v.  Pintard,  12  How.  (U.  S.)  15.  See,  also,  Coos  Bay  Wagon  Co.  v. 
Crocker,  6  Saw.  C.  C.  574 ;  Brown  v.  Gihnan,  4  Wheat.  (U.  S.)  256. 


320  NATURE    AND    REQUISITES   OF    THE    CONTRACT. 

suggested  the  inference  that  the  court  of  chancery  was  induced 
to  interpose,  for  the  reason  that  real  estate  could  not  be  at- 
tached on  mesne  process ;  nor,  except  in  certain  cases,  and  to  a 
limited  extent,  be  taken  in  execution  for  debt.  The  learned 
judge  rejects  the  theory  of  natural  equity,  because  that  would 
apply  to  a  sale  of  chattels  as  well  as  of  land  ;  and  also  the  theory 
of  a  trust,  as  that  would  include  too  many  other  cases  to  which, 
confessedly,  the  doctrine  had  not  been  extended,  and  hence, 
rejects  the  doctrine  of  a  vendor's  lien.' 

This  theory  of  the  Massachusetts  court  as  to  the  origin  of  the 
doctrine  is  imperfect  and  unsatisfactory.  The  absence  of  any 
power  at  common  law  to  make  the  land  liable  for  ordinary 
debts,  instead  of  being  the  source  of  the  vendor's  lien,  is  itself 
only  another  instance  and  consequence  of  the  same  general 
superiority  given  to  the  ownership  of  the  land ;  both  are  inci- 
dents of  one  common  mode  of  treating  real  estate,  as  compared 
with  personal  property.^ 

Mr.  Pomeroy  repudiates  the  idea  of  its  being  a  trust,  and 
thinks  that  the  original  and  true  ground  of  the  lien  arises  out 
of  the  natural  judicial  conception,  that  upon  the  sale  of  any- 
thing on  credit,  the  very  identical  thing  sold  should  be  re- 
garded in  some  sort  as  a  special  fund  out  of  which  payment  of 
the  price  was  to  be  obtained  or,  at  least,  secured  ;  and  that  the 
seller  should  not  be  considered  as  parting  absolutely  with  his 
whole  interest  and  dominion  until  the  price  is  fully  paid.^ 

Judge  Story  states  the  true  ground  when  he  says,  "  that  the 
principle  upon  which  courts  of  equity  have  proceeded  in  estab- 
lishing the  lien  in  the  nature  of  a  trust  is,  that  a  person  who 
has  gotten  the  estate  of  another  ought  not,  in  conscience,  as 
between  them,  be  allowed  to  keep  it,  and  not  pay  the  full  con- 
sideration-money." * 

"  It  has  often  been  objected  that  the  creation  of  such  a  trust 
by  courts  of  equity  is  in  contravention  of  the  statute  of  frauds. 

'  Ahrend  v.  Odiorne,  118  Mass.  261 ;  19  Am.  Rep.  449. 
^3  Pom.  Eq.  Jur.,  sect.  1250,  note. 
'3  Pom.  Eq.  Jur.,  sect.  1250. 
*  Story,  Eq.  Jur.,  sect.  1219. 


vendor's  lien.  321 

But  whatever  may  be  tlie  original  force  of  such  an  objection, 
the  doctrine  is  now  too  firmly  established  to  be  shaken  by  any 
mere  theoretical  doubts."  ^ 

§  308.  AVhen  the  Lien  Attaches. — In  many  of  the  United 
States  and  in  England,  if  the  purchase-money  is  not  paid  the 
vendor's  lien  will  be  kept  alive,  for  equity  requires  it.  This 
lien  will  be  enforced  in  equity  against  the  vendee,  volunteers, 
and  all  others  claiming  under  him  with  notice — that  is,  against 
all  persons  except  bona  fide  purchasers  for  a  valuable  con- 
sideration without  notice.^  And  this  doctrine  seems  to  be  de- 
rived from  the  civil  law.^ 

However,  in  other  States  this  doctrine  has  been  abandoned.* 
The  vendor's  equitable  lien  attaches,  if  possession  of  the 
estate  has  been  delivered  to  the  purchaser,  although  there  has 
been  no  conveyance  to  him,^  and  it  attaches  upon  copyholds 
and  leaseholds  as  well  as  freeholds.^  And  this  doctrine,  as  to 
the  vendor's  lien,  applies  with  as  much  force  to  the  case  of  a 
purchase  by  a  married  woman  as  to  any  other  case.^ 

^Storjs  Eq.  Jur.,  sect.  1218. 

^Bayley  v.  Greenleaf,  7  Wheat.  (U.  S.)  46  ;  Watson  v.  Wells,  5  Conn.  468; 
Fish  r.  Rowland,  1  Paige  (N.  Y.),20;  Mackreth  v.  Symmons,  15  Yes.  339; 
Cheesebrough  v.  Millard,  1  Johns.  Ch.  (N.  Y.)  409 ;  Gordon  v.  Bell,  50  Ala, 
213 ;  Holman  v.  Patterson,  29  Ark.  357 ;  Burt  v.  Wilson,  28  Cal.  632 ;  Francis 
V.  AVella,  2  Colo.  660 ;  Johnson  v.  McGrew,  42  Iowa,  555 ;  Walton  r.  Har- 
groves,  42  Miss.  18  ;  Richards  v.  Fisher,  8  W.  Va.  55 ;  Stafford  r.  Van  Eens- 
selaer,  9  Cow.  (N.  Y.)  316  ;  Ledford  v.  Smith,  6  Bush  (Ky.),  129  ;  Briscoe  v. 
Bronaugh,  1  Tex.  326  ;  Marsh  v.  Turner,  4  Mo.  253 ;  Ross  v.  Whitson,  6  Yerg. 
(Tenn.)  50 ;  Williams  v.  Roberts,  5  Ohio,  35 ;  Carr  v.  Hobbs,  11  Md.  285 ; 
Deibler  v.  Barwick,  4  Blackf.  (Ind.)  339  ;  Dyer  v.  Martin,  4  Scam.  (111.)  147 ; 
Chilton  V.  Braiden,  2  Black  (U.  S.),  458. 

^Dig.,  Lib.  18,  tit.  1,  law  1,  sect.  19. 

♦Hepburn  v.  Snyder,  3  Pa.  St.  72;  Womble  v.  Battle,  3  Ired.  Eq.  (N.  Car.) 
182 ;  Wragg  v.  General,  2  Dessau.  (S.  Car.)  509 ;  Philbrook  r.  Delano,  29  Me. 
410  ;  Arlin  r.  Brown,  44  N.  H.  102 ;  Atwood  v.  Vincent,  17  Conn.  576 ;  Perry 
('.Grant,  10  R.  I.  .334;  Ahrend  v.  Odiorne,  118  Mass.  261 ;  19  Am.  Rep.  449  ; 
Brown  v.  Simpson,  4  Kan.  76  ;  Yancey  v.  Mauck,  15  Gratt.  (Ya.)  300. 

*  Smith  V.  Hibbard,  2  Dick.  730 ;  Andrew  v.  Andrew,  8  Dc  G.,  M.  &  G.  336  ;, 
LangPtaff  v.  Nicholson,  25  Beav.  160. 

*Wrout  r.  Dawes,  25  Beav.  369  ;  Richardson  r.  Bowman,  40  Miss.  782. 

'Chilton  r.  Braiden,  2  Black  (U.  S.),  458  ;  Armstrong  i\  Ross,  20  N.  J.  Eq. 
109 ;  Pylant  v.  Reeves,  53  Ala.  132. 

VOL.  I.— 21 


322  NATURE   AND    REQUISITES   OF    THE    CONTRACT. 

But  the  lien  will  not  be  given  by  a  court  of  equity  as  a  se- 
ewrity  for  unliquidated  and  uncertain  damages.^  On  the  other 
ihand,  when  the  vendor  is  unable  to  make  title,  the  vendee  has 
a  lien  on  the  land  for  the  purchase-money  paid  by  him.^ 

A  party  may  have  a  lien  in  the  exchange  of  real  estate. 
Accordingly,  on  exchange  of  land,  $200  was  due  one  of  the 
vendors,  which  was  to  be  deposited  in  a  bank  to  be  paid  when 
this  vendor  had  performed  a  certain  work  on  the  land  he  ex- 
changed. The  $200  was  never  deposited.  It  was  held  that 
after  performance  of  the  work  specified,  this  vendor  was  en- 
titled to  recover  the  $200,  and  that  he  had  a  lien  on  the  prop- 
erty he  exchanged  for  the  amount.^ 

Two  parties  contracted  jointly  to  build  and  keep  a  hotel  on 
the  ground  .owned  by  one  of  them.  The  other  partner  had  an 
option  to  buy  the  interest  of  such  land.  It  was  held  in  a  suit 
for  specific  performance  of  the  contract,  that  the  owner  of  the 
land  had  an  equitable  lien  for  the  purchase-money  on  the 
property,  which  .should  be  sold  to  satisfy  this  lien  as  in  mort- 
gage cases.* 

But  no  lien  attaches  when  the  vendor  accepts  therefor  the 
obligations  of  a  third  party,  intending  to  rely  for  payment  on 
such  obligations,  and  that  his  vendee  shall  take  the  land  un- 
incumbered.^ 

A  vendee  may  have  .a  vendor's  lieu  on  land  on  which  there 
is  already  a  vendor's  lien.  Thus  a  vendee  on  whose  land  was 
a  vendor's  lien,  sold  part  to  a  third  party  who  paid  part  and 
agreed  to  pay  two-tliirds  of  the  original  price,  but  failed  to 
meet  one  of  the  notes  when  due,  and  the  vendee  paid  it,  the 
third  party  agreeing  to  repay  him.     By  mutual  agreement  the 

^  Payne  v.  Averj',  21  Mich.  524  ;  Arlin  v.  Brown,  44  N.  H.  102. 

'^  Wythers  v.  Lee,  3  Drew.  396 ;  Rose  v.  Watson,  10  H.  L.  Cas.  672 ;  Story's 
Eq.  Jur.,  sect.  1231. 

^  Brown  v.  O'Brien,  39  Minn.  13.  See,  also,  Drinkwater  v.  Moreman,  61  Ga. 
395 ;  Bryant  v.  Stephens,  58  Ala.  636 ;  Pratt  v.  Clark,  57  Mo.  189  ;  Dawson  v. 
Girard  Life  Co.,  27  Minn.  411 ;  Burns  v.  Taylor,  23  Ala.  255;  McDole  r.Purdy, 
23  Iowa,  277. 

*  Johnson  v.  Fowler,  68  Mich.  1.    See  Pope  v.  Heartwell,  79  Ga.  482. 

*  Springfield,  etc..  Railroad  Co.  v.  StcAvart,  51  Ark.  285;  Richardson  v. 
Green,  46  Ark.  270. 


vendor's  lien.  323 

original  vendor  conveyed  to  eacli  his  respective  portion,  taking 
from  each  new  notes  for  the  portion  of  the  unpaid  price 
each  had  agreed  to  pay.  It  was  held  that  the  first  vendee 
had  a  lien  on  the  third  party's  tract  for  the  two-thirds  of  the 
note  so  paid  by  him.*  So  where  the  vendee  of  land  paid  a 
part  of  the  price  and  took  possession  and  agreed  to  execute  a 
mortgage  for  the  residue,  and  the  mortgage  was  so  prepared, 
which  he  was  to  execute,  but  which  he  never  did  execute,  pro- 
viding that  the  mortgagor  should  keep  the  taxes  paid,  but  he 
also  failed  to  pay  the  taxes,  and  the  vendor  paid  them  to  pre- 
serve his  security,  the  vendor  had  a  lien  according  to  the  terms 
of  the  prepared  mortgage,  not  only  for  the  residue  of  the 
purchase  price,  but  also  for  the  taxes  which  he  had  paid.^ 

It  has  been  held  that  a  lien  will  not  arise  from  the  ex- 
change of  land  for  chattels,  or  for  other  land.^  But  the  cor- 
rect doctrine  is,  that  there  is  nothing  to  distinguish  an  ex- 
change of  lands  so  far  as  respects  the  application  of  this 
principle  of  lien  for  the  purchase-money  from  a  sale  of  lands.* 
So  a  vendor  who  is  fraudulently  induced  to  take  land  instead 
of  the  money  for  which  he  originally  agreed,  may  treat  the 
payment  as  a  nullity  and  enforce  his  lien.^ 

AVhere  a  part  of  a  tract  of  land  burdened  with  a  vendor's 
lien  is  mortgaged  to  secure  a  contingent  liability,  the  mort- 
gagee cannot  under  the  statute  foreclose  the  lien  for  the 
value  of  the  mortgaged  portion  ascertained  by  the  decree, 
so  that  it  shall  be  decreed  to  pay  its  proportion  of  the  lien, 
when  at  the  time  of  the  decree  the  mortgagor's  liability  has 
not  become  liquidated  absolutely.^ 

§309.  Payment  in  Services  or  in  Specific  Articles. — 
Other  things  besides  money  and  notes  may  be  received  in 

^  Henson  v.  Reed,  71  Tex.  726. 
'Devin  v.  Eagleson,79  Iowa,  269. 
'Coit  V.  Fougera,  .36  Barb.  (N.  Y.)  195. 
*  Burns  v.  Taylor,  23  Ala.  255. 

=^  Bradley  v.  Bosley,  1  Barb.  Ch.  (N.  Y.)  125.     See,  also,  Mills  v.  Bliss,  55 
N.  Y.  139  ;  Brown  r.  O'Brien,  39  Minn.  13. 
«Gridley  v.  Brooks- Waterfield  Co.  (Ky.),  14  S.  W.  Rep.  407. 


324  NATURE    AND    REQUISITES   OF   THE   CONTRACT. 

payment,  and  the  vendor's  lien  will  subsist  until  the  con- 
tract is  fulfilled.  Accordingly  where  land  is  sold  for  a  spe- 
cific price  in  money,  the  vendor  has  a  lien  for  the  price, 
though  it  is  agreed  that  the  price  may  be  paid  in  services 
by  the  vendee.^  So  the  lien  of  the  vendor  is  not  aff'ected 
by  taking  notes  of  the  vendee  payable  in  sj)ecific  articles.^ 

There  must  be  a  debt  for  unpaid  purchase-money  to  a 
fixed  amount  due  directly  to  the  vendor.  If  the  obligation 
of  the  vendee  consists  of  collateral  covenants,  or  be  for  the 
discharge  of  a  liability  to  a  third  party  no  lien  is  retained 
when  the  conveyance  is  absolute.^  But  when  specific  articles 
are  agreed  to  be  paid  for  the  purchase  of  real  estate,  the 
vendor,  upon  the  failure  of  the  vendee  to  pay  him,  may  en- 
force his  lien,* 

§310.  Conveyance  for  Support — Rights  of  a  Vendee 
OF  an  Equity. — When  the  vendee  takes  only  an  equity,  the 
vendor's  lien  does  not  attach.  Thus  where  a  vendee  takes  real 
estate  with  the  condition  that  he  must  use  the  income  thereof, 
or  so  much  as  is  necessary  for  the  support  of  a  party  during 
life,  no  vendor's  lien  exists  in  favor  of  the  vendor,  because 
he  is  rather  the  vendee  of  an  equity  of  the  premises,  and  the 
lien  will  not  attach.^ 

Nor  is  such  a  lien  implied  to  secure  the  performance  of  a 
consideration  for  the  transfer  of  real  estate,  when  the  consid- 
eration is  of  such  a  nature  that  the  court  cannot  accurately 
ascertain  and  define  the  amount  of  the  charge  to  be  thus  im- 
posed upon  the  land,  such  as  the  agreement  to  support  the 
grantor  during  life.'' 

The  great  weight  of  authority  is  that  a  vendor  of  real  prop- 
erty is  not  entitled  to  an  implied  equitable  lien  to  secure  the 
performance  of  a  consideration,  when  that  is  of  such  a  na- 

1  Winters  v.  Fain,  47  Ark.  493  ;  Young  v.  Harris,  36  Ark.  162. 
"Plowman  v.  Riddle,  14  Ala.  169. 
^  Patterson  v.  Edwards,  29  Mi.«s.  67. 
■  ^  Harvey  v.  Kelly,  41  Miss.  490. 
^McArthur  v.  Gordon,  51  Hun  (N.  Y.),  511. 
« Peters  D.  Tunell,  43  Minn.  473. 


vendor's  lien.  325 

ture  that  a  court  cannot  accurately  ascertain  and  define  the 
amount  of  the  charge  to  be  imposed  upon  the  land  and  en- 
force it/  While  there  are  decisions  which  support  the  right 
of  lien  in  such  cases,  it  is  considered  that  the  stronger  cur- 
rent of  authority  is  the  other  way,  and  that  to  allow  the  im-- 
plication  of  a  reserved  lien  in  such  cases,  would  be  extending 
the  doctrine  beyond  its  established  limits.  The  contract  to 
support  the  grantor  during  life  is  not  to  be  performed  by  a 
single  act,  but  performed  during  an  indefinite  period.  There 
can  be  no  lien  unless  it  existed  from  the  beginning  at  the  time 
of  the  conveyance  and  before  any  obligation  had  become  de- 
fined, certain,  and  ascertainable." 

This  lien  will  not  be  given  by  a  court  of  equity  as  a  security 
for  unliquidated  and  uncertain  amounts.^ 

So  where  a  vendee,  by  his  bond  reciting  the  conveyance  of 
the  land  to  him  as  the  consideration  of  such  bond,  covenanted 
to  maintain  the  vendor  and  his  son  during  their  natural  lives, 
it  was  held  that  the  covenant  was  the  substituted  consideration 
for  the  purchase-money,  and  that  the  bond  was  not  an  equit- 
able incumbrance  on  the  land  in  behalf  either  of  the  obligee 
or  of  his  son,  who  was  only  a  beneficiary.* 

§  311.  Selling  Real  Estate  and  Personal  Property  To- 
gether AT  A  Gross  Price. — When  real  estate  and  personal 
property  are  sold  together,  at  a  gross  price,  not  distinguishing 
the  separate  values  or  price  of  either,  there  is  no  vendor's  implied 
lien  on  the  land ;  and  though  the  note  taken  for  the  credit  pay-: 
ment  recites  that  it  was  given  for  a  part  of  the  purchase-money 
of  the  land,  this  will  not  change  the  rule,  because  parol  evi- 
dence is  admissible  to  show  that  personal  property  was  also 
included  in  the  sale.^ 

»ArliniJ.  Brown,  44  N.  H.  102;  Brawley  v.  Catron,  8  Leigh  (Va.),  522; 
Hiscock  V.  Norton,  42  Mich.  320  ;  Clarke  v.  Royle,  3  Sim.  499. 

''Hammond  v.  Payton,  34  Minn.  529. 

n^ayne  c.  Avery,  21  Mich.  524 ;  Arlinv.  Brown,  44  N.  H.  102. 

*  McKilUp  V.  McKillip,  8  Barb.  (N.  Y.)  552. 

^Wilkinson  v.  Parmer,  82  Ala.  367;  Robinson  v.  Lehman,  72  Ala.  401; 
|lussell  V.  McCormick,  45  Ala.  587. 


326  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

So  where  the  contract  of  sale  embraces  both  real  and  per- 
sonal property,  and  no  data  are  furnished  by  which  to  ascer- 
tain that  a  separate  and  definite  price  was  fixed  for  the  land, 
there  is  an  implied  waiver  of  the  vendor's  lien.  The  verbal 
admissions  of  the  deceased  party,  though  competent  evidence, 
should  be  received  with  great  care,  especially  when  many 
years  have  elapsed  since  they  were  made,  and  they  are  incon- 
sistent with  a  writing  signed  at  the  time  of  the  transaction  to 
which  they  related.' 

It  is  the  general  rule  that  the  vendor's  lien  upon  real  estate, 
does  not  arise  in  the  cases  of  sale  of  both  real  estate  and  per- 
sonal property  for  one  entire  sum  or  consideration  without  any 
distinct  price  having  been  set  upon  the  real  estate.^  But  it  is 
otherwise  where  it  appears  that  the  land  and  the  chattels  were 
valued  separately,  though  conveyed  by  the  same  deed.^ 

§  312.  Right  of  Way. — A  party  selling  the  right  of  way 
to  a  railroad  company  has  no  vendor's  lien  on  the  company's 
property.  So  a  contract  in  the  form  of  a  deed  duly  recorded, 
by  which  the  vendor  sells  a  right  of  way  to  a  railroad  com- 
pany, which  stipulates,  without  any  words  reserving  a  lien, 
that  the  said  company  shall  pay  a  certain  amount  per  annum, 
or  may  pay  the  price  in  full  for  said  right  of  way,  does  not 
give  the  vendor  a  lien  on  the  property  of  the  company.* 

§  313.  Parties  Entitled  to  this  Lien. — One  who  has 
contracted  to  convey  real  estate,  but  has  not  made  the  convey- 
ance, has  an  equitable  lien  upon  the  land  for  the  unpaid  pur- 
chase-money, as  between  him  and  the  vendee  and  those  claim- 
ing under  the  vendee.^ 

'  Alexander  v.  Hooks,  84  Ala.  605. 

2  Peters  v.  Tunell,  43  Minn.  473  ;  Stringfellow  v.  Ivie,  73  Ala.  209 ;  McCand- 
lieh  r.  Keen,  13  Gratt.  (Va.)  615 ;  Meigs  v.  Dimock,  6  Conn.  458 ;  Chapman  v. 
Beardsley,  31  Conn.  115 ;  Betts  v.  Sykes,  82  Ala.  378 ;  3  Pom.  Eq.,  sect.  1251, 
note. 

*  Russell  V.  McCormick,  45  Ala.  587  ;  6  Am.  Rep.  707. 

*  Baltimore  and  Liberty  Turnpike  Co.  v.  Moale,  71  Md.  353.  See,  also,  Walker 
V.  Ware,  etc.,  L.  R.  1  Eq.  195 ;  Dubois  v.  Hull,  43  Barb.  (N.  Y.)  26. 

5  Birdcall  v.  Cropsey,  29  Nebr.  672,  679;  Rhea  v.  Reynolds,  12  Nebr.  128; 
Whitehorn  v.  Cranz,  20  Nebr.  392. 


vendor's  lien.  327 

A  statute  ^  which  provides  that  "  when  any  real  estate 
shall  be  conveyed,"  the  vendor  shall  have  no  lien  on  the  land 
unless  it  is  stated  in  the  deed  what  part  of  the  consideration 
remains  unpaid,  does  not  deprive  the  vendor  of  his  lien  on  the 
land  as  against  a  remote  bona  fide  purchaser,  where  neither  the 
deed  of  the  vendor  nor  that  of  the  vendee  was  recorded  or 
lodged  for  record.^ 

On  an  administrator's  sale  of  land,  the  price  of  which  the 
intestate  had  not  fully  paid,  the  intestate's  vendor  will  not  be 
preferred  in  the  distribution  of  the  proceeds  unless  he  has 
given  public  notice  that  his  interest  also  might  be  sold,  or 
shows  that  the  land  brought  its  full  value.^ 

The  fact  that  a  deed  recites  the  payment  of  the  purchase- 
money  does  not  waive  or  destroy  the  vendor's  lien  for  the  pur- 
chase-money.* And  where  a  party  furnishes  another  with 
mone}^  to  buy  land  under  an  agreement,  that  the  vendee  will  give 
him  a  mortgage  on  the  property  to  secure  such  debt  as  soon  as 
the  deed  is  received,  but  the  vendee  refuses  to  give  the  mort- 
gage, the  party  furnishing  the  money  will  have  a  vendor's  lien 
which  he  can  enforce  against  the  land.' 

So  in  a  case  for  money  advanced,  which  was  used  in  buying 
land,  the  fact  that  a  party  holds  the  purchase-money  notes, 
though  they  have  never  been  assigned  to  him,  and  that  the 
vendee  has  made  payments  to  him,  which  have  been  credited 
on  the  notes,  show,  as  between  them,  that  the  party  is  holding 
the  notes  as  securitv  for  his  advances,  and  he  is  entitled  to  a 
vendor's  lien  as  against  the  vendee's  widow,  who  claims  a 
homestead.®  So  where  a  vendor  sells  land  by  an  executory 
contract,  on  credit,  and  places  the  vendee  in  possession,  and 
the  vendee,  without  obtaining  a  legal  title  from  the  vendor  by 
paying  all  his  purchase-money,  sells  it  to  a  third  party  and 

1  Gen.  Stat,  of  Ky.,  ch.  63,  art.  1,  sect.  24. 
^Lncy  V.  Hopkins  (Ky.),  13  S.  W.  Rep.  518. 
'Thompson  r.  Atwater,  84  Ga.  270. 
*  Clark  V.  Collins,  76  Tex.  33. 

'Williams  v.  Rice,  60  Mich.  102.    See,  also,  2  Dev.  Deeds,  1150,  and  cases 
cited. 
« Dudley  v.  Goddard  (Ky.),  12  S.  W.  Rep.  302. 


328  NATURE   AND    REQUISITES    OP    THE    CONTRACT. 

gives  a  deed  to  the  same,  the  vendor  can  enforce  his  lien, 
although  the  second  vendee  has  paid  all  the  purchase-money 
to  the  first  vendee,  from  whom  he  bought  the  land.^ 

One  holding  land  under  a  deed  reserving  a  vendor's  lien 
and  selling  subject  thereto,  is  himself  entitled  to  a  lien  upon 
whatever  interest  he  may  have  conveyed  by  reason  of  his  con- 
tract and  to  foreclose  such  lien,  notwithstanding  the  foreclosure 
of  the  pre-existing  lien.^ 

§  314.  Waiving  op  the  Implied  Lien. — Wherever  this  lien 
is  recognized,  it  is  not  waived,  in  the  absence  of  an  express 
agreement  to  that  effect,  by  taking  a  note  or  other  personal 
security  of  the  vendee  for  the  purchase-money.^  But  it  is 
waived  by  taking  a  distinct  and  independent  security,  unless 
there  is  at  the  time  an  express  agreement  for  its  retention.* 
Taking  a  mortgage  of  other  property  is  a  waiver ;  ^  so  is  it  a 
waiver  by  taking  personal  security ;  ^  or  taking  the  bond  or 
note  of  the  vendee  with  a  surety ;  ^  or  taking  a  negotiable  note 
drawn  by  the  vendee  and  indorsed  by  a  third  person,  or 
drawn  by  a  third  person  and  indorsed  by  the  vendee.*  An 
express  security  on  the  land  itself  for  the  whole  amount  un- 
paid, as  by  a  mortgage  or  deed  of  trust,  will  likewise  merge 
the  lien.^     And  it  was  held  that  taking  a  mortgage  for  the 

» Fisher  v.  McNulty,  30  W.  Va.  186. 

^Burchard  v.  Record  (Tex.),  17  S.  W.  Rep.  241. 

'Winter  v.  Anson,  3  Russ.  488  ;  Garaon  v.  Green,  1  Johns.  Ch.  (N.  Y.)  308 ; 
Ex  parte  Peake,  1  Mad.  191 ;  Christian  v.  Austin,  36  Tex.  540 ;  Denny*  v. 
Steakly,  2  Heisk.  (Tenn.)  156 ;  Selby  v.  Stanley,  4  Minn.  65. 

*Bauni  ?'.  Grigsby,  21  Cal.  175;  Campbell  v.  Baldwin,  2  Humph.  (Tenn.) 
248 ;  Fonda  v.  Jones,  42  Miss.  792. 

5  Richardson  v.  Ridgely,  8  Gill.  &  J.  (Md.)  87  ;  Young  v.  Wood,  11  B.  Mon. 
(Ky.)  123. 

« Boon  V.  Murphy,  6  Blackf.  (Ind.)  272 ;  Mayham  v.  Coombs,  14  Ohio,  428 ; 
McGonigal  v.  Plummer,  30  Md.  422. 

"  Kinney  v  Ensminger  (Ala),  10  South  Rep.  143  ;  Corrico  v.  Merchants,  etc., 
Nat.  Bank,  33  Md.  235. 

^Boynton  v.  Champlin,  42  111.  57 ;  Yaryan  v.  Shririer,  26  Ind.  364 ;  Sanders 
V.  McAffee,  41  Ga.  684;  Schwarz  v.  Stein,  29  Md.  112;  Curette  v.  Briggs,  47 
Mo.  356. 

^Mattix  V.  Weand,  19  Ind.  151 ;  Little  v.  Brown,  2  Leigh  (Va.),  353.  Com- 
pare Boos  V.  Ewing,  17  Ohio,  500. 


vendor's  lien.  329 

purchase-money  excludes  the  lien,  although  the  security  is  de- 
fective or  inadequate/ 

An  express  security  or  an  express  contract  for  a  lien  on  the 
land  conveyed,  as  to  part  of  the  amount  remaining  unpaid, 
will  he  an  implied  waiver  of  the  lien  to  any  greater  extent.^ 
But  taking  collateral  security  will  not  waive  this  lien  where 
there  is  an  express  agreement  that  it  shall  survive.^ 

A  clause  in  a  bond  for  a  deed  providing  for  the  forfeiture  of 
the  contract,  and  all  payments  made  thereon,  in  case  of  default 
in  any  other  j^ayment,  will  not  operate  as  a  waiver  of  the 
vendor's  lien  on  the  premises  for  the  unpaid  purchase-money. 
Because  such  clause  of  forfeiture  is  not  a  security  independent 
of  the  land,  and  is  intended  for  the  benefit  of  the  vendor, 
which  he  may  enforce  or  not,  at  his  pleasure.*  The  vendee 
or  his  assignee  can  take  no  advantage  of  such  clause.^  Gen- 
erally, whether  there  has  been  a  waiver  of  this  implied  lien  is 
a  question  of  intention.''  Where  a  husband  purchases  land 
and  takes  the  deed  in  his  wife's  name,  it  does  not  waive  the 
vendor's  lien.^  And  subsequent  purchasers  of  land  subject  to 
a  vendor's  lien  are  not  released  from  its  operation  by  an  exten- 
sion of  time  of  payment  granted  to  their  vendor,  without  their 
consent.^  A  vendor  loses  his  lien  when,  in  making  a  settlement, 
he  brings  in  other  items,  thus  mingling  different  accounts  so 
that  the  vendor's  lien  cannot  be  separated.^  So,  when  he 
transfers  the  notes,  even  with  the  advice  of  the  vendee,  he  loses 
his  lien ;  ^^  and  also,  if  he  takes  the  security  of  a  third  person." 

>  Camden  v.  Vail,  23  Cal.  633. 

'Fish  V.  Howland,  1  Paige  (N.  Y.),  20,  30;   Brown  v.  Oilman,  4  Wheat. 
(U.  S.)  256. 
'  Daughaday  v.  Paine,  6  Minn.  443. 

*  Robinson  v.  Appleton,  124  111.  276. 

*  Mason  v.  Cad  well,  5  Gilm.  (III.)  196;  Chrisman  v.  Miller,  21  111.  227. 

« Cordova  v.  Hood,  17  Wall.  (U.S.)  1;  Campbell  v.  Baldwin,  2  Humph. 
(Tenn.)  248. 

^  Davis  t).  Smith,  88  Ala.  596. 

*Dalton  V.  Rainey,  75  Tex.  516. 

'Erickson  v.  Smith,  79  Iowa,  374.  And  see  Reusch  v.  Keenan,  42  La. 
Ann.  419. 

'"Grulin  V.  Richardson,  128  111.  178;  Richards  v.  Learning,  27  111.  432; 
vl^hndorf  r.  Cope,  122  111.  133. 

"  Rice  V.  Rice,  36  Fed.  Rep.  858. 


330  NATURE   AND    REQUISITES    OF    THE    CONTRACT. 

Where  the  vendor  indorses  the  purchase-money  notes  and 
transfers  them  to  a  third  party,  and  the  notes  are  not  paid  at 
maturity,  and  he  is,  therefore,  compelled  to  take  them  back, 
his  lien  is  revived.^ 

An  assignment  for  the  benefit  of  creditors,  in  Iowa,  waives 
the  vendor's  lien,  though  the  assignee  takes  the  place  of  the 
assignor  as  to  his  rights.^  If  the  vendor  takes  collateral  or 
other  security  for  the  purchase-money,  he  waives  his  lien  on 
the  property  sold.^  So,  if  he  transfers  the  evidence  of  the  in- 
debtedness, he  loses  his  lien,  *  or  if  he  keeps  back  title  to  part 
of  the  premises  as  security.^ 

But  when  the  vendor  sells  the  premises  to  the  vendee  for  a 
certain  amount  and  takes  a  mortgage  back  for  part  of  the  pur- 
chase-money, and  the  balance  in  cash  from  a  third  party  who 
takes  a  mortgage  on  the  premises  from  the  vendee  as  security, 
and  by  agreement  of  all  the  parties  the  deed  and  both  mort- 
gages were  executed,  delivered,  and  recorded  at  the  same  time, 
he  does  not  necessarily  waive  his  prior  equitable  lien  for  the 
purchase-money,  which  drew  with  it  the  lien  of  his  mortgage, 
and  gave  it  preference  to  the  third  party's  mortgage.^ 

Taking  an  invalid  mortgage  does  not  waive  the  vendor's 
lien/ 

§  315.  Devolution  op  this  Lien  and  Securities. — The 
vendor's  implied  lien  does  not  die  with  him,  but  survives  to 
his  personal  representatives.*  Since  such  a  lien  is  a  mere 
chose  in  action,  it  must  necessarily  go  by  succession  to  the 
vendor's  executor  or  administrator,  and  not  to  his  heirs,  or 
widow,  as  sucli.^     Upon  the  death  of  the  vendor  the  securities 

1  Bancroft  v.  Cosby,  74  Cal.  583. 

2  Prouty  V.  Clark,  73  Iowa,  55. 
^iiett  v.  Collins,  103  111.  74. 

*  Elder  v.  Jones,  85  111.  384.     See,  also,  Richards  v.  Learning,  27  111.  431 ; 
Conover  v.  Warren,  1  Gilm.  (111.)  498. 
»Kirkham  v.  Boston,  67  111.  599. 
«  Boies  V.  Benham,  127  N.  Y.  620. 
'Chapman  v.  Chapman,  55  Ark.  542. 

8  Hubbard  v.  Clark  (N.  J.),  7  Atl.  Rep.  26 ;  Nat.  Bank  v.  Mill  Co.,  39  Fed.  Rep. 
89. 

9  Evans  v.  Enloe,  70  Wis.  345. 


vendor's  lien.  331 

which  he  has  taken  for  the  purchase-money  go  to  his  personal 
representatives.^ 

§  316.  Assignment  of  the  Implied  Lien. — Whether  the 
benefit  of  the  vendor's  impHed  lien  or  equity  accompanies  an 
assignment  of  the  note  or  bond  for  the  purchase-money  is  a 
question  of  dispute.  The  weight  of  authority,  however,  is 
that  such  an  equity  is  assignable  with  the  note  or  bond.  In 
some  of  the  States  no  distinction  is  made  between  the  vendor's 
implied  lien  and  express  lien,  as  to  transferability,  and  the  as- 
signment of  the  note  and  bond  for  the  purchase-money  is  held 
to  carry  the  lien  in  either  case.^  However,  a  contrary  doctrine 
is  held  by  able  courts ;  that  a  vendor's  implied  lien  is  a  mere 
personal  equitable  right  in  the  vendor,  and  is  not  assignable.  It 
looks  only  to  the  security  of  the  vendor,  and  does  not  pass  to  the 
assignee  of  the  vendee's  obligation  for  the  consideration-money, 
and,  consequently,  cannot  be  enforced  in  the  assignee's  favor.^ 

While  there  is  a  great  diversity  of  opinion  in  this  country, 
yet  the  weight  of  authority  holds  that  either  the  implied  or  ex- 
press lien  of  the  vendor,  may  be  assigned  by  assigning  the 
note  or  bond  given  for  the  purchase-money. 

'  Smith  V.  Moore,  26  111.  393 ;  Martin  v.  O'Bannon,  35  Ark.  62 ;  Masterson 
V.  Pullen,  62  Ala.  145  ;  Lewis  v.  Hawkins,  23  Wall.  (U.  S.)  119 ;  Cleveland  v. 
Martin,  2  Head  (Tenn.),  128;  Merritt  v.  Jiidd,  14  Cal.  59;  Dukes  v.  Turner, 
44  Iowa,  575;  Button  v.  Schroyer,  5  Wis.  598  ;  Scroggins  v.  Hoadley,  56 'Ga. 
165 ;  Lingan  v.  Henderson,  1  Bland  Cli.  (Md.)  236 ;  Richards  v.  Fisher,  8  W. 
Va.  55 ;  Walkenhorst  v.  Lewis,  24  Kan.  420. 

*  Wells  V.  Morrow,  38  Ala.  125  ;  Fisher  v.  Johnson,  5  Ind.  492 ;  Honore  v. 
Bakewell,  6  B.  Mon.  (Ky.)  67  ;  Rakestraw  v.  Hamilton,  14  Iowa,  147  ;  White 
V.  Stover,  10  Ala.  441 ;  Wilkinson  v.  May,  69  Ala.  33  ;  Nichols  v.  Glover,  41 
Ind.  24;  AViseman  v.  Hutchinson,  20  Ind.  40;  Ripperdonr.  Cozine,  8  B.  Mon. 
(Ky.)  465  ;  Bank  v.  Knapp,  61  Miss.  485  ;  made  so  by  the  Code  of  1880,  sect. 
1124  ;  Sloan  v.  Campbell,  71  IVIp.  387  ;  Brooks  r.  Young,  60  Tex.  32 ;  Cannon 
V.  McDaniel,  46  Tex.  303  ;  Bates  v.  Childers,  4  N.  Mex.  347. 

MValsh  V.  Boyle,  30  Md.  262 ;  Webb  v.  Robinson,  14  Ga.  216;  Simpson  v. 
Montgomery,  25  Ark.  365  ;  Sheratz  v.  Nicodemus,  7  Yerg.  (Tenn.)  9 ;  Ross  v. 
Heintzen,  36  Cal.  313 ;  Keith  v.  Horner,  32  111.  525  ;  Lindsey  v.  Bates,  42  Miss. 
397 ;  Hecht  v.  Spears,  27  Ark.  229 ;  11  Am.  Rep.  784 ;  Baum  v.  Grigsby,  21  Cal. 
172;  AVellborn  i).  Bonner,  9  Ga.  82;  Briggs  v.  Hill,  6  How.  (Miss.)  362;  Ham- 
mon  V.  Peyton,  34  Minn.  529 ;  Small  v.  Stagg,  95  111.  39 ;  Markoe  v.  Andras, 
67  111.  34 ;  "BonneU  v.  Holt,  89  111.  71 ;  Nat.  Bank  v.  Mill  Co.,  39  Fed.  Rep.  89. 


332  nature  and  requisites  of  the  contract. 

Article  2. 
Reservation  of  Vendor^s  Lien. 

§  317.  A  Lien  by  Contract.  §  324.  Assignment  of  the  Purchase- 

§  318.  In  Case  of  Title  Bonds.  Money  Notes. 

§  319.  Reservation  of  Lien  in  Note.  §  325.  Waiver  and  Extinguishment 

§  320.  Reservation  in  Deed.  of  the  Express  Lien. 

§  321.  Purchase-Money  Notes.  §  326.  Assumption  of  Lien. 

§  322.  Reservation  as  to  Crops.  §  327.  Substituting  Note  or  Bond. 

^  323.  Rights  to  Rents  and  Profits. 

§  317.  A  Lien  by  Contract. — There  is  a  broad  line  of  de- 
markation  between  the  rights  of  the  vendor  under  an  absolute 
deed  with  warranty,  which  recites  the  existence  of  unpaid  pur- 
chase-money notes,  but  retains  no  express  lien  in  terms  for 
their  payment,  and  his  rights  under  a  deed  which  declares 
that  a  lien  is  reserved  for  unpaid  purchase-money.  Under  the 
former  the  vendor  has  parted  with  the  title,  and  has  only  an 
implied  vendor's  lien  for  the  purchase-money ;  under  the  latter 
the  superior  title  remains  with  the  vendor,  and  the  deed  is 
evidence  of  the  executory  contract.  It  is  true  the  expression 
has  sometimes  been  used  in  opinions,  that,  until  the  purchase- 
money  is  paid  the  superior  title  is  in  the  vendor ;  but  it  is  sug- 
gested that  this  is  found  in  discussions  where  there  was  an 
express  lien,  or  where  the  contract  was  executory.^ 

This  express  lien  has  not  the  objectionable  characteristics  of 
the  equitable  lien  of  the  vendor  who  has  parted  with  the  legal 
title  acknowledging  the  receipt  of  the  purchase-money,  with 
which  it  is  often  confounded,  but  is  wholly  dissimilar,  being 
the  same  in  effect  as  a  conveyance  and  mortgage  back  to  secure 
the  purchase-money.^ 

The  vendor  has  a  right,  when  the  deed  is  executed,  to  insert  in 

'  Baker  v.  Compton,  52  Tex.  252  See,  also,  Lowery  v.  Peterson,  75  Ala.  109 ; 
Church  V.  Smith,  39  Wis.  492  ;  Ransom  v.  Brown,  63  Tex.  188 ;  Reese  v.  Burts, 
39  Ga.  565 ;  Pitts  v.  Parker,  44  Miss  247  ;  Hutton  v.  Moore,  26  Ark.  382  ;  White 
v.  Blakemore,  8  Lea  (Tenn.),  49;  Driver  ?>.  Hudspeth,  16  Ala.  348. 

2  Moore  v.  Anders,  14  Ark.  628.  See,  also.  Bell  ?>.  McDuffie,  71  Ga.  264; 
Servis  v.  Beatty,  32  Miss.  52 ;  Yancey  v.  Mauck,  15  Gratt.  (Va.)  300 ;  Amory  v. 
ReiUy,  9Ind.  490. 


vendor's  lien,  333 

it  a  clause  reserving  a  vendor's  lien  for  the  unpaid  purchase- 
money/ 

And  it  is  held  that  one  who  has  contracted  to  convey  real 
estate,  but  has  not  made  the  conveyance,  has  an  equitable  lien 
upon  the  land  for  the  unpaid  purchase-money  as  between  him 
and  the  vendee,  and  those  claiming  under  the  vendee,^  and 
that  a  vendor's  lien  may  arise  as  well  before  the  conveyance 
as  after  it.^ 

§318.  In  Case  op  Title  Bonds. — The  relation  of  the  par- 
ties to  a  title  bond  is  that  of  mortgagor  and  mortgagee.  The 
action  to  establish  a  vendor's  lien  is  analogous  to  a  foreclosure 
of  a  mortgage.  A  strong  analogy  also  exists  between  the 
action  for  the  vendor's  lien  and  a  suit  for  a  specific  perform- 
ance.* So  a  title  bond  is  at  common  law  a  mortgage,^  and  the 
relation  of  the  parties  is  that  of  mortgagor  and  mortgagee,^ 
and  this  doctrine  prevails.'^  Or  the  rule  may  be  stated  that 
the  legal  effect  of  a  title  bond  is  like  a  deed  executed  by  the 
vendor,  and  a  mortgage  back  by  the  vendee.^ 

There  can  be  no  just  and  proper  distinction  between  a  mort- 
gage to  secure  the  payment  of  the  purchase-money  executed 
contemporaneously  with  the  conveyance  of  the  land,  and  the 
reservation  of  the  legal  estate  as  a  security  for  its  payment.' 

'Findley  v.  Armstrong,  23  W.  Va.  113 ;  Warren  v.  Branch,  15  W.  Va.  38. 

"^  Birdsall  v.  Cropsey,  29  Nebr.  672,  679. 

•''English  V.  Russell,  1  Hemp.  C.  C.  35;  Hill  v.  Grigsby,  32  Cal.  55;  Yan(?ey 
V.  Mauck,  15  Gratt.  (Va.)  300 ;  Servis  v.  Beatty,  32  Miss.  52.  See  Wright  v. 
Troutman,  81  111.  374. 

The  vendor's  implied  lien  is  a  right  which  has  no  existence  until  it  is  es- 
tablished by  the  decree  of  court  in  a  particular  case :  Gilman  v.  Brown,  1 
Mas.  C.  C.  191 ;  Hutton  v.  Moore,  26  Ark.  .382,  386 ;  Campbell  v.  Rankin,  28 
Ark.  401,  406. 

'' Wells  V.  Francis,  7  Colo.  396.  See,  also,  Lowery  v.  Peterson,  75  Ala.  109. 

^Merritt  v.  Judd,  14  Cal.  59. 

« Button  V.  Schroyer,  5  Wis.  598;  Lewis  v.  Hawkins,  23  Wall.  (U.  S.)  119. 

'Lingan  v.  Henderson,  1  Bland.  Ch.  (Md.)  236;  Moreton  v.  Harrison,  1 
Bland.  Ch.  (Md.)  491 ;  Relfe  v.  Relfe,  34  Ala.  500,  504. 

^Holman  v.  Patterson,  29  Ark.  363 ;  Martin  v.  O'Bannon,  35  Ark.  68  ;  Har- 
din V.  Boyd,  113  V.  S.  756. 

'Graham  y.McCampbell,  Meigs  (Tenn.),  52;  Bankhead  v.  Owen,  60  Ala. 
^57,  467. 


334  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

Because  when  the  vendor  retains  the  legal  title  as  a  security 
for  the  purchase-money,  the  essential  incidents  of  a  mortgage 
attach/ 

§  319,  Reservation  op  Lien  in  Note. — The  reservation 
of  the  vendor's  lien  may  be  in  the  note  given  for  the  purchase- 
money.  The  reservation  of  the  purchase-money  lien  in  the 
notes,  renders  the  sale  executory  in  the  same  manner  as  if  the 
reservation  was  contained  in  the  deed  itself.^  And  this  reser- 
vation in  a  note  is  not  affected  by  substituting  a  new  note  re- 
serving the  same  lien.^ 

When  the  legal  title  is  left  in  the  vendor  it  is  not  necessary, 
in  order  to  reserve  the  vendor's  lien,  to  insert  the  reservation 
in  the  note  taken  for  the  purchase-money,  the  lien  to  hold  until 
paid  in  full.*  This  reservation  may  be  oral.  Thus,  an  oral 
agreement  at  the  time  the  note  was  given  that  the  husband's 
name  thereon  as  personal  security  should  not  operate  as  a 
waiver  or  abandonment  of  the  vendor's  lien,  is  sufficient  to 
preserve  the  lien.^ 

The  reservation  in  a  purchase-money  note  given  for  land 
renders  the  sale  executory  in  the  same  manner  as  if  the  reser- 
vation was  contained  in  the  deed  itself.^ 

§  320.  Reservation  in  Deed. — A  deed  from  the  State  land 
agent  containing  a  stipulation  that  when  the  purchase-money 
is  paid  "  then  this  to  be  a  good  and  sufficient  deed  to  convey 
said  lots,  otherwise  to  be  null  and  void,  and  said  lots  to  be  and 
remain  the  property  of  the  said  State,"  does  not  convey  the 
legal  title.^ 

1  Roper  V.  McCook,  7  Ala.  318 ;  Conner  v.  Banks,  18  Ala.  42  ;  Magruder  v. 
Campbell,  40  Ala.  611. 

"  Lundy  v.  Pierson,  67  Tex.  233 ;  McKelvain  v.  Allen,  58  Tex.  387. 

'Helm  V.  Weaver,  69  Tex.  143. 

*Thacker  v.  Booth  (Ky.),  6  S.  W.  Rep.  460. 

*  Ramage  v.  Towles,  85  Ala.  588. 

8  McKelvain  v.  Allen,  58  Tex.  383,  387. 

^Stratton?'.  Cole,  78  Me.  553.  The  statute  of  1832  provides  that  "in  the 
eale  of  lands  by  the  land  agent,  the  lien  which  the  State  retains  in  the  land 
as  security  for  the  payment  of  the  purchase-money,  may  be  expressed  in  the 
deed  of  conveyance  from  the  State  instead  of  taking  a  mortgage  thereon." 


vendor's  lien.  335 

It  seems  clear  that  however  expressed  and  in  whatever  in- 
strument, the  lien  or  estate  to  be  retained  by  the  State  is  at 
least  as  effectual  and  great  as  that  of  a  mortgage.^ 

And  when  an  express  reservation  is  made  in  a  deed  it  is 
notice  to  every  one.^  To  make  this  lien  effective  it  must  be 
expressly  charged  upon  the  land.^  It  is  sufficient  if  the  deed 
describes  the  notes  for  the  purchase-money,  and  the  haben- 
dum is  "  to  have  and  to  hold  on  the  payment  of  the  notes 
herein  above  stated."  *  And  a  stipulation  that  the  "  land  shall 
be  bound  for  the  notes  "  given  for  the  purchase-money  creates 
an  effectual  lien.^ 

A  deed  of  land  "  charged  with  the  pa3aiient "  of  certain 
sums  creates  a  lien  in  the  nature  of  a  mortgage  and  not  in  the 
nature  of  a  vendor's  lien,^ 

When  one  buys  land  sold  by  a  decree  of  court  which  reserves 
a  lien  for  purchase-money,  he  takes  subject  to  the  lien  reserved.^ 

A  deed  providing  on  its  face  that  it  shall  be  absolute  on  the 
payment  of  certain  notes,  but  in  default  of  payment  shall  be 
void,  amounts  in  equity  to  a  mortgage.^  So  a  stipulation  in  a 
deed  that  the  title  shall  not  vest  in  the  grantee  until  the  pur- 
chase-money is  paid,  is  in  equity  a  mortgage.^ 

This  express  lien  becomes  a  matter  of  record  when  the  deed 
is  recorded.^*^  This  express  lien  is  good  in  case  both  personal 
property  and  real  are  sold  for  a  gross  sum." 

'  Oakeg  v.  Moore,  24  Me.  214. 

"Bank  v.  Bradley,  15  Lea  (Tenn.),  279;  Lucas  v.  Hendrix,  92  Ind.  54,  57; 
Ufford  V.  Wells,  52  Tex.  612;  Coles  v.  AVithcrs,  33  Gratt.  (Va.)  lS(j;  Webster 
V.  Mann,  52  Tex.  416 ;  Eichelberger  v.  Gitt,  104  Pa.  St.  64  ;  Davis  v.  Hamilton, 
50  Miss.  213;  Caldwell  v.  Fraim,  32  Tex.  310. 

'Heist  V.  Baker,  49  Pa.  St.  9. 

*Blaisdell  v.  Smith,  3  111.  App.  150. 

*  Moore  v.  Lackey,  53  Miss.  85.  See,  also,  Ross  v.  Swan,  7  Lea  (Tenn.),  463; 
I^vi<rne  V.  Naramore,  52  Vt.  267  ;  Carr  v.  Holbrook,  1  Mo.  240. 

« Stanhope  v.  Dodge,  52  Md.  483. 

'  Ross  V.  Swan,  7  Lea  (Tenn.),  463. 

'Lucas  V.  Hendrix,  92  Ind.  54. 

'Pngh  V.  Holt,  27  Miss.  461 ;  Lavigne  v.  Naramore,  52  Vt.  267. 

'"Ober  V.  Gallagher,  93  U.  S.  199;  White  v.  Downs,  40  Tex.  225,  231 ;  Ar- 
mentrout  v.  Gibbons,  30  Gratt.  (Va.)  632  ;  Moore  v.  Lackey,  53  Miss.  85. 
^"  Ruhl  V.  Ruhl,  24  W.  Va.  279,  287.    See  section  311. 


336  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

Tlic  legal  title  passes  to  the  vendee  subject  to  the  lien,  and 
the  land  is  subject  to  attachment  and  execution  as  his  other 
property  is.^ 

This  reservation  of  a  vendor's  lien  in  a  deed  of  conveyance 
is  equivalent  to  a  mortgage  taken  for  the  purchase-money  con- 
temporaneously with  the  deed,  and  nothing  more.  The  vendee 
has  the  equity  of  redemption  precisely  as  if  he  had  received  a 
deed  and  given  a  mortgage  for  the  purchase-money." 

§  321.  Purchase-Money  Notes. — A  vendor's  lien  attaches 
to  a  purchase-money  note  payable  to  a  third  person,  and  held 
by  him  as  collateral  security  for  the  vendor's  debt  to  him.''  So 
where  the  purchaser  of  land  gives  his  note  for  the  unpaid  pur- 
chase-money, but  title  is  taken  at  his  instance  in  the  name  of 
another,  the  vendor's  lien  attaches  to  the  land  in  the  hands  of 
such  grantee.*  And  the  same  is  true  where  a  note  is  given  for 
the  purchase-money,  though  made  payable  to  another  person 
than  the  vendor.^ 

Where  notes  are  given  in  payment  for  land  sold,  the  vendor 
has  a  lien  for  the  price  as  between  him  and  the  vendee,  though 
the  deed  acknowledges  payment  in  full.''  Though  there  is  a 
variance  between  the  note  and  the  deed  as  to  the  date  of  ma- 
turity, it  is  not  fatal  to  the  lien  when  the  deed  sufficiently  de- 
fines the  note.'^ 

Where  a  note  provides  for  the  payment  of  attorney's  fees, 
and  states  that  it  is  given  to  secure  the  payment  of  the  pur- 
chase-money of  certain  lands,  the  vendor's  lien  includes  the 
attorney's  fee.^ 

§  322.  Reservation  as  to  Crops. — A  reservation  in  a  war- 
ranty deed  of  the  crops  that  might  be  produced,  to  secure  the 

1  Chitwood  V.  Trimble,  2  Baxt.  (Tenn.)  78. 

^  King  V.  Young  Men's  Asso.,  1  Woods  C.  C.  386. 

"Linn  v.  Boss,  84  Ala.  281 ;  Mize  v.  Barnes,  78  Ky.  506. 

*Crainpton  v.  Prince,  83  Ala.  246 ;  Sims  v.  Nat.  Com.  Bank,  73  Ala.  248. 

^Neese  v.  Riley,  77  Tex.  348. 

«  Brown  >\  Ferrell,  83  Ky.  417. 

^Lucy  ti  Hopkins  (Ky.),  13  S.  W.  Rep.  518. 

^Neese  v.  Riley,  77  Tex.  348. 


..t 


VENDOR  S    LIEN.  337 

interest  on  the  purchase-money  is  a  valid  lien.^  The  vendor 
and  vendee,  for  most  purposes,  occupy  the  relation  of  mort- 
gagor and  mortgagee.  And  in  North  Carolina  it  is  held  that 
the  only  sense  in  which  the  mortgagee  can  be  said  to  have 
any  interest  in  the  crops,  when  not  reserved,  growing  on  the 
mortgaged  land,  is  that  he  has  the  right  to  them  after  taking 
possession  as  an  incident  to  his  possession.^ 

The  express  lien  which  the  vendor  of  land  reserves  on  the 
crops  for  the  year  when  the  purchase-money  shall  become  due, 
attaches  as  soon  as  the  vendee  acquires  title  to  the  crops.^ 

§  323.  Right  to  Rents  and  Profits. — In  a  proceeding  to 
enforce  a  vendor's  lien,  when  the  vendor  remains  in  possession, 
and  there  is  a  delay  in  completing  the  transfer  beyond  the 
specified  time,  the  vendee  should  be  credited  with  a  share  of 
whatever  the  vendor  may  have  received  in  respect  to  the  use 
and  enjoyment  of  the  property,  proportioned  to  the  amount  he 
may  have  paid  on  the  purchase.^ 

In  fulfillment  of  his  promise  to  reconvey  the  property  as 
security  for  the  payment  of  the  purchase-money,  if  not  paid  in 
a  certain  time,  the  vendee  gave  a  lease  on  the  propert}^  to  the 
vendor  with  a  right  to  apply  the  rents  and  profits  from  year  to 
year  on  the  purchase-money  notes.  It  was  held  that  the  assign- 
ment of  the  rents  and  profits  created  a  lien  on  the  body  of  the 
property,  which  could  be  enforced  in  equity,  in  case  the  rents 
and  profits  were  not  sufficient  to  pay  the  debt.^ 

§  324.  Assignment  of  the  Purchase-Money  Notes. — A 
lien  of  the  vendor  for  a  note  given  for  unpaid  purchase-money, 
under  an  express  lien,  is  not  lost  by  the  taking  of  a  note  as 
security  with  the  agreement  that  the  legal  title  shall  not  pass, 
but  that  the  assignee  may  collect  and  apply  the  proceeds  to 

•  Darlington  v.  Robbing,  60  Vt.  347  ;  Smith  v.  Atkins,  18  Vt.  461 ;  Batchel- 
der  V.  JennesH,  59  Vt.  104 ;  Leslie  v.  Guthrie,  1  Bing.  (N.  C.)  697 ;  Langton  v. 
Horton,  1  Hare,  549 ;  Lewis  v.  Lyman,  22  Pick.  (Mass.)  437. 

^Killebrew  v.  Hines,  104  N.  Car.  182. 
'Williams  v.  Cunningham,  52  Ark.  439. 

*  Grove  v.  Miles,  71  111.  376. 

\Gest  V.  Packwood,  39  Fed.  Eep.  525. 
VOL.  I.— 22 


338  NATURE    AND    REQUISITES    OP    THE    CONTRACT. 

the  debt  secured ;  this  is  a  mere  collateral  security  and  the 
vendor  does  not  waive  his  lien.^ 

Where  the  vendee  gets  nothing  from  the  would-be  vendor, 
but  acquires  the  same  land  by  a  subsequent  purchase  from 
another,  who  has  paramount  title,  there  is  no  lien  which  at- 
taches from  the  first  sale,  because  there  was  no  title  conferred, 
and  the  subsequent  acquisition  by  the  vendee  cannot  be 
treated  a  buying  in,  to  perfect  a  title  as  in  an  ordinary  case  of 
a  vendee  purchasing  an  outstanding  title.^ 

And  when  a  vendor  transfers  notes  for  the  price,  for  the  full 
consideration  to  a  third  person  without  indorsement  and  with- 
out recourse  or  warranty,  his  right  and  power  to  demand  or 
receive  payment  of  the  price  ceases  to  exist,  and  with  it  his 
right  to  demand  a  resolution  of  the  same  in  event  of  non- 
payment, and  the  corresponding  obligation  of  the  buyer.^ 

When  two  notes  are  given  for  the  purchase-money  of  land, 
and  the  vendor  assigns  the  one  last  falling  due  and  retains  the 
first,  the  assigned  note  is  entitled  to  the  priority  and  superior 
lien  ;  and  this  priority  of  lien  passes  to  a  sub-purchaser  of  the 
land  who  acquires  the  assigned  note  as  part  of  the  considera- 
tion of  the  purchase.*  Because  such  note  would  be  entitled  to 
a  preference  of  payment  as  a  charge  on  the  land  over  the  other 
note  retained  by  the  vendor.^ 

The  fact  that  the  vendor's  decedent  surrenders  the  original 
notes  for  the  purchase-money,  and  accepts  new  ones  does  not 
divest  the  lien.'' 

In  Texas  the  sale  and  indorsement  of  a  note  reserving  a 
lien,  given  for  the  purchase-money,  "  without  recourse,"  does 
not  extinguish  the  indorser's  lien  which  passes  to  the  indorsee.^ 

In  Maryland,  however,  such  an  indorsement  has  been  held 
to  extinguish  the  lien,  because  the  owner  thereof  was  thereby 

.  ^Cate  V.  Gate,  87  Tenn.  41. 
>*  Harper  v.  Wilkins,  65  Miss.  215. 
3  People's  Bank  v.  Cage,  40  La.  Ann.  138, 
*  Parsons  v.  Martin,  86  Ala.  852. 

5  Ala.  Gold  Life  Ins.  Co.  v.  Hall,  58  Ala.  1 ;  White  v.  King,  53  Ala.  162. 
«Hitt  V.  Pickett  (Ky.),  11  S.  W.  Rep.  9. 
^  Neese  v.  Riley,  77  Tex.  348 ;  White  v.  Downs,  40  Tex.  226. 


vendor's  lien.  339 

released  from  liability  on  the  note,  and  no  longer  had  any 
interest  in  the  lien/ 

Some  of  the  States  have  enacted  la^ws  that  the  assisfnee  or 
transferee  of  a  purchase-money  note  shall  have  the  vendor's 
lien  pass  to  him.^  But  a  transfer  of  the  note  before  such  stat- 
ute did  not  pass  the  lien.^ 

But  after  the  statute  is  passed,  it  makes  no  difference 
whether  the  note  is  assigned  before  or  after  maturity/  But 
such  lien  will  not  pass  to  the  assignee  where  the  vendor  has 
conveyed  by  an  absolute  deed/  In  such  assignments  of  the 
notes,  where  there  is  no  writing  to  indicate  the  transfer,  the 
vendors  are  necessary  parties  to  complete  the  foreclosure/ 

§  325.  Waiver  and  Extinguishment  of  the  Express 
Lien. — This  express  lien  is  governed  by  the  same  rules  that  a 
mortgage  is,  and  passes  by  the  assignment  of  the  note  secured 
by  it.^  It  is  not  waived  as  an  implied  lien  is  by  taking  other 
security.^  This  reservation  may  secure  an  agreement  to  pay 
in  specific  articles.'  This  reserved  lien  is  not  lost  or  extin- 
guished as  an  implied  lien  is  by  accepting  other  security,'^ 
Where  the  wife  can  conve}^  her  separate  estate,  and  she  makes  a 
reservation  allowing  the  vendee  to  take  out  a  mort2:ao:e  on  the 


^to"^&" 


^Schnebly  v.  Ragan,  7  Gill  &  John.  (:Md.)  120.  See,  also,  Hazelrigg  v. 
Boarman  (Ky.),  2  S.  W.  Rep.  769  ;  Woods  v.  Bailey,  3  Fla.  41 ;  2  Dan.  on  Notes 
and  Bills,  272 ;  Buckhart  r.  HoMard,  14  Ore.  39. 

''Ala.  Code,  1886,  sect.  1764  ;  Ark.  Mansf.  Dig.,  sect.  474 

'Weaver  i;.  Brown,  87  Ala.  533. 

*  Morris  v.  Ham,  47  Ark.  293. 

^Crossland  v.  Powers  (Ark.),  13  S.  W.  Rep.  732, 
6 Davis  r.  Smith,  88  Ala.  596. 

'Carpenter  v.  Mitchell,  54  111.  126;  :Markoe  ?'.  Andras,  67  111.34;  Dingleyi;, 
Bank,  57  Cal.  467. 

*  Carpenter  v.  Mitchell,  54  111.  126.  See,  also.  King  r.  Young  Men's  Assn., 
1  Woods  C.  C.  386 ;  Chitwood  v.  Trimble,  2  Baxt.  (Tenn.)  78  ;  Gordon  v.  Rixey, 
76  Va.  694 ;  Kirk  v.  Williams,  24  Fed.  Rep.  437. 

»Ruhl  r.  Ruhl,  24  W.  Va.  279,  287. 

"Strickland  v.  Summerville,  55  Mo.  164;  Hurley  v.  Hollyday,  35  Md.  469; 
Bradley  v.  Curtis,  79  Ky.  327;  Huffman  v.  Cauhle,  86  Ind.  591;  Price  v. 
Lauve,  49  Tex.  74 ;  Whitehurst  v.  Yandall,  7  Baxt.  (Tenn.)  228 ;  Bozeman  v. 
Ivey,  49  Ala.  75  ;  Hatcher  v.  Hatcher,  1  Rand.  (Va.)  53  ;  Dunlap  v.  Shanklin, 
10  W.  Va.  662.     Compare  Hawkins  v.  Thunnan,  1  Idaho,  598. 


340  NATURE    AND    REQUISITES   OF   THE   CONTRACT. 

land,  and  to  pay  her  a  part  of  the  proceeds,  and  then  to  give  her 
a  second  mortgage  back  to  secure  the  balance  due,  she  will  be 
estopped  to  deny  a  waiver  of  her  lien,  and  to  enforce  it  as 
against  the  first  mortgagee/ 

But  notes  referred  to  in  a  deed  which  contains  a  waiver  of 
the  maker's  personal  property  exemptions  do  not  waive  the 
vendor's  lien.^  But  when  the  deed  recites  that  the  grantor 
took  the  notes  of  a  third  person,  though  indorsed  by  the 
grantee,  and  it  is  not  shown  that  they  were  only  taken  as  se- 
curity for  the  purchase-money  which  was  still  due,  the  vendor 
thus  waives  his  lien.^ 

The  recital  in  a  deed  of  payment  does  not  waive  nor  destroy 
the  vendor's  lien,  but  such  recital  is  prima  facie  evidence  of 
payment,  which  the  vendor  must  explain  or  disprove  in  seek- 
ing to  enforce  his  lien/  But  the  vendor  is  estopped  to  assert 
his  express  lien  as  against  an  innocent  third  person,  as,  for  in- 
stance, a  junior  lien-holder  without  notice/ 

When  the  vendor  has  taken  other  security,  and  the  evidence 
shows  that  he  relies  wholly  upon  the  other  security,  he  has 
waived  his  lien/ 

A  change  of  notes,  or  a  reducing  them  to  judgment,  does 
not  divest  the  lien/ 

A  lien  expressly  reserved  cannot  be  modified  by  evidence 
of  a  verbal  agreement  that  there  should  be  no  lien/ 

§  326.  Assumption  of  Lien. — The  vendee  may  convey  the 
land  in  such  a  manner  that  his  grantee  assumes  the  payment 
of  the  original  vendor's  lien,  and  thus  renders  himself  per- 

'  Wilder  v.  Wilder,  89  Ala.  414. 

"Thompson  v.  Sheppard,  85  Ala.  611. 

^Dutton  V.  Bratt  (Ark.),  11  S.  W.  Rep.  821. 

*  Kelly  V.  Kansner,  81  Ala.  500. 

''Bunton  v.  Palm  (Tex.),  9  S.  W.  Rep.  182. 

«  Warren  v.  Branch,  15  W.  Va.  21,  22;  Byrna  r.  Woodward,  10  Lea  (Tenn.), 
444 ;  Frazier  v.  Hendren,  80  Va.  265  ;  Daniels  v.  Moses,  12  S.  Car.  130.  See, 
also,,  Butler  v.  Williams,  5  Heisk.  (Tenn.)  241. 

'  Boseman  v.  Ivey,  49  Ala.  75 ;  Coles  v.  Withers,  33  Gratt.  (Va.)  186.  See, 
also,  Conner  v.  Banks,  18  Ala.  42 ;  Luddington  v.  Gabbert,  5  W.  Va.  330. 

8  Hutchinson  v.  Patrick,  22  Tex.  318. 


vendor's  lien.  341 

sonally  liable  therefor.  The  element  which  lies  at  the  bottom 
of  this  assumption,  and  which  alone  gives  it  efficacy  is  the 
fact  that  the  vendor's  lien  is  included  in  the  purchase  price, 
as  a  constituent  part  thereof,  and  the  grantee  actually  secures 
or  pays  to  his  grantor  only  the  balance  of  the  gross  price  after 
deducting  such  vendor's  lien.  When  the  deed  executed  by 
the  grantor  contains  a  clause  sufficiently  showing  such  intent, 
the  acceptance  thereof  by  the  grantee  consummates  the  assump- 
tion of  the  original  vendor's  lien,  and  creates  a  personal  lia- 
bility on  his  part  which  inures  to  the  benefit  of  the  original 
vendor  as  though  he  had  himself  executed  the  deed.^ 

Thus,  a  vendee's  agreement  with  his  vendor  to  pay  the  pur- 
chase price  of  land  to  a  third  person,  designated  by  the  vendor 
— being  a  former  incumbrancer — renders  the  vendee  liable  to 
such  third  person  for  the  amount,  and  the  same  may  be  re- 
covered by  a  suit  of  such  third  person  against  the  vendee  or 
his  personal  representatives.^ 

The  person  who  thus  assumes  a  mortgage  or  lien  debt  becomes, 
as  to  the  mortgagor  or  lienor,  the  principal  debtor  and  the  mort- 
gagor as  surety.  Upon  such  a  promise  the  original  vendor  can 
maintain  an  action  at  law.^  This  is  upon  the  ground  that  the 
original  vendor,  in  adopting  the  act  of  the  vendee  for  his 
benefit,  is  brought  into  privity  with  the  promisor,  and  may 
enforce  the  promise  as  if  it  were  made  directly  to  him.* 

However,  there  are  cases  holding  that  where  lands  are  pur- 
chased subject  to  a  mortgage  or  vendor's  lien,  and  the  vendee 
enters  into  a  bond  at  the  time,  or  subsequently,  to  pay  off  the 
incumbrance,  that  this  alone,  without  other  circumstances,  will 
not  be  regarded  as  a  sufficient  demonstration  of  his  intention 
to  make  it  his  personal  debt  with  respect  to  the  fund  primarily 
liable  for  its  payment.'' 

^  3  Pom.  Eq.  Jur.,  sect.  1206. 

^  O'Conner  r.  O'Conner,  88  Tenn.  76. 

•"•Moore  v.  Stovall,  2  Lea  (Tenn.),  543. 

*  Lawrence  v.  Fox,  20  N.  Y.  268  ;  Burr  v.  Beers,  24  N.  Y.  178 ;  Thompson  v. 
Bertram,  14  Iowa,  476 ;  Thompson  v.  Thompson,  4  Ohio  St.  333. 

5  Billinghurst  v.  Walker,  2  Bro.  C.  C.  604  ;  Evelyn  v.  Evelyn,  2  P.  Wm.  664, 
and  note ;  T^veddell  v.  Tweddell,  2  Bro.  C.  C.  101. 


342  NATURE    AND    REQUISITES    OF   THE    CONTRACT. 

These  cases  proceed  upon  the  notion  that  the  assumption  of 
the  incumbrance  is  only  by  way  of  collateral  security,  the 
land  remaining  the  principal  and  the  primary  fund  for  its 
payment.  But  slight  circumstances  take  this  class  of  cases 
out  of  this  rule/  Slight  circumstances,  in  addition  to  a  cove- 
nant to  pay,  are  sufficient  to  make  the  debt,  in  such  cases,  the 
personal  debt  of  the  vendee.^ 

Lord  Thurlow  says :  "  The  mere  purchase  of  an  estate  sub- 
ject to  charges — as,  an  equity  of  redemption — does  not  make  the 
personal  estate  of  the  purchaser  liable  to  the  charge ;  but  if  the 
charge  is  i3art  of  the  price,  then  the  personal  estate  is  liable."  ^ 

§  327.  Substituting  Note  or  Bond. — Where  a  purchaser 
of  land  assumes  as  part  of  the  agreed  purchase-money,  a  debt 
which  the  vendor  owes  to  a  third  party  and  gives  his  note  pay- 
able to  that  third  person  by  agreement  among  the  three,  the 
vendor's  lien  attaches  to  the  note  unless  waived,  and  may  be 
enforced  by  the  payee  by  a  bill  in  his  own  name.* 

And  when  such  notes  are  received  with  the  intention  orally 
expressed  that  the  vendor's  lien  is  not  to  be  relinquished,  it  is 
sufficient  to  overcome  the  implication  of  the  contrary  intention 
raised  upon  the  mere  fact  of  taking  personal  security,  with  a 
waiver  of  exemptions  on  the  notes.^ 

The  change  of  notes  or  the  substitution  of  notes  of  another 
person  docs  not  effect  the  lien." 

A  third  person  who  pays  the  money  on  behalf  of  the  pur- 
chaser to  the  vendor  upon  an  express  agreement  among  the 
three  that  he  shall  have  a  lien  for  it  upon  the  land,  will  be 
held  in  equity  to  succeed  to  the  vendor's  lien.^ 

J  Earl  of  Oxford  r.  Lady  Rodney,  14  Ves.  418. 

''.Warintx  r.  Ward,  7  Ves.  336 ;  Woods  v.  Huntingford,  3  Ves.  128. 

SBillinghurst  v.  Walker,  2  Bro.  C.  C.  604. 

*  Woodall  V.  Kelly,  85  Ala.  368  ;  Carver  v.  Eads,  65  Ala.  190. 

6  Cordova  v.  Hood,  17  Wall.  (U.  S.)  1 ;  Napier  v.  Jones,  47  Ala.  90 ;  Fonda 
V.  Jones,  42  Miss.  792 ;  2  Am.  Rep.  669  ;  Moshier  v.  Meek,  80  111.  79. 

^  Bozeman  v.  Ivey,  49  Ala.  75 ;  Bank  v.  Good,  21  W.  Va.  455 ;  Coles  v. 
Withers,  33  Gratt.  (Va.)  186  ;  Woodward  v.  Echols,  58  Ala.  655  ;  Hess  v.  Dille, 
23  W.  Va.  90. 

'  Mitchell  V.  Butt,  45  Ga.  162. 


vendor's  lien.  343 

A  lien  can  be  reserved  for  purchase-money  in  favor  of  a 
third  part}^  by  express  provision  of  the  deed.^ 

When  a  vendee  gave  his  note  for  the  purchase-price  and 
afterward  paid  the  note  from  the  proceeds  of  his  minor  chil- 
dren's property,  the  children  will  be  subrogated  to  the  vendor's 
lien.^  So  where  a  bond  was  given  to  a  wife  and  then  another 
to  her  husband  representing  the  same  land,  the  wife's  disap- 
pearing, the  wife  may  rely  upon  the  husband's  bond  to  up- 
hold her  rights,* 

Article  3. 
Priorities. 

1 328.  Rights  of  Bona  Fide  Purchas-  1 332.  Remedy  of  Vendor— Election. 

ers  and  Mortgagees.  §  333.  Ejectment  May  Be  Brought. 

§  329.  Pennsylvania  Doctrine.  I  334.  In  Case  of  Two  Funds. 

1 330.  Mechanics'  Lien  and  Home-  1 335.  Election  of  Remedy — Contrary 

stead  Rights.  Doctrine. 

§  331,  Rights  of  the  Creditors  of  the 

Vendee. 

§328.  Rights  of  Bona  Fide  Purchasers  and  Mort- 
gagees.— The  vendor's  implied  lien  does  not  prevail  against 
bona  fide  purchasers  and  mortgagees  without  notice.* 

This  lien  is  paramount  to  a  homestead  right  acquired  by  the 
purchaser,^  and  a  wife  has  no  dower  right  in  lands  thus  sold 
to  her  husband  as  against  the  vendor's  lien.  Thus  where  the 
husband  sells  land  on  which  there  is  a  vendor's  lien,  the  wife 
cannot  claim  dower  in  it.^ 

When  the  vendor  transfers  the  purchase-money  notes 
without  indorsement  or  guaranty  he  has  no  longer  any 
priority.^ 

'  Mize  V.  Barnes,  78  Ky.  506 ;    Perkins  v.  Gibson,  51  Miss.  699 ;  James  v. 
Burbridge,  33  W.  Va.  272, 275. 
^  Oury  V.  Saunders,  77  Tex.  278. 
^  Acton  r.  Waddington,  46  N.  J.  Eq.  16. 

*  Adams  v.  Buchanan,  49  Mo.  64  ;  Houston  v.  Stanton,  11  Ala.  412 ;  Moshier 
V.  Meek,  80  111.  79 ;  Haines  v.  Chaillee  (Ind.),  28  N.  E.  Rep.  848. 

*  Berry  v.  Boggess,  62  Tex.  239. 

^Culbertson  v.  Stevens,  82  Va.  406  ;  Hugunin  v.  Cochrane,  51  111.  302. 
^  Hunt  V.  Harber,  80  Ga.  746. 


344  NATURE    AND    REQUISITES   OF   THE    CONTRACT. 

The  vendee  cannot  destroy  the  lien  by  creating  other  liens 
as  a  conveyance  or  mortgage  to  parties  with  notice/  or 
mechanics'  lien  for  labor  and  materials  furnished  the  vendee 
with  notice  of  the  vendor's  lien.^ 

A  bona  fide  purchaser  of  land  without  notice  of  the  vendor's 
lien  takes  it  discharged  of  any  such  liability.^  He  will  be 
protected  against  the  operation  of  the  lien  because  in  foro  con- 
scientise  he  must  be  considered  as  holding  a  right  paramount 
to  that  of  a  negligent  and  confiding  vendor,  who  has  been  in- 
cautious as  to  part  with  his  title  without  securing  the  consid- 
eration by  mortgage  or  sufficient  personal  guaranty,  and  has 
made  his  vendee  the  ostensible  owner  in  equity  as  well  as  real 
owner  in  law  of  the  land.  And  if  this  were  not  so,  the  law 
requiring  deeds  to  be  recorded  would  be  of  no  avail.  The  rule 
caveat  emptor  applies  to  purchasers  of  defective  legal  titles.  But 
the  purchaser  of  the  legal  title  is  not  to  be  affected  by  any  latent 
equity,  whether  founded  on  trust,  fraud,  or  otherwise,  of  which 
he  has  no  actual  notice,  or  which  does  not  appear  in  some 
deed  necessary  on  the  deduction  of  title  so  as  to  amount  to 
constructive  notice.* 

The  same  rule  applies  to  a  bona  fide  mortgagee  of  such  ven- 
dee, and  he  is  entitled  to  equal  protection."  And  a  mortgage 
for  the  purchase-money  executed  simultaneously  with  the  deed 
from  the  vendor  takes  precedence  and  priority  over  liens  aris- 
ing from  the  mortgagor's  act."  And  a  purchaser  acquiring 
title  through  a  sale  in  good  faith  without  notice  of  the  vendor's 
lien,  has  a  paramount  title.'^ 

The  vendor's  lien  exists  and  is  enforceable,  it  is  commonly 
held,  against  all  persons  except   bona  fide  purchasers  without 

^  Rogers  v.  Blum,  56  Tex.  1 ;  Beattie  v.  Dickinson,  39  Ark.  203 ;  Sitz  v. 
Deihl,  55  Mo.  17. 

2  Seitz  V.  Railroad  Co.,  16  Kan.  133 ;  Thorpe  v.  Durbon,  45  Iowa,  192 ;  CJoch- 
ran  v.  Wimberly,  44  Miss.  503. 

^  Adams  v.  Buchanan,  49  Mo.  64. 

^Clark?;.  Hunt,  3  J.  J.  Marsh.  (Ky.)  553;  Anderson  v.  Wells,  6  B.  Mon. 
(Ky.)  540,  541 . 

6  Eubank  v.  Poston,  5  Mon.  (Ky.)  288. 

«  Rogers  v.  Tucker,  94  Mo.  346. 

'  Yetter  v.  Fitts,  113  Ind.  34. 


vendor's  lien.  345 

notice.^     A  purchaser  cannot  claim  to  be  innocent  so  long  as 
the  mortgage  remains  uncancelled.^ 

§329.  Pennsylvania  Doctrine. — In  Pennsylvania  a  ven- 
dor's lien  will  be  divested  by  subsequent  sheriff  sales,  unless 
it  is  in  the  nature  of  testamentary  provisions  for  wife  and 
children,  or  is  incapable  of  valuation,  or  is  expressly  created 
to  run  with  the  land.^  A  clause  of  reservation  of  a  vendor's 
lien  on  specific  land  conveyed  in  a  deed  is  not  a  condition, 
nor  a  reservation  of  any  estate  in  the  vendor,  which  does  not 
pass  to  the  vendee  at  a  sheriff's  sale,  and  the  greatest  effect 
that  can  be  claimed  for  this  clause  is  that  it  created  an  equita- 
ble lien  for  so  much,  which  lien  is  discharged  by  a  sale.* 

§  330.  Mechanics'  Lien  and  Homestead  Rights. — The 
vendor's  lien  is  paramount  to  a  homestead  right  of  the  pur- 
chaser.^ Neither  can  the  purchaser  destroy  this  lien  by  creat- 
ing another  lien,  as  for  instance,  mechanic's  lien  for  labor  and 
material  expended  on  the  land.*'  If  he  creates  a  mechanic's 
lien,  it  wdll  be  subordinate  to  the  vendor's.'' 

But  where  parties  have  placed  machinery  in  a  mill  pur- 
chased by  the  vendee,  they  may  remove  it  where  the  vendor's 
lien  is  discharged,  though  they  do  not  replace  the  old  ma- 
chinery as  found  at  first.^ 

§  331.  Rights  of  the  Creditors  of  the  Vendee. — The 
vendor's  implied  lien  does  not  prevail,  as  a  general  rule, 
against  creditors  of  the  vendee,  but  upon  this  question  there 

'  Dunton  v.  Outhouse,  64  Mich.  419. 

^Dugan  V.  Lyman  (N.  J.),  23  Atl.  Rep.  657.    See,  also,  Crow  v.  Conant 
(Mich.),  51  N.  W.  Rep.  450. 
'Strauss's  Appeal,  49  Pa.  St.  353. 

*  Pierce  v.  Gardner,  83  Pa.  St.  211 ;  Hiester  v.  Green,  48  Pa.  St.  96. 

*  Berry  v.  Boggess,  62  Tex.  239;  Williams  v.  Samuels  (Ky.),  13  S.  W.  Rep. 
438. 

®  Thorpe  r.  Durbon,  45  Iowa,  192;  Cochran  i;.  Wimberly,  44  Miss.  500; 
Seitz  V.  R.  R.  Co.,  16  Kan.  1.33. 

'  Irish  V.  Lundin,  28  Nebr.  84. 

^Slocum  V.  Caldwell  (Ky.),  13  S.  W.  Rep.  1069 ;  Northern  Bank  v.  Decke- 
bach,  83  Ky.  154. 


346  NATURE    AND    REQUISITES    OF   THE    CONTRACT. 

is  no  uniformity  of  doctrine.  So  where  creditors  have  secured 
the  legal  title  to  property  upon  which  a  secret  lien  is  claimed, 
without  notice  of  such  lien,  they  will  hold  the  property  as 
against  persons  claiming  such  lien.'  And  it  is  generally  stated 
that  a  purchaser  of  real  estate  for  valuable  consideration,  and 
without  notice,  is  not  bound  by  an  equitable  lien  on  the  land 
for  the  unpaid  purchase-money.^  But  it  is  held  otherwise  as 
to  judgment  creditors.^  Still,  on  the  other  hand,  it  is  held 
that  the  vendor's  lien  exists  as  against  judgment  and  general 
creditors.*  This  doctrine  is  denied  in  some  of  the  States  ^  and 
is  indorsed  in  many  other  States.^ 

A  late  case  decided  by  the  Michigan  Supreme  Court  holds 
that  the  vendor's  lien  is  paramount  to  all  others,  except  those 
of  a  bona  fide  purchaser  without  notice.^  However,  the  doc- 
trine is  not  uniform  in  this  regard. 

§  332.  Remedy  op  Vendor — Election. — A  deed  expressly 
retaining  a  lien  for  unpaid  purchase-money  does  not  divest 
the  vendor's  title.  He  may  elect  to  sue  either  for  recovery  of 
the  laud  or  for  the  purchase-money  with  foreclosure;  and 
merely  filing  his  petition  to  foreclose  the  lien  is  not  such  an 
election  as  prevents  him  from  amending  and  asking  for  re- 
covery of  the  land.^  Nor  can  it  be  objected  to  when  the  bill 
in  equity  is  brought  to  enforce  a  vendor's  lien,  that  the  vendor 
should  have  first  exhausted  his  remedy  at  law.^  When  de- 
fault of  payment  occurs,  the  vendor  may  elect  to  sue  for  the 
unpaid  purchase-money,  or  disaffirm  the  contract,  and  recover 
the  land.'" 

1  Taylor  v.  Baldwin,  10  Barb.  (N.  Y.)  626 ;  Bayley  v.  Greenleaf,  7  Wheat. 
(U.  S.)  46. 

2  Aldridge  v.  Dunn,  7  Blackf.  (Ind.)  249. 
^Story  Eq.  Jur.  430. 

*Repp  V.  Repp,  12  Gill  &  J.  (Md.)  .341 ;  Brown  v.  Vanlier,  7  Humph.  (Tenn.) 
239. 
s  Bayley  v.  Greenleaf,  7  Wheat.  (IT.  S.)  46. 
«See  1  White  &  Tudor's  Eq.  Gas.  (3d  Am.  Ed.)  371-4. 
'Dunton  v.  Outhouse,  64  Mich.  419. 
8  Stone  Land  &  Cattle  Co.  r.  Boon,  73  Tex.  548.  * 
'Burgess  v.  Fairbanks,  83  Cal.  215. 
1°  Hamblen  v.  Folts,  70  Tex.  132;  Micou  v.  Ashurst,  55  Ala.  607;  McConnell 


vendor's  lien.  347 

§  333.  Ejectment  may  be  Brought, — It  is  the  general  rule 
that  ejectment  may  not  be  maintained  against  the  vendee  ex- 
cept when  time  is  the  essence  of  the  contract,  either  made  so 
by  the  language  employed,  ^  or  arising  from  the  circumstances 
surrounding  the  transaction.^  But  in  some  cases  the  right  has 
been  sustained,  after  default,  to  bring  ejectment  on  general 
principles.^  In  New  York,  after  default,  the  vendor  is  entitled 
to  immediate  possession,  and  may  bring  ejectment  to  gain 
possession.* 

§  334.  In  Case  of  Two  Funds. — In  case  a  creditor  has  two 
funds  to  which  he  may  resort  for  payment,  or  has  a  lien  on 
two  parcels  of  land,  or  on  land  and  personal  property,  and  an- 
other creditor  has  a  lien  on  only  one  of  the  funds,  or  on  the 
parcel  of  land,  or  on  the  land  and  not  on  the  personal  prop- 
erty, the  latter  may  compel  the  former,  who  has  two  funds,  to 
resort  to  the  fund  or  property  to  which  the  latter  has  no 
recourse,  and  exhaust  it  before  subjecting  the  other  fund.^ 

§335.  Election  op  Remedy — Contrary  Doctrine. — Of 
course,  the  general  rule  is  that  the  vendor  need  not  first  ex- 
haust his  remedy  at  law  before  proceeding  in  equity ;  ^  that  he 
need  not  first  exhaust  his  remedy  against  the  personal  estate 

V.  Beattie,  34  Ark.  113 ;  Palmer  v.  Harris,  100  111.  276 ;  Smith  v.  Rowland,  13 
Kan.  245,  251 ;  Bradley  v.  Bosley,  1  Barb.  Ch.  (N.  Y.)  152 ;  Galloway  v.  Hamil- 
ton, 1  Dana  (Ky.),  576;  Richardson  v.  Baker,  5  J.  J.  Marsh.  (Ky.)  323;  High 
V.  Batte,  10  Yerg.  (Tenn.)  186  ;  Huffinan  v.  Cauble,  86  Ind.  593. 

1  Higbie  v.  Farr,  28  Minn.  439  ;  Mickelwait  v.  Leland,  54  Iowa,  662 ;  Peters 
r.  Canfield,  74  Mich.  498  ;  Overman  v.  Jackson,  104  N.  Car.  4  ;  Gunst  r.  Pel- 
ham,  74  Tex.  586 ;  Judd  v.  Skidmore,  33  Minn.  140 ;  Sornberger  v.  Berggren, 
20  Nebr.  399  ;  Schumann  v.  Mark,  35  Minn.  379. 

2  Austin  V.  Wacks,  30  Minn.  335 ;  Gilman  v.  Smith,  71  Md.  171. 

3  Gregg  V.  Von  Phul,  1  Wall.  (U.  S.)  274;  Burnett  v.  Caldwell,  9  Wall. 
(U.  S.)  290 ;  Kerns  v.  Dean,  77  Cal.  555 ;  Wallace  v.  Maples,  79  Cal.  433  ; 
Rose  V.  Perkins,  98  Mo  253 ;  Miles  v.  Lewis,  115  Pa.  St.  580. 

*  Wright  V.  Moore,  21  Wend.  (N.  Y.)  230;  Ketchum  v.  Evertson,  13  Johns. 
(N.  Y.)  359. 

^  Cheeseborough  v.  Millard,  1  Johns.  Ch.  (N.  Y.)  409 ;  Aldrich  v.  Cooper,  3 
White  &  Tudor's  Lead.  Cas.  Eq.  198,  and  note ;  Bryant  v.  Stephens,  58  Ala. 
636,  641. 

«  Burgess  v.  Fairbanks,  83  Cal.  215 ;  Sparks  v.  Hess,  15  Cal.  186,  193. 


348 


NATURE    AND    REQUISITES    OF    THE    CONTRACT. 


of  the  vendee.'  But  to  this  general  rule  there  is  a  contrary 
doctrine,  which  holds  that  as  a  vendor's  lien  is  a  mere  equita- 
ble right,  therefore  it  cannot  be  asserted  until  the  vendor  has 
exhausted  his  legal  remedy  against  the  personal  estate  of  the 
vendee.^ 


i336.  Reservation    of    the 
Rights  of  Assignee, 
i  337.  Rights  of  Vendee. 
1338.  Contribution. 
I  339.  Order  of  Payment. 
;  340.  Subrogation  of  Surety. 
;  341.  Limitation  and  Laches. 
i342.  Parties. 


Article  4. 
Enforcement  of  the  Lien 
Lien 


§343.  Pleadings. 

§344.  Comminghng  the    Aggregate 

Price  of  Real  and  Personal 

Property. 
§  345.  Defense — Tender  of  Deed. 
§  346.  Decree. 
§  347.  Sale  of  Land. 


§  336.  Reservation  op  the  Lien — Rights  of  Assignee. — 
An  assignee  of  a  note  or  bond  given  for  the  purchase-money, 
as  a  general  rule,  is  entitled  to  the  benefit  of  the  security  and 
may  enforce  specific  performance,  or  may  enforce  the  lien  re- 
served in  the  same  manner  as  his  assignor.^  This  reserved  lien 
is  regarded  as  an  incident  to  the  debt* 

In  a  suit  to  enforce  a  vendor's  lien  against  an  assignee  with 

1  Smith  V.  Rowland,  13  Kan.  245,  251. 

2  Pratt  V.  Van  Wyck,  6  Gill  &  Johns.  (IMd.)  495 ;  Bottorf  v.  Conner,  1 
Blackf.  (Ind.)  287;  Russell  v.  Todd,  7  Blackf.  (Ind.)  239.  (The  law  is  different 
in  Indiana  now  :  Hufiman  v.  Cauble,  86  Ind.  591,  593) ;  Richardson  v.  Stil- 
linger,  12  Gill  &  Johns.  (Md.)  477. 

3  Sloan  V.  Campbell,  71  Mo.  387  ;  Brooks  v.  Young,  60  Tex.  32  ;  Rakestraw 
V.  Hamilton,  14  Iowa,  147  ;  Reynolds  v.  Morse,  52  loAva,  155  ;  Ober  v.  Gallagher, 
93  U.  S.  199  ;  James  r.  Burbridge,  33  W.  Va.  272 ;  Wright  v.  Troutman,  81 
111.  374  ;  Felton  v.  Smith,  84  Ind.  485  ;  Tharpe  v.  Dunlap,  4  Heisk.  (Tcnn.) 
674  ;  Walkenhorst  v.  Lewis,  24  Kan.  420  ;  Walker  r.  Kee,  16  S.  Car.  76  ;  Camp- 
bell V.  Rankin,  28  Ark.  401  ;  Martin  v.  O'Bannon,  35  Ark.  62 ;  McClintic  v. 
Wise,  25  Gratt.  (Va.)  448  ;  Hobson  v.  Edwards,  57  Miss.  128  ;  Hadley  v.  Nash, 
69  N.  Car.  162 ;  Adams  r.  Cowherd,  30  Mo.  458  ;  Lowery  v.  Peterson,  75  Ala. 
109  ;  Bradley  r.  Curtis,  79  Ky.  327.    This  is  the  English  doctrine. 

*  Lowery  v.  Peterson,  75  Ala.  109  :  James  v.  Burbridge,  33  W.  Va.  272 ; 
Tingle  v.  Fisher,  20  W.  Va.  497  ;  Gwathmeys  v.  Ragfand,  1  Rand.  (Va.)  466  ; 
Grubbs  v.  Wysors,  32  Gratt.  (Va.)  127 ;  McClintic  v.  Wise,  25  Gratt.  (Va.) 
448. 


1 


vendor's  lien.  349 

notice  of  the  lien,  it  cannot  be  objected  that  the  vendor  has  an 
adequate  remedy  at  law  on  the  contract  with  the  original  ven- 
dee when  the  latter  is  insolvent/ 

If  the  note  does  not  contain  a  full  description  of  the  land 
as  set  out  in  the  petition,  other  evidence  must  be  introduced  to 
give  full  description,  or  no  decree  will  be  rendered.^  But  if 
the  note  shows  upon  its  face  that  an  express  lien  of  particular 
land  is  reserved  the  assignee  may  enforce  its  payment.^ 

If  a  party  buys  land  knowing  that  there  is  an  outstanding 
note  for  the  purchase-money  previously  assigned  by  the  vendor, 
he  takes  the  land  subject  to  the  lien  of  that  note,*  unless  the 
note  was  transferred  after  maturity,  then  he  has  all  the  equities 
that  the  maker  would  have.^ 

The  assignment  is  good  until  set  aside,  when  the  assignor 
can  then  enforce  the  lien  as  to  his  equities.^  At  common  law 
the  assignee  stands  in  no  better  situation  than  the  assignor. 
But  in  Ohio,  under  statutory  provisions,  a  mortgage  void  as  to 
creditors  is  void  as  against  an  assignee  for  the  benefit  of 
creditors,^  though  valid  as  to  the  mortgagor. 

§  337.  Rights  of  the  A^'exdee. — Any  vendee  may  have 
his  notes  protected  by  pajdng  the  purchase-money  due,  or  by 
bringing  it  into  court  under  appropriate  pleading  before  judg- 
ment.^ But  when  he  is  in  possession  he  cannot  recoup  dam- 
ages for  breach  of  warranty  of  title  as  to  part  of  the  land  in  a 
suit  to  enforce  the  vendor's  lien,  unless  his  vendor  is  insolvent.^ 
If  he  alleges  that  the  lien  does  not  exist  for  any  reason  in  a 

1  Bates  r.  Childers,  4  X.  :\Iex.  347. 

^  Daugherty  v.  Eastbum,  74  Tex.  08. 

3  Bailey  v.  Smock,  61  Mo.  213  ;  Osborne  v.  Royer,  1  Lea  (Tenn.),  217. 

*  Young  V.  Atkins,  4  Heisk.  (Tenn.)  529  ;  Joslin  v.  N.  J.  Car  Co.,  36  N.  J.  L. 
141 ;  Bassett  v.  Hughes,  43  Wis.  319  ;  Bristow  v.  Lane,  21  111.  194  ;  Bohanan  v. 
Pope,  42  Me.  93  ;  Vrooman  v.  Turner,  8  Hun  (X.  Y.),  78 ;  Brown  v.  Roger 
Williams  Ins.  Co.,  5  R.  I.  394  ;  Carnegie  v.  Morrison,  2  Met.  381 ;  Urquhart  v. 
Brayton,  12  R.  I.  169. 

*Shinn  v.  Fredericks,  56  111.  4.39. 
« Green  v.  Betts,  1  Fed.  Rep.  289.    ' 
^  Kilbourne  v.  Fay,  29  Ohio  St.  264. 

*  Stone  Land  and  Cattle  Co.  v.  Boon,  73  Tex.  548; 
MVoodall  V.  Kelly,  85  Ala.  368. 


350  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

particular  case,  the  bvirden  is  on  him  to  show  the  circum- 
stances which  sustain  his  allegation.^ 

The  wife's  land  can  also  be  sold  for  the  purchase-money, 
though  the  husband  made  the  purchase  and  took  title  in  her 
name." 

Where  a  second  vendee  is  ignorant  of  the  existence  of  an 
outstanding  note  for  purchase-money  with  no  negligence  on 
his  part,  he  takes  the  property  unaffected  by  any  lien  in  favor 
of  the  holder  of  the  note.^ 

But  if  the  note  is  described  in  a  mortgage,  then  he  has 
notice.  The  vendee  may  incumber  his  interest  and  it  may  be 
sold  upon  execution,*  but  subject  to  the  rights  of  the  vendor.' 
He  has  a  lien  upon  the  land  for  what  he  has  paid  upon  the 
contract  which  he  can  enforce,"  and  this  lien  may  be  enforced 
as  against  a  purchaser  from  the  vendor  with  notice.^ 

§  338.  Contribution. — Whether  several  persons  who  have 
successively  purchased  portions  of  an  incumbered  estate  shall 
be  liable  to  contribution,  is  a  question  upon  which  the  authori- 
ties are  not  uniform.**  Where  land  is  sold  subject  to  a  vendor's 
lien,  in  separate  parcels,  to  different  persons,  by  simultaneous 
deeds,  the  grantees  stand  upon  equal  footing,  and  one  who 
pays  the  incumbrance  is  entitled   to  contribution  from  the 

1  Carson  v.  Green,  1  Johns.  Ch.  (N.  Y.)  308 ;  Gilman  v.  Brown,  1  Mas.  C.  C. 
191,  213,  21-1 ;  Schnebly  v.  Ragan,  7  Gill  &  J.  (Md.)  120,  125 ;  Thompldns  v. 
Mitchell,  2  Rand.  (Va.)  428,  429 ;  Allen  v.  Bennett,  8  Sm.  &  M.  (Miss.)  672, 
681 ;  Campbell  v.  Baldwin,  2  Humph.  (Tenn.)  248,  258 ;  Manly  v.  Slason,  21 
Vt.  271. 

2  Williams  v.  Simmons,  79  Ga.  649. 

^  Nat.  Valley  Bank  v.  Harman,  75  Va.  604. 

*  Smith  V.  Moore,  26  111.  393 ;  Lewis  v.  Hawkins,  23  Wall.  (U.  S.)  119 ;  But- 
ton V.  Schroyer,  5  Wis.  598 ;  Martin  v.  O'Bannon,  35  Ark.  62 ;  Scroggins  r. 
Hoadley,  56  Ga.  165 ;  Masterson  v.  Pullen,  62  Ala.  145 ;  Schorn  v.  McWhirter, 
8  Baxt.  (Tenn.)  201 ;  Richards  v.  Fisher,  8  W.  Va.  55 ;  Merritt  v.  Judd,  14  Cal. 
59 ;  Purdy  v.  Bullard,  41  Cal.  444 ;  Dukes  v.  Turner,  44  Iowa,  575 ;  Walken- 
horst  V.  Lewis,  24  Kan.  420. 

*  Thompson  v.  Heffner,  11  Bush  (Ky.),  353. 
«3Pom.  Eq.  Jur.  1263. 

^  Clark  i;.  Jacob,  56  How.  Pr.  (N.  Y.)  519;  Stewart  v.  Wood,  63  Mo.  252; 
Rose  V.  Watson,  10  H.  L.  Cas.  672. 
8  See  2  Waah.  Real  Prop.  (4th  Ed.)  200,  220. 


vendor's  lien.  351 

others.^  Thus,  two  sub-purchasers  of  land  subject  to  a  vendor's 
hen,  buying  ^t  the  same  time,  must  contribute  ratably  to  the 
purchase-money.  If  one  of  the  two  sub-purchasers,  liable  to 
contribute  to  the  discharge  of  the  vendor's  lien,  owes  a  part  of 
the  purchase-money  to  the  original  vendee,  that  will  first  be 
applied,  and  he  will  contribute  pro  rata  to  the  remainder.^ 

And  if  land  which  is  subject  to  a  lien  of  a  judgment  or  other 
incumbrance  is  sold  in  parcels  to  different  persons  by  succes- 
sive alienation,  it  is  chargeable  in  the  hands  of  the  purchasers 
in  the  inverse  order  of  such  alienation.^ 

So  where  a  vendor  has  a  lien  upon  land  which  has  been 
divided  into  lots  and  sold  by  the  vendee,  the  whole  is  subject 
to  the  lien  in  making  sale  for  its  satisfaction,  and  the  last  lot 
purchased  will  be  sold  first,  and  so  on  in  the  inverse  order 
until  satisfaction  is  obtained.* 

§  339.  Order  op  Payment. — When  bonds  are  secured  by  a 
vendor's  lien,  and  are  assigned  at  different  times  to  different 
persons,  they  are  to  be  satisfied  out  of  the  proceeds  of  the  land 
upon  which  they  are  secured  in  the  order  of  their  assignment.^ 
But  there  is  no  uniformity  of  decision,  and  no  general  rule  can 
be  stated.  In  Pennsylvania,  where  bonds  are  to  be  paid  to 
various  parties,  some  as  assignees,  and  assigned  at  different 
times,  it  is  held  that  the  respective  assignees  and  the  mort- 
gagee, when  he  holds  some  of  the  bonds,  are  entitled  to  a  pro 
rata  dividend  of  the  proceeds,  according  to  the  amounts  of  the 
bonds  which  they  hold.*^  So  in  Mississippi,  where  notes  are 
assigned  at  different  times,  and  which  mature  at  different 
times,  the  holders  of  all  the  notes  stand  upon  an  equal  footing 

1  Stevens  v.  Cooper,  1  Johns.  Ch.  (N.  Y.)  425  ;  Bailey  v.  INIyrick,  50  Me.  171 ; 
Johnson  v.  White,  11  Barb.  (N.  Y.)  194 ;  Aiken  v.  Gale,  37  N.  H.  501 ;  Bates 
V.  Ruddick,  2  Iowa,  423. 

nVilkes  V.  Smith,  4  Heisk.  (Tenn.)  86. 

^  Whitten  v.  Saunders,  75  Va.  563 ;  Harman  v.  Oberdorfer,  33  Gratt.  (Va.) 
497. 

♦Alabama  v.  Stanton,  5  Lea  (Tenn.),  423. 

^Paxton  V.  Rich,  85  Va.  378;  McClintic  v.  Wise,  25  Gratt.  (Va.)  448; 
Menken  v.  Taylor,  4  Lea  (Tenn.),  445. 

^  Donley  v.  M'Kean,  17  S.  &  R.  400 ;  Mohler's  Appeal,  5  Barr,  421. 


352  NATURE    AND    REQUISITES    OF   THE    CONTRACT. 

and  are  each  entitled  to  share  ratably  in  the  proceeds  of  the  sale 
of  the  mortgaged  property/  In  Alabama,  however,  where  the 
purchaser  of  land  executes  several  notes  for  the  purchase- 
money  due  at  different  times,  secured  by  mortgage  or  other 
instrument,  he  creates  a  lien  on  the  land  for  their  payment, 
and  an  assignment  of  the  notes  is  an  assignment  pro  tanto  of 
the  security  for  their  payment,  and  the  several  assignees  are 
entitled  to  priority  of  payment  according  to  the  date  of  their 
respective  agreements,  without  regard  to  the  time  when  the 
notes  severally  mature.^ 

Then  the  rule  in  Texas  is  that  when  a  series  of  notes  are 
given  at  the  same  time  for  the  purchase-money,  the  notes  fall- 
ing due  at  different  dates,  the  vendor's  lien  being  reserved, 
they  are  equally  secured  in  the  common  fund,  and  have  equal 
rights  to  be  satisfied  out  of  it.^ 

The  assignee  of  one  of  the  notes  secured  by  mortgage  is  en- 
titled, as  a  general  rule,  to  be  paid  out  of  the  proceeds  of  the 
mortgaged  property  in  preference  to  the  mortgagee  who 
retains  one  or  more  notes  secured  by  the  same  mortgage.* 

§  340.  Subrogation  of  Surety. — The  subrogation  of  the 
surety  for  indemnity,  on  payment  of  the  debt  of  his  principal, 
to  all  the  rights,  remedies,  and  securities  of  the  creditor  against 
the  principal  debt  is  a  familiar  doctrine  of  courts  of  chancery. 
Equity  adopts  this  mode  to  compel  the  ultimate  discharge  of  the 
debt  by  him  who  in  good  conscience  ought  to  pay  it,  and  to 
relieve  him  whom  none  but  the  creditor  could  ask  to  pay.  To 
effect  this  the  surety  is  allowed  to  take  the  place  of  the  creditor 
and  make  use  of  the  creditor's  securities  as  if  they  were  his  own.^ 

1  Henderson  v.  Herrod,  10  Sm.  &  M.  631. 

2  Alabama  Gold  Life  Ins.  Co.  v.  Hall,  58  Ala.  1 ;  White  v.  King,  53  Ala.  162 ; 
Cullum  ?'.  Erwin,  4  Ala.  452. 

3  McDonough  v.  Cross,  40  Tex.  287  ;  Delespine  r.  Campbell,  45  Tex.  628 ; 
Ellis  V.  Singlotary,  45  Tex.  27 ;  Cannon  v.  McDaniel,  46  Tex.  314 ;  Paris  Ex. 
Bank  v.  Beard,  49  Tex.  363. 

*  Cullum  V.  Erwin,  4  Ala.  455 ;  Bryant  r.  Damon,  6  Gray  (Mass.),  564 ;  Van 
Rensselaer  v.  Stafford,  Hopkins  Ch.  (N.  Y.)  574 ;  Bank  v.  Bank,  9  Wend.  (N.  Y.) 
412 ;  Salzman  v.  Creditors,  2  Rob.  (La.)  241 ;  Whitehead  v.  Fisher,  64  Tex.  638. 

^McCormick  v.  Irwin,  35  Pa.  St.  Ill,  117. 


vendor's  lien.  353 

Thus,  a  surety  upon  a  note  given  to  a  vendor  for  the  pur- 
chase-money, who  pays  it,  is  subrogated  to  the  vendor's  lien  if 
no  equity  in  favor  of  the  vendor  would  thereby  be  displaced/ 

But  this  principle  has  no  application  where  its  enforcement 
would  be  unjust  and  inequitable.  It  may  be  invoked  for  in- 
demnity, and  sometimes,  and  on  certain  conditions,  for  exon- 
eration, by  a  surety  against  his  principal,  but  not  in  case  when 
it  would  operate  to  the  prejudice  of  the  creditor.  Thus,  it  has 
been  held  that  the  surety  upon  paying  the  debt  is  entitled  to 
all  the  securities  held  by  a  creditor,  provided  the  creditor  has 
no  lien  upon  them  or  right  to  make  them  available  against 
the  principal  debtor,  to  enforce  the  payment  of  a  debt  different 
from  that  which  the  surety  has  paid.  But  if  the  creditor  had 
such  a  right,  and  one  arising  out  of  the  transaction  itself,  of 
which  the  suretyship  forms  a  part,  then  the  right  of  the  surety 
to  the  benefit  of  the  securities  is  subordinate  to  the  right  of 
the  creditor  to  make  them  available  for  the  payment  of  the 
other  claims,  and  can  only  be  made  available  after  the  para- 
mount right  is  satisfied.^ 

This  principle  will  apply  to  a  case  where  the  creditor  has  a 
security  for  the  entire  debt,  payable  in  installments,  for  one 
only  of  which  the  surety  is  personally  liable.  To  allow  the 
surety,  on  payment  of  his  installment,  to  have  the  benefit  of 
the  security  which  was  provided  for  the  entire  debt,  and  post- 
pone the  creditor  until  the  surety  is  indemnified,  would  be,  in 
effect,  in  a  case  where  the  security  is  insufficient  to  pay  the 
whole  debt,  to  require  the  creditor  to  indemnify  instead  of  the 
principal  debtor;  for  the  creditor  has  the  prior,  subsisting, 
paramount  right  to  resort  to  the  security  until  his  entire  debt 
is  satisfied.^ 

But  the  payment  of  a  purchase-money  mortgage  by  a  firm, 

standing  in  the  names  of  the  partners,  does  not  subrogate  the 

firm  to  the  vendor's  lien.*     And  the  fact  that  a  mortgage  was 

^  Grubbs  v.  Wysors,  32  Gratt.  (Va.)  127. 
"^  Farebrother  v.  Wodenhouse,  23  Beav.  18. 

3  Grubbs  v.  Wyson,  32  Gratt.  (Va.)  127, 130.    See,  also,  McConnell  v.  Beattie, 
34  Ark.  113 ;  Menken  v.  Taylor,  4  Lea  (Tenn.),  445. 
*Ratcliflf  V.  Mason  (Ky.),  14  S.  W.  Rep.  9G0. 
VOL.  I.— 23 


354  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

given  for  money  advanced  by  the  mortgagee  to  pay  off  a 
vendor's  lien  on  the  land,  does  not  subrogate  the  mortgagee  to 
(the  vendor's  rights.^ 

§  341.  Limitations  and  Laches. — An  equitable  lien  of  a 
vendor  is  not  an  estate  in  the  land  itself,  but  is  a  charge  or 
right  which  has  its  inception  only  by  bill  filed  for  enforcement. 
From  the  fact  that  it  is  a  mere  remedy  or  security,  and  not  a 
right  of  property,  it  results  in  those  States  where  a  mortgage  is 
held  as  a  security  only,  that  the  lien  cannot  be  enforced  after 
the  bar  of  the  statute  of  limitations  has  barred  the  debt.^  In 
such  jurisdictaons  the  barring  of  the  debt  also  bars  the  fore- 
closure of  the  mortgage  or  vendor's  lien,  intended  to  secure  it ; 
hence,  as  a  logical  sequence,  this  rule  applies  in  those  States 
where  a  mortgage  is  regarded  merely  as  a  pledge  or  security, 
the  title  remaining  in  the  mortgagor  until  foreclosure,  and  the 
rights  and  remedies  being  clearly  equitable.^ 

So  when  the  statute  of  limitations  bars  an  action  for  a  debt, 
as  a  vendor's  lien,  the  lien  expires  with  the  debt,  and  cannot 
be  enforced.* 

This  rule,  however,  does  not  generally  apply  where  the  legal 
estate  passes  to  the  mortgagee.  Thus,  in  Virginia,  the  vendor's 
lien  may  be  enforced  in  equity  within  twenty  years,  even 
though  the  action  of  the  debt  secured  thereby  is  barred  by 
limitation.^ 

Delay  is  not  always  to  be  considered  laches.®  The  delay 
must  be  such  as  to  afford  a  reasonable  presumption  of  the  satis- 
faction or  abandonment  of  the  claim,  or  such  as  to  present  a 
proper  defense  by  reason  of  the  death  of  parties  or  loss  of  evi- 

1  Kline  v.  Ragland,  47  Ark.  111. 

''Linthicum  v.  Tapscott,  28  Ark.  267;  Waddell  v.  Carlock,  41  Ark.  523; 
Borst  V.  Corey,  15  N.  Y.  505 ;  Trotter  v.  Erwin,  27  Miss.  772. 

^Ewell  V.  Daggs,  108  U.  S.  143 ;  Schmucker  v.  Sibert,  18  Kan.  104 ;  26  Am. 
Rep.  765 ;  Day  v.  Baldwin,  34  Iowa,  380 ;  Lord  v.  Morris,  18  Cal.  482 ;  Mc- 
Carthy V.  White,  21  Cal.  495 ;  Eborn  v.  Cannon,  32  Tex.  231. 

*  Chase  v.  Cartright,  53  Ark.  358 ;  Stevens  w.  Shannon,  43  Ark.  464,  467. 

*  Tunstall  v.  Withers,  86  Va.  892.  See,  also,  Phillips  v.  Adams,  78  Ala.  225 ; 
May  V.  Wilkinson,  76  Ala.  543 ;  Hardin  v.  Boyd,  113  U.  S.  756. 

«  Coles  V.  Ballard,  78  Va.  139. 


vendor's  lien.  355 

dence ;  so  that  whether  the  lapse  of  time  is  sufficient  to  bar 
recovery  must  of  necessity  depend  upon  the  particular  circum- 
stances of  each  case.* 

So  under  the  common-law  rule,  the  vendor's  lien  may  be 
enforced,  although  the  debt  be  barred  by  the  statute  of  limi- 
tations.^ 

Under  both  of  these  rules,  the  relation  of  a  purchaser  by 
title  bond  to  the  vendor  is  that,  in  effect,  of  mortgagor  to 
mortgagee,  and  what  will  bar  foreclosure  under  a  mortgage 
will  have  the  same  effect  as  to  foreclosure  of  a  vendor's  lien.^ 

§  342.  Parties. — The  only  necessary  or  proj)er  parties  to  a 
foreclosure  of  a  vendor's  lien  are  the  parties  to  the  original 
contract  and  those  occupying  the  property  or  claiming  some 
interest  therein  subsequent  to  the  original  contract.^  A  holder 
of  an  adverse  title  to  the  contract  of  a  vendor's  lien  is  an  un- 
necessary and  improper  party  to  the  foreclosure.'^  Some  courts 
hold,  as  a  vendor's  lien  in  effect  is  a  mortgage,  that  the  same 
persons  must  be  made  parties  that  are  necessary  in  foreclosure 
of  a  mortgage.^  When  land  is  sold  by  decree  of  court  for  dis- 
tribution among  the  heirs  of  the  deceased  owner,  all  persons 
in  whom  the  title  is  vested  are  necessary  parties.^  So,  also,  a 
person  in  possession  from  the  vendee  before  suit  to  foreclose  the 
vendor's  lien  is  a  necessary  party.^ 

Where  a  purchaser  agrees  to  pay  off  a  mortgage  as  part  of 
the  price  embracing  the  land  conveyed  to  him  and  other  lands 
owned  by  the  vendor,  but  fails  to  comply  with  his  agreement, 

'Tazewell  r.  Saunders,  13  Gratt.  (Va.)  354;  Terry  v.  Fontaine, 83  Va.  451. 

^'Bizzell  V.  Nix,  60  Ala.  281 ;  White  v.  Blakemore,  8  Lea  (Tenn.),  49. 

3  Lewis  V.  Hawkins,  23  Wall.  (U.  S.)  119;  Butler  v.  Douglass,  1  McCrary,  C. 
C.  630 ;  Gudger  v.  Barnes,  4  Heisk.  (Tenn.)  570 ;  Daniels  v.  Moses,  12  S.  Car. 
130 ;  Lewis  v.  McDowell,  88  N.  Car.  261 ;  Adair  v.  Adair,  78  Mo.  630. 

*  Faubion  v.  Rogers,  66  Tex.  472. 

^Morcland  v.  Metz,  24  W.  Va.  119  ;  Faubion  r.  Rogers,  6f)  Tex.  472. 

« Wells  V.  Francis,  7  Colo.  396;  King  v.  Young  jNIen's  Ass'n,  1  Woods  C.  C. 
386  ;  Gaston  v.  White,  46  Mo.  486  ;  Dukes  v.  Turner,  44  Iowa,  575 ;  Iowa  Rev. 
Code,  1873,  sects.  3329,  .3.3.30  ;  Law  of  Tenn.  of  1885,  ch.  9. 

'  Gardner  v.  Kelso,  80  Ala.  497. 

^Ballard  r.  Carter,  71  Tex.  161. 


356  NATURE    AND    REQUISITES   OF   THE    CONTRACT. 

the  vendor  may  pay  the  amount  and  enforce  his  lien  against 
the  vendee.^ 

In  West  Virginia  it  is  not  error  to  decree  sale  to  pay  such 
lien  without  making  other  creditors,  having  subsequent  liens 
thereon,  parties,  and  ascertaining  the  amount  and  priority  of 
their  debts.^ 

If,  however,  the  lien  is  for  land  conveyed  by  trust-deed,  then 
the  trustees  should  be  made  parties,  but  it  is  not  necessary  to 
make  the  cestuis  que  trustent  in  deeds  parties  before  decreeing 
in  favor  of  the  person  holding  the  vendor's  lien.^  In  such 
cases  the  doctrine  which  requires  lienors  in  an  ordinary  credit- 
ors' suit  to  be  made  parties  does  not  apply .^ 

A  vendor's  executor  can  maintain  an  action  to  enforce  the 
vendor's  lien  on  land  conveyed  by  his  testator  during  his  life.^ 

The  assignee  may  foreclose  the  lien  without  making  the  as- 
signor  a  party." 

So  where  a  third  party  is  the  payee  he  has  a  right  to  the 
debt  and  a  right  to  enforce  the  lien,  and  the  grantor  is  not  a 
necessary  party,  nor  after  his  death  his  personal  representatives 
or  heirs.  Or  if  a  third  party  becomes  the  assignee  he  is  en- 
titled to  the  debt  and  to  the  lien  as  its  incident,  and  in  a  suit 
by  him  or  his  assignee  to  enforce  it,  the  grantor,  or,  after  his 
death,  his  heirs  or  personal  representatives  are  not  necessary 
parties.^  The  lien  may  be  enforced  against  the  widow  and 
heirs  of  an  insolvent  vendee,  as  no  lien  can  be  superior  to 
this.« 

§  343.  Pleadings, — Generally,  the  vendor  may  maintain  a 
bill  to  enforce  his  security,  whenever  the  vendee,  if  he  had  paid 

'  Strohm  v.  Good,  113  Ind.  93. 

2  Cunningham  v.  Hedrick,  23  W.  Va.  579 ;  Neeley  v.  Ruleys,  26  W.  Va. 
686,  688. 

3  Arnold  v.  Cobum,  32  W.  Va.  272. 

♦Cunningham  v.  Hedrick,  23  W.  Va.  579;  Neeley  v.  Ruleys,  26  W.  Va. 
686. 
5  Robinson  v.  Appleton,  124  111.  276. 
«  Kirk  V.  Sheets,  90  Ala.  504. 
'  James  v.  Burbridge,  33  W.  Va.  272. 
8  Solomon  v.  Skinner,  82  Tex.  345. 


vendor's  lien.  367 

the  purchase-money,  could  maintaiu  a  bill  for  specific  perform- 
ance/ 

And  when  a  vendor  resorts  to  a  court  of  equity  to  enforce 
his  lien,  he  must  allege  the  contract  of  sale  with  reasonable 
certainty,  and  the  consideration  and  terms  of  payment  must 
be  alleged  and  clearly  proven.^ 

Thus,  where  a  bill  alleges  that  the  unpaid  purchase-money 
was  to  be  paid  in  five  or  six  years,  at  a  given  rate  of  interest, 
and  the  vendor  proved  that  the  vendee  was  to  have  six  or 
seven  years  in  which  to  make  such  payment  the  bill  wdll  be 
dismissed.^ 

Generally,  where  there  is  a  want  of  precision  and  certainty, 
and  want  of  equity,  the  bill  will  be  dismissed/ 

So,  where  the  petition,  in  an  action  on  a  note  and  foreclosure 
lien,  merely  states  that  "  the  notes  are  liens  "  on  the  land,  not 
showing  how  the  lien  was  acquired,  or  contains  no  averments 
as  to  the  contract,  but  avers  that  the  vendor  was  "  able,  will- 
ing, and  ready  to  make  a  deed  "  to  said  land,  but  shows  no 
title  thereto  in  himself,  it  is  fatally  defective/  The  vendor 
must  set  out  the  contract,  and,  if  he  has  not  already  conveyed, 
the  character  of  the  title  to  be  made.  If  he  has  conveyed,  that 
fact  should  be  set  out,  and  if  not,  he  must  allege  that  he  is 
able  and  willing  to  do  so  according  to  the  terms.^ 

And  the  vendor  may  have  judgment  in  personam  if  the  alle- 
gation of  the  petition  is  sufficient  to  authorize  it,  although  the 
allegation  may  not  be  sufficient  to  authorize  judgment  in  remJ 

If  the  complaint  contains  the  section,  range,  township, 
county,  and  State,  it  is  a  reasonable  certainty  of  description, 
and  is  sufficient.^     But  when  there  is  nothing  in  the  bill  to 

*  Hopper  I'.  Hopper,  16  N.  J.  Eq.  147 ;  Sykes  v.  Betts,  87  Ala.  537. 

*  Diinton  V.  Outhous,  64  Mich.  419 ;  Mowrey  v.  Vandling,  9  Mich.  39. 
nVaterfield  v.  Wilber,  64  Mich.  642. 

*  Cleaver  v.  Matthews,  83  Va.  801. 

5  Mitchell  V.  Clark  (Ky.),  6  S.  W.  Rep.  908. 

«Bullard  v.  Graham,  87  Ky.  120;  Calvin  v.  Duncan,  12  Bush  (Ky.),  101; 
Bybee  v.  Smith  (Ky.),  11  S.  W.  Rep.  722. 
'  Bullard  v.  Graham,  87  Ky.  120. 

*  Thompson  v.  Sheppard,  85  Ala.  611 ;  Gaston  v.  Weir,  84  Ala.  193. 


358  NATURE    AND    KEQUISITES    OF   THE    CONTRACT. 

identify  the  land  for  wliicli  the  foreclosure  is  made,  the  bill  is 
insufficient.^ 

If  the  purchase-money  be  made  payable  on  a  day  certain, 
the  payment  then  is  not  dependent  upon  making  the  title,  and 
the  vendor  need  not  aver  an  offer  on  his  part  to  convey,  or  to 
aver  his  readiness  to  make  title.^  If  the  vendee  has  posses- 
sion, he  cannot  deny  his  liability  on  the  note,  bond,  or  con- 
tract for  the  purchase-money.^ 

The  vendor  must  also  aver  the  amount  of  the  unpaid  pur- 
chase-money.* In  the  division  of  land  to  make  a  settlement, 
where  the  petition  gives  such  a  description  of  the  land  that  the 
court  may,  from  the  description  given,  determine  whether  or 
not  the  land  is  susceptible  of  advantageous  division,  the  alle- 
gation in  that  regard  need  not  be  made.^ 

And  it  is  sufficient  to  aver  that  the  vendor  sold  land  to  one 
of  two  vendees  for  a  certain  sum,  of  which  sum  said  vendee 
paid  part,  leaving  a  balance  due  and  unpaid,  and  that  at  the 
time  of  sale,  for  reasons  known  to  such  vendee,  and  at  his  re- 
quest, a  conveyance  was  made  by  the  vendor  with  the  name  of 
another  vendee  inserted  therein  who  knew  all  the  facts  of  the 
transaction  ;  this  will  be  sufficient  to  enforce  the  vendor's  lien 
against  such  other  vendee  for  the  balance  of  the  unpaid  pur- 
chase-money.^ 

If  a  vendor  retains  the  legal  title,  his  heirs-at-law  are  neces- 
sary parties  as  holders  of  the  legal  title  if  he  died  intestate ; 
but  if  the  bill  alleges  that  he  left  a  will,  the  devisees  are 
necessary  parties.^ 

§  344.  Commingling  the  Aggregate  Price  of  Real  and 
Personal  Property. — When,  by  the  contract,  no  lien  or  se- 

'  Daniel  v.  Watson,  72  Tex.  642. 

''Burkett  v.  Munford,  70  Ala,  423;  Reeve  v.  Downs,  22  Kan.  330;  Mun- 
ford  V.  Pearce,  70  Ala.  452. 

3  Harvey  v.  Morris,  63  Mo.  475;  Brock  v.  Hidy,  13  Ohio  St.  306;  Mclndoe 
V.  Morman,  26  Wis.  588. 

^Calvin  v.  Duncan,  12  Bush  (Ky.),  101. 

^Cockrill  V.  Mize  (Ky.),  12  S.  W.  Rep.  1040. 

«  Burgess  v.  Fairbanks,  83  Cal.  215. 

'  Liles  V.  Ratchford,  88  Ala.  397. 


vendor's  lien.  359 

curity  is  carved  out  or  reserved,  either  expressly  or  by  impli- 
cation, when  it  becomes  a  matter  of  presumption,  whether  or 
not  the  presumption  arises  before  conveyance  is  made,  depends 
on  the  same  principle  applicable  after  a  conveyance  is  made. 
When  there  is  a  blending  and  commingling  in  the  same  note 
or  contract  of  the  aggregate  price  of  real  and  personal  property 
sold  at  the  same  time,  and  the  agreed  price  of  the  real  and  per- 
sonal property  cannot  be  separated  and  definitely  ascertained,  by 
reference  to  either  the  writings  or  extrinsic  evidence,  or  both, 
the  presumption  of  the  intention  of  the  equitable  lien  is  re- 
butted, and  the  vendor's  lien  cannot  be  enforced.^  So  when 
the  considerations  are  blended  and  combined,  and  it  is  impos- 
sible, without  resort  to  conjectural  inquiries,  to  separate  them 
in  the  pleadings  or  proof,  the  presumption  must  be  that  the 
vendor  did  not  look  to  the  lands  for  payment,  but  relied  ex- 
clusively on  the  personal  liability  of  the  vendee." 

A  blending  of  considerations  is  obnoxious.  It  must  be 
shown  what  price  was  agreed  to  be  paid  for  the  lands  at  the 
time  of  making  the  contract,  and  the  relation  of  vendor  and 
vendee  established  as  a  matter  of  separate  negotiation.^  Thus 
under  a  written  agreement  between  two  married  sisters,  their 
husbands  uniting  with  them  for  a  "  distribution  and  final 
settlement  of  the  estate "  of  their  deceased  father,  it  is 
stipulated  that  one  is  to  take  certain  lands  and  pay  the  other 
$500,  and  the  second  is  to  take  certain  other  lands  with  all 
the  personal  property,  pay  all  the  debts,  and  save  the  first 
harmless  against  them  ;  no  words  of  conveyance  being  used, 
but  promises  to  the  effect  that  "  all  proper  instruments  and 
conveyances  necessary  to  carry  out  this  agreement  are  to  be 
executed  between  the  parties,"  and  that  "  this  instrument  is  to 
be  recorded  as  a  final  settlement  and  distribution  of  said  es- 
tate ;"  a  vendor's  lien  to  enforce  the  payment  of  the  $500  does 
not  arise  by  operation  of  law,  and  the  facts  repel  the  presump- 
tion that  it  was  retained  by  contract ;  and  though  it  is  alleged 

'  Sykes  v.  Betts,  87  Ala.  537. 
'^Stringfellow  v.  Ivie,  73  Ala.  209. 
^Alexander  v.  Hooks,  84  Ala.  605. 


360  NATURE   AND   REQUISITES   OF   THE   CONTRACT. 

that  there  were  in  fact  no  outstanding  debts,  and  that  the  per- 
sonal assets  were  valueless,  these  allegations  do  not  show  that 
the  $500  was  one-half  of  the  estimated  difference  in  value  of 
the  lands  only.^ 

§  345.  Defense — Tender  of  Deed. — As  a  general  rule  the 
vendor  is  not  obliged  to  tender  a  deed  before  beginning  suit  in 
an  equitable  action  to  enforce  a  lien  under  a  contract  for  the 
unpaid  purchase-money.^  If  he  avers  his  ability  and  readi- 
ness to  convey,  it  is  unnecessary  to  make  such  tender  unless  it 
appears  that  the  contract  was  executory  and  that  the  payment 
of  the  jDurchase-money  was  to  be  contemporaneous  with  the 
execution  of  the  conveyance  or  subsequent  thereto.^ 

If  the  time  of  performance  has  passed,  neither  party  offer- 
ing to  perform,  no  action  at  law  will  lie,  but  either  party  may 
claim  specific  performance  in  equity,  making  an  offer  of  his 
willingness  and  readiness  to  perform.* 

The  action  to  enforce  a  vendor's  lien  is,  in  effect,  an  equitable 
one,  and  in  such  action  a  tender  of  the  deed  is  not  required.* 

The  general  rule  is  that  the  vendor  in  actions  of  specific 
performance  of  contracts  must  aver  in  the  bill  performance  or 
a  readiness  and  willingness  to  perform  on  his  part.^  And 
even  if  the  vendor  is  able  to  perform  at  the  time  of  the  final 
judgment,  he  is  entitled  to  his  relief,  although  he  may  not 
have  been  in  a  state  to  perform  at  the  time  he  brought  suit.^ 
He  may  be  compelled  to  pay  costs,  but  nevertheless  his  cause 
of  action  had  accrued  upon  the  filing  of  the  bill  or  the  com- 
mencement of  the  suit.*     And  so  it  is  not  necessary  for  the 

^  Sykes  v.  Betts,  87  Ala.  537,  opinion  by  Clopton,  J. 

2  Wakefield  v.  Johnson,  26  Ark.  506  ;  Klyce  v.  Broyles,  37  Miss.  524  ;  Turner 
V.  Lassiter,  27  Ark.  662  ;  Mclndoe  v.  Merman,  26  Wis.  588  ;  Freeson  v.  Bis- 
8ell,  63  N.  Y.  168. 

3  Davis  V.  Smith,  88  Ala.  596. 

*  Bruce  v.  Tilson,  25  N.  Y.  194  ;  Stevenson  v.  Maxwell,  2  N.  Y.  408. 
»  Freeson  v.  Bissell,  63  N.  Y.  1(58. 
®  Walker  v.  Jeffreys,  1  Hare,  352. 

'  Baldwin  y.  Salter,  8  Paige  (N.  Y.),  475;   Stevenson  v.  Maxwell,  2  N.  Y. 
408 ;  Bruce  v.  Tilson,  25  N.  Y.  194. 
^  Vroom  V,  Ditmas,  4  Paige  (N.  Y.),  526. 


vendor's  lien.  361 

vendor  actually  to  execute  a  deed  after  his  ofiFer  and  the  ven- 
dee's refusal  to  comply  with  the  contract.^ 

This  doctrine  is  sustained  on  the  principle  that  concurrent 
promises  are  those  where  the  acts  to  be  performed  are  simul- 
taneous, and  either  party  may  sue  the  other  for  breach  of  the 
contract  on  showing  either  that  he  was  able,  ready,  and  willing 
to  do  this  act  at  the  proper  time  and  in  the  proper  manner,  or 
that  he  was  prevented  from  doing  it  by  the  act  of  the  other 
contracting  party.^ 

The  vendor  must  do  one  of  two  things — he  must  make  a 
tender  of  a  sufficient  warranty  deed,  and  the  tender  must  be 
kept  good  by  bringing  the  instrument  into  court,  or  he  must 
make  an  averment  of  his  readiness  and  willingness  to  execute 
the  deed  that  will  vest  title  in  the  vendee.^ 

In  case  the  representatives  of  the  vendor  bring  suit,  they 
must  show  that  they  are  willing  and  able  to  give  a  deed,  and 
make  the  heir  or  devisee  who  holds  the  legal  title  in  trust  for 
the  vendee  a  party  to  the  suit,  so  that  he  will  be  bound  by  the 
decree.* 

Where  one  obtains  possession  under  a  contract  of  sale  and 
afterward  acquires  an  outstanding  title  adverse  to  the  vendor's, 
neither  he  nor  his  assignee,  with  notice,  can  use  it  to  defeat  an 
action  to  enforce  the  vendor's  lien,  the  vendor  having  con- 
tracted to  give  a  quit-claim  deed  only.^ 

However,  in  Indiana  and  some  other  States,  it  is  held  that 
if  a  tender  be  not  made  it  must  be  alleged  that  the  plaintiff  is 
willing  and  ready  to  deliver  a  deed  to  the  vendee  which  will 
convey  a  good  title.^ 

The  general  rule  is  that  when  the  vendor  resorts  to  a 
personal  action  against   the   vendee   it   is   necessary  that   a 

1  Carpenter  v.  Holcomb,  105  Mass.  281 ;  Cobb  v.  Hall,  33  Vt.  233  ;  White  v. 
Mann,  26  Me.  361 ;  Hanna  v.  Eatekin,  43  111.  462. 

*  Howland  r.  Leach,  11  Pick.  (Mass.)  151 ;  Tinney  v.  Ashley,  15  Pick. 
(Mass.)  54(i ;  INIcWilliams  v.  Brookens,  39  Wis.  334. 

'  Goodwine  v.  INIorey,  111  Ind.  68. 

*  Thomson  v.  Smith,  63  N.  Y.  301. 

*  Robinson  v.  Appleton,  124  111.  276. 

*  Goodwine  v.  Morey,  111  Ind.  68. 


362  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

tender  of  a  deed  be  first  made,  and  that  the  tender  be  kept 
good.^ 

§  346.  Decree. — A  foreclosure  sale  of  the  vendor's  lien 
exhausts  it.  After  the  land  has  been  sold,  bringing  only  part 
of  the  judgment,  and  redeemed  by  the  vendee,  the  vendor's 
lien  is  divested.^ 

The  decree  must  either  enforce  the  vendor's  lien  or  rescind 
the  contract.^ 

In  Virginia  the  court  may  decree  sale  of  the  land  to  satisfy 
the  lien,  with  any  previous  accounts  of  rents  and  profits.* 

If  the  vendee,  while  remaining  in  possession  of  the  land, 
can  claim  an  abatement  of  the  purchase-money  in  a  suit  to 
enforce  the  vendor's  lien  on  the  ground  that  the  conveyance 
was  not  properly  executed  to  pass  title  to  a  portion  which  con- 
stituted the  homestead,  the  defense  must  be  interposed  by 
cross-bill  or  answer,  alleging  the  insolvency  of  the  vendor,  and 
electing  to  recoup  damages  on  account  of  a  defect  of  the  title. 
Nor  can  the  defense  avail,  when  it  appears  that  the  vendor  is 
able  and  willing  to  execute  a  sufficient  conveyance  and  the  re- 
lief is  decreed  to  him  on  the  express  condition  that  he  does  so.' 

In  an  action  to  enforce  a  vendor's  lien  against  an  assignee 
for  value,  of  the  original  vendee,  personal  judgment  should 
not  be  rendered  against  the  assignee.®  And  a  judgment  on 
land  described  in  the  petition  but  including  land  which  was 
excepted  from  the  conveyance  to  the  vendee,  is  in  nowise  pre- 
judicial to  the  vendee.^ 

A  vendee  to  claim  the  land  by  buying  in  an  outstanding 
paramount  title,  must  first  surrender  the  land  to  the  vendor. 

^Wyvell  V.  Jones,  37  Minn.  68;  Berryhill  v.  Byington,  10  Iowa,  223; 
Critchett  v.  Cooper,  65  N.  H.  167 ;  Griffith  v.  Winborne,  105  N.  Car.  403 ; 
Eddy  V.  Davis,  116  N.  Y.  247. 
'     ''Todd  r.  Davey,  60  Iowa,  532. 

'Baldwin  r-.  Whaley,  78  Mo.  186. 

♦  Neff  V.  Wooding,  83  Va.  432  ;  Code  of  1873,  ch.  115,  sect.  1.  Chapter  182, 
sect.  9,  applies  to  suits  for  the  enforcement  of  judgment  liens. 

5  Woodall  V.  Kelly,  85  Ala.  368 ;  Tedder  v.  Steele,  70  Ala.  347. 

6  Bates  V.  Childers,  4  N.  Mex  347. 
^Nass  V.  Chadwick,  76  Tex.  572. 


vendor's  lien.  363 

Thus,  where  the  vendor's  title  depends  on  adverse  possession 
to  a  part  of  the  land,  a  decree  enforcing  the  lien  against  the 
land  is  proper ;  for  neither  the  vendee  nor  his  assignee  can  set 
up  this  adverse  title,  which  has  been  bought,  against  the  ven- 
dor without  first  giving  up  the  possession  he  has  derived  from 
the  vendor/  And  a  purchaser  under  a  contract  of  sale  may- 
be restrained  from  impairing  the  vendor's  lien.  He  may 
make  improvements  if  he  does  not  impair  the  vendor's  security. 
If  the  vendee  sells  buildings  to  a  purchaser  with  notice  of  a 
fraudulent  intent  to  impair  the  vendor's  security,  no  title 
passes  as  against  the  vendor.^ 

Ordinarily  the  vendor  has  a  right  to  strict  foreclosure  of  the 
contract  after  default  by  the  vendee ;  in  which  case  the  vendee 
will  be  allowed  a  specified  time  to  pay  the  balance  due,  or  be 
barred  of  all  rights  thereunder.^ 

§347.  Sale  of  Land. — A  decree  foreclosing  the  vendor's 
lien  and  ordering  sale  of  the  laud,  and  directing  a  sale  to  be 
made  in  a  county  in  which  the  land  is  situated,  is  correct ;  but 
such  sale  in  a  different  county  would  be  a  nullity.*  And  a 
sale  of  the  land  passes  the  growing  crops,  unless  the  decree 
otherwise  orders.^  But  the  vendor's  lien  is  subordinate  to  any 
prior  lawful  lien  on  the  crops.®  And  in  Kentucky  the  court 
may  order  sale  of  the  land  in  separate  parts,  where  it  appears 
from  the  description  in  the  petition  that  it  is  divisible,  though 
there  is  no  special  allegation  of  that  fact.'^  And  in  Iowa  an 
unrecorded  lien  for  unpaid  purchase-money  cannot  be  enforced 
by  the  vendor  after  a  conveyance  by  the  vendee,  unless  such 

*  Robinison  v.  Appleton,  124  111.  276. 

MVeed  v.  Hall,  101  Pa.  St.  592. 

^  Button  V.  Schroyer,  5  Wis.  598 ;  Baker  v.  Beach,  15  Wis.  99;  Church  v. 
Smith,  39  Wis.  492;  Buswell  v.  Peterson,  41  Wis.  82;  Kirby  v.  Harrison,  2 
Ohio  St.  326 ;  Benedict  v.  Lynch,  1  Johns.  Ch.  (N.  Y.)  374 ;  McKinney  v. 
Jones,  55  Wis.  39. 

♦Dalton  V.  Rainey,  75  Tex.  516. 

5  Yates  V.  Smith,  11  111.  App.  459;  Johnston  v.  Smith,  70  Ala.  108;  Smith  v, 
Hap:ue,  25  Kan.  246. 

«  Wooten  V.  Bellinger,  17  Fla.  289. 

'Lucy  V.  Hopkins  (Ky.),  13  S.  W.  Rep.  518 ;  Civil  Code,  sect.  694. 


364 


NATURE    AND    REQUISITES    OF    THE    CONTRACT, 


conveyance  is  made  after  suit  is  brought  by  the  vendor.^  But 
a  verbal  contract  for  the  sale  of  land  is  not  a  conveyance 
within  the  meaning  of  this  section,  and  does  not  defeat  the 
lien  of  the  vendor,  where  there  is  a  subsequent  conveyance 
within  the  meaning  of  this  section,  in  accordance  with  the 
terms  of  the  contract  after  suit  is  brought  by  the  vendor.^ 

» Code,  ssect.  1940. 

2  Shropshire  v.  Lyle,  31  Fed.  Rep.  694. 


\ 


CHAPTER  X. 


THE    PARTIES   TO    THE   MORTGAGE. 


Article  1. 
Classification  and  Competency  of  Grantors. 


348.  In  General.  I  363. 

349.  Insane  and  Feeble-Minded  Per- 

sons. §  364. 

350.  Mortgages  of  Insane  Persons  are 

Voidable.  §  365. 

351.  Infancy — Persons  Under  Age. 

352.  Affirmance   of  Voidable  Mort-     ?  366. 

gages. 

353.  Married  Woman's  Mortgage.  ?  367. 

354.  Mortgaging  Her  Property  to  Se- 

cure her  Husband's  Debts.  ^  368. 

355.  What  Consideration  is  Valid. 

356.  The  Wolfe's  Equity  of  Exonera-     ?  369. 

tion.  ?  370. 

357.  The  Husband  Cannot    Extend     §  371. 

the  Wife's  Mortgage  Without 

Her  Consent.  ?  372. 

I  358.  Lex  Rei  Sitfe  Governs.  §  373. 

\  359.  Administrators  and  Executors. 

\  360.  Guardian.  §  374. 

\  361.  Partners. 

\  362.  Real  Estate  Held  by  a  Partner-    I  375. 
ship. 


Taking  Mortgages  in  the  Firm 
Name. 

Mortgage  of  Real  Estate  by 
One  of  the  Firm. 

Rights  of  Mortgagee  With  No- 
tice. 

One  Partner  May  Become 
Surety  for  the  Firm. 

After  Dissolution  of  the  Part- 
nership. 

Corporations — Power  to  Mort- 
gage Real  Estate. 

Religious  Corporations. 

Corporate  Franchises. 

Validating  Defective  Mort- 
gages. 

Corporate  Seal. 

Execution  by  Attorney  in 
Fact. 

Mode  of  Executing  the  Au- 
thority. 

Joint  Mortgagors. 


§  348.  In  General. — It  is  a  general  rule  of  law  that  all 
persons  may  be  parties  to  a  contract,  unless  they  are  incompe- 
tent by  reason  of  a  personal  disability,  or  from  considerations 
of  public  policy.  In  every  contract  there  must  be,  of  necessity, 
at  least  two  parties ;  one  who  is  bound  to  perform  the  contract, 
and  the  other  who  is  entitled  to  have  it  performed. 

In  case  of  mortgages  on  real  estate,  provisions  are  made  by 
statute,  authorizing  guardians  to  execute  mortgages  for  persons 
^under  natural  or  legal  disability.     So  trustees,  executors,  and 

365 


366 


NATURE    AND    REQUISITES    OF    THE    CONTRACT. 


administrators  are  authorized  to  execute  mortgages  in  their 
representative  capacity.  This  statutory  power  must  be  strictly 
followed.  Thus,  the  power  of  the  guardian  to  mortgage  his 
ward's  land  is  limited  and  purely  statutory  and  must  be  exer- 
cised strictly  for  the  purpose  for  which  it  is  giveu.^ 

§  349.  Insane  and  Feeble-Minded  Persons. — "  Lunaticus," 
or  "  no7i  compos  mentis,"  or  "  insana  mentis  "  is  equivalent  to 
the  English  phrase  "  of  unsound  mind."  These  expressions  all 
import  a  total  deprivation  of  sense,  and  courts  of  law  so  under- 
stand them.^  It  is  the  general  rule  that  a  conveyance  of  an 
insane  person,  or  one  of  feeble  mind  ^  is  ineffectual  to  convey 
title  to  land,  as  against  the  grantor  or  against  his  heirs  and 
devisees,  unless  it  is  confirmed  by  the  grantor  when  of  sane 
mind.^  Such  conveyance  may  be  confirmed  by  the  grantor 
afterward  sane,  or  by  his  heirs  ;  if  under  guardianship,  the 
conveyance  is  absolutely  void.^  And  this  right  of  avoiding 
the  contract  exists  notwithstanding  the  person  with  whom  the 
insane  man  contracted  was  not  apprised  of  his  condition,  and 
had  no  reason  to  suspect  such  insanity,  and  did  not  over- 
reach him  by  any  fraud  or  deception.^ 

So  an  insane  person  or  his  guardian  may  bring  an  action  to 
recover  land  on  which  a  deed  was  made  by  him  while  insane, 
without  first  restoring  the  consideration  to  the  grantee,  the 
deed  not  having  been  ratified  nor  confirmed.'' 

It  is  generally  held  that  a  person  of  unsound  mind  is  not 
bound  by  his  contract,  though  no  fraud  nor  imposition  has 
been  practiced  on  him.^ 

In  England  such  persons  are  held  by  their  contracts,  unless 
fraud  and  imposition  have  been  practiced,  but  the  doctrine  in 

iMerritt  v.  Simpson,  41  111.  391. 
2  Ex  parte  Barnsley,  3  Atk.  1G8. 
'  Brio-ham  v.  Fayerweather,  144  Mass.  48. 
*Valpey  v.  Rea,  130  Mass.  384. 
5  Wait  V.  Maxwell,  5  Pick.  (Mass.)  219. 
®  Seavers  v.  Phelps,  11  Pick.  (Mass.)  304. 

''  Gihson  v.  Soper,  6  Gray  (Mass.),  279 ;  Arnold  v.  Richmond  Iron  Work?^,  1 
Gray  (Mass.),  434. 
8  Chew  V.  Bank,  14  Md.  318. 


THE  PARTIES  TO  THE  MORTGAGE.  367 

the  United  States  is  the  other  way.  If  not  so,  the  effect  in 
many  cases  would  be  to  place  lunatics  on  the  same  footing 
with  persons  of  sound  mind.^ 

However,  if  the  mortgagor  comprehended  at  the  time  he 
executed  the  mortgage  what  he  was  doing,  and  if  no  fraud 
has  been  practiced  on  him,  the  instrument  will  he  held  valid.^ 

In  some  cases  it  has  been  held  that  when  a  mortgage  is 
made  in  good  faith,  for  the  benefit  of  the  lunatic,  without 
notice  of  incapacity,  and  so  far  performed  that  if  rescinded  the 
party  executing  cannot  be  placed  in  statu  quo,  the  contract 
must  stand.^  Equity  will  not  interfere  to  avoid  an  executed 
contract,  where  it  was  made  in  good  faith,  without  knowledge 
of  the  incapacity,  and  the  lunatic  has  had  the  benefit  of  it.* 

A  grantor  in  a  deed  of  trust  was  mentally  incompetent  to 
execute  it.  The  grantee  mortgaged  the  premises  to  secure  a 
loan  to  one  who  had  no  knowledge  of  the  grantor's  condition, 
a  portion  of  the  money  being  paid  to  the  grantor.  A  brother 
of  the  mortgagee  drew  the  deed  and  was  present  at  its  execu- 
tion, and  acted  as  agent  of  the  mortgagee  in  negotiating  the 
loan.  It  was  held  that  the  mortgage  would  not  be  considered 
as  having  been  taken  in  good  faith  without  notice  and  was  in- 
valid except  as  to  the  portion  received  by  the  grantor.^ 

The  evidence  of  the  mortgagor's  mental  incapacity  must 
be  clear  and  satisfactory  in  order  to  avoid  his  mortgage.® 

§  350.  Mortgages  of  Insane  Persons  are  Voidable. — The 
contracts  of  insane  persons,  in  the  absence  of  fraud  and  impo- 
sition, are  not  void  but  voidable.^     In  an  action  to  set  aside 

*  Hovey  v.  Hobson,  53  Me.  451 ;  Chew  v.  Bank,  14  Md.  299,  318. 

*  Day  V.  Seely,  17  Vt.  542. 

^Mutual  Life  Ins.  Co.  v.  Hunt,  79  N.  Y.  541 ;  Riggs  v.  Am.  Tract  Society,  84 
X.  Y.  330. 

*Loomis  V.  Spencer,  2  Paige  (N.  Y.),  158  ;  Canfield  v.  Fairbanks,  63  Barb. 
(N.  Y.)  401. 

^Sponable  v.  Hanson,  87  Mich.  204. 

« Howell  V.  Griffiths  (N.  J.  Ch.),  22  Atl.  Rep.  928. 

'  Ingraham  v.  Baldwin,  9  N.  Y.  45 ;  Loomis  v.  Spencer,  2  Paige  (N.  Y.),  158  ; 
Beals  V.  See,  10  Barr  (Pa.),  56 ;  Allis  v.  Billings,  6  Met.  (Mass.)  415 ;  Howe  v. 
Howe,  99  Mass.  98  ;  Allen  v.  Berryhill,  27  Iowa,  534 ;  1  Am.  Rep.  309  ;  Eaton 
(•.  Eaton,  37  N.  J.  L.  108 ;  Hunt  v.  Wier,  4  Dana  (Ky.),  348. 


368  NATURE    AND    REQUISITES    OF   THE    CONTRACT. 

such  a  contract,  fraud  or  unconscionable  advantage,  or  at  least 
knowledge  of  the  insanity  must  be  shown.^  If  this  is  es- 
tablished by  an  averment  that  the  grantor  was  insane,  then 
the  burden  is  upon  the  grantee  to  show,  among  other  things, 
that  he  accepted  the  conveyance  in  ignorance  of  such  mental 
unsoundness.^  But  if  he  holds  the  estate  for  which  he  has 
paid  no  consideration,  he  cannot  defeat  the  action  to  set  aside 
the  conveyance  on  account  of  the  insanity  of  his  grantor  by 
showing  that  the  grantor  had  the  appearance  of  being  men- 
tally sound,  and  that  he  accepted  the  deed  without  knowledge 
of  the  insanity  of  such  grantor.^  Thus,  an  injunction  to  pre- 
vent the  sale  of  mortgaged  premises  will  be' made  perpetual 
when  it  appears  that  the  mortgagor  was  rendered  imbecile  by 
habitual  drunkenness  and  reduced  to  a  condition  verging  on 
insanity  by  the  mortgagee,  who  had  thus  obtained  complete 
control  over  him,  and  when  no  valuable  consideration  was 
shown  to  have  been  given  for  the  mortgage.* 

A  mortgage  will  not  be  set  aside,  however,  on  account  of 
the  weakness  of  the  mortgagor's  intellect  unless  fraud  has 
been  used  or  advantage  has  been  taken  of  such  disability  by 
the  mortgagee.^ 

The  rule  is  generally  stated  that  an  executed  contract  made 
with  a  lunatic,  in  good  faith,  for  a  full  consideration,  without 
advantage  taken  of  the  lunatic,  without  knowledge  of  the  in- 
sanity and  without  such  information  as  would  lead  a  prudent 
person  to  a  belief  of  the  incapacity,  and  when  there  had  been 
no  finding  by  a  commission  de  lunatico  inquirendo,  will  be  in- 
forced  as  against  a  lunatic.^ 

^  Lincoln  v.  Buckmaster,  32  Vt.  652 ;  Person  v.  Warren,  14  Barb.  (N.  Y.) 
488 ;  Musselman  v.  Cravens,  47  Ind.  1 ;  Young  v.  Stevens,  4S  N.  H.  133  ;  Beh- 
rens  v.  McKenzie,  23  Iowa,  343 ;  May  v.  Maj^  109  Mass.  254. 

^  Riggs  V.  Am.  Tract  Society,  84  N.  Y.  330 ;  Fulwider  v.  Ingels,  87  Ind.  414. 

='Hull  V.  Louth,  109  Ind.  315. 

*  Van  Horn  v.  Keenan,  28  111.  445. 

^  Marmon  v.  Marmon,  47  Iowa,  121. 

^Lincoln  v.  Buckmaster,  32  Vt.  652  ;  Matthiessen  v.  McMahon,  38  N.  J.  L. 
536  ;  Bank  v.  Moore,  78  Pa.  St.  407  ;  21  Am.  Rep.  24  ;  Wilder  v.  AVeakley,  34 
Ind.  181 ;  Menkins  v.  Lightner,  18  111.  282 ;  Loomis  v.  Spencer,  2  Paige  (N. 
Y.),  153. 


THE    PARTIES   TO   THE   MORTGAGE.  369 

When  one  has  wholly  lost  his  understanding,  and  is  abso- 
lutely 7ion  compos  mentis,  then  his  contract  is  absolutely  void 
and  not  voidable.^ 

§351.  Infancy — Persons  Under  Age. — It  is  generally 
held  that  the  deed  of  an  infant  is  not  void  but  only  voidable.^ 

At  common  law  it  was  sometimes  held  that  an  infant  was 
not  bound  by  his  contract,  unless  he  ratified  it  after  becoming 
of  age. .  In  other  cases  it  was  held  that  in  order  to  avoid  the 
contract,  there  must  be  a  disaffirmance  after  majority ;  and  in 
some  cases  it  was  held  that  the  disaffirmance  must  be  made 
within  a  reasonable  time  after  attaining  full  age.  And  again 
it  was  held  that  a  disaffirmance  at  any  time  within  the  statute 
of  limitations  would  be  sufficient ;  and  in  some  cases  of  executed 
contracts  it  was  held  that  there  could  be  no  disaffirmance 
without  a  return  of  the  property  or  money  received  by  the  in- 
fant pursuant  to  the  contract,  and  other  cases  held  the  contrary 
doctrine.^ 

In  many  cases  the  disaffirmance  of  a  deed  made  during  in- 
fancy is  a  fraud  upon  third  parties.  But  this  has  never  been 
held  sufficient  to  avoid  the  disaffirmance,  for  it  would  take- 
away the  very  protection  which  the  law  intends  to  throw 
around  the  infant  to  guard  him  from  the  effects  of  his  folly,, 
rashness,  and  misconduct.'* 

So  the  right  of  an  infant  to  avoid  his  contracts  is  absolute 
and  paramount  to  all  equities  in  favor  of  third  persons,  includ- 
ing purchasers  without  notice.^ 

But  there  is  no  reason  why  one,  who  by  means  of  a  voidable 

'  Osterhout  v.  Shoemaker,  .3  Hill  (N.  Y.),  531 ;  Odell  v.  Buck,  21  Wend.  (N. 
Y.)  142 ;  Van  Dusen  v.  Sweet,  51  N.  Y.  379 ;  Lozear  v.  Shields,  23  N.  J.  Eq. 
509 ;  Miller  v.  Craig,  36  111.  109  ;  Spiers  v.  Sewell,  4  Bush  (Ky.),  339 ;  Dennett 
t'.  Dennett,  44  N.H.  531. 

*Ir\'ine  v.  Irvine,  9  Wall.  (U.  S.)  617,  625;  Thompson  r.  Strickland,  52  Miss. 
574 ;  Nightingale  v.  Withington,  15  Mass.  272,  274. 

3  2  Kent's  Com.  245  ei  seq. ;  2  Greenl.  Ev.,  sects.  362-368 ;  Tucker  v.  More- 
land,  10  Pet.  (IT.  S.)  58. 

*  Tucker  v.  Moreland,  10  Pet.  (V.  S.)  58. 

^Jenkins  r.  Jenkins,  12  Iowa,  195;  Myers  r.  Sandei-s,  7  Dana  (Ky.),  506; 
Hawes  ;•.  Railroad  Co.,  64  Iowa,  315 ;  Leacox  v.  Griffith,  76  Iowa,  89. 
vol..  I. — 24 


370  NATURE    AND    REQUISITES    OF    THE   CONTRACT. 

.contract  made  in  his  infancy,  has  obtained  possession  of  prop- 
•erty  which  he  retains  on  coming  of  age  should  be  allowed  to 
•disaffirm  the  contract  and  at  the  same  time  retain  the  benefit 
derived  from  it.  In  such  case,  if  he  retains  the  property,  it  is 
justly  held  that  he  affirms  the  contract.' 

Where  land  is  conveyed  and  a  mortgage  given  back  for  the 
purchase-money,  it  is  but  one  transaction,  and  the  title  passes 
by  the  deed  subject  to  the  mortgage ;  and  where  the  grantee 
in  such  case  is  an  infant,  he  may  disaffirm  the  deed  on  coming 
of  age,  but  by  retaining  the  land  he  affirms  the  mortgage.^ 

If  an  infant,  upon  his  coming  of  age,  allows  a  foreclosure 
and  sale,  he  thus  confirms  the  contract.^ 

So  if  an  infant  wishes  to  avoid  his  mortgage,  he  must  do  so 
promptly  upon  coming  of  age.* 

Where  the  father,  for  himself  and  as  guardian  for  his  minor 
heirs,  purchases  land  and  takes  a  deed  to  himself,  and  then 
agrees  to  give  a  mortgage  for  the  purchase-money,  the  mort- 
gage is  good  in  equity  against  the  minors  who  aj)pear  by 
guardian  ad  litem,  and  do  not  disclaim  the  title  to  the  land 
vested  in  them.^  And  one  who  takes  and  holds  the  legal  title 
to  land  in  trust,  cannot  disaffirm  or  avoid  his  deed  in  the  exe- 
cution of  the  trust  on  the  ground  of  his  minority.^  So,  if  one 
of  the  partners  is  a  minor  at  the  time  of  the  execution  of  the 
mortgage,  and  his  acts  after  becoming  of  age  are  such  as  to 
affirm  the  contract  of  partnership,  the  mortgage  is  valid.^ 

^  Lawson  v.  Lovejoy,  8  Me.  405 ;  Boyden  v.  Boyden,  9  Met.  (Mass.)  519 ; 
Cresinger  v.  Welch,  15  Ohio,  156 ;  Boody  v.  McKenney,  23  Me.  517 ;  Robbins 
V.  Eaton,  10  N.  H.  561 ;  Boston  Bank  v.  Chamberlin,  15  Mass.  220 ;  Hubbard  v. 
Cummings,  1  Me.  11 ;  Palmer  v.  Miller,  25  Barb.  (N.  Y.)  399. 

*  Young  V.  McKee,  13  Mich.  552;  Willis  v.  Twambly,  13  Mass.  204. 
='Flynn  v.  Powers,  35  How.  (N.  Y.)  279;  Terry  v.  McClintock,  41  Mich.  492. 

*  Askey  v.  Williams,  74  Tex.  294 ;  Loomer  v.  Wlieelwright,  3  Sand.  Ch. 
(N.  Y.)  135 ;  Featherston  v.  McDonnell,  15  U.  C.  C.  P.  162.  Upon  this  ques- 
tion there  is  an  unreconcilable  conflict,  and  it  is  held  that  an  avoidance  may 
be  made  any  time  before  the  statute  has  barred  an  entry  :  Cole  v.  Pennoyer,  14 
111.  158 ;  Jackson  v.  Burchin,  14  Johns.  (N.  Y.)  124 ;  Vaughan  v.  Parr,  20  Ark. 
GOO ;  Moore  v.  Abernathy,  7  Blackf.  (Ind.)  442. 

*  Peers  i;.  McLaughlin,  88  Cal.  294. 
«Nordholdt  v.  Nordholdt,  87  Cal.  552. 
'  Salinas  v.  Bennett,  33  S.  Car.  285. 


THE    PARTIES    TO    THE    MORTGAGE.  371 

§  352.  Affirmance  of  Voidable  Mortgage. — An  infant 
upon  coming  of  age  may  affirm  his  mortgage  in  many  ways. 
Thus,  if  he  continues  to  hold  the  estate,  he  thereby  affirms  his 
mortgage  made  in  infancy.^  So  he  may  affirm  by  a  convey- 
ance after  majority  to  a  third  person  subject  to  the  mortgage. 
But  such  a  deed,  which  does  not  refer  to  the  mortgage,  is  rather 
a  disaffirmance.^ 

Accordingly  a  voidable  deed  may  be  confirmed  by  a  recital 
in  a  subsequent  deed  with  a  design  to  ratify.''  This  right  of 
disaffirmance  is  a  personal  privilege  of  the  infant  only,  and 
his  privies  in  blood,  and  not  his  privies  in  estate.^ 

He  can  ratify  by  execution  and  redelivery  of  the  mortgage, 
after  majority,  and  the  instrument  relates  back  in  its  effects  to 
the  original  delivery,  and  affects  all  intermediate  sales  except 
for  a  new  and  full  consideration.' 

An  infunt  feme  covert  cannot  relinquish  her  dower  right  by 
joining  with  her  husband  in  a  mortgage,^  and  she  may  repu- 
diate her  own  mortgage  on  coming  of  age.^ 

It  appears  by  some  authorities  that  if  the  mortgage  is  in  no 
way  for  the  infant's  benefit,  it  is  void  absolutely.^ 

Where  a  minor  mortgages  his  land,  and  on  coming  of  age 
conveys  it  to  another  person  in  fee,  subject  to  the  mortgage, 
which  he  recognizes  in  the  second  deed,  it  is  held  to  be  a  rati- 
fication of  the  mortgage.^  So  slight  acts  of  assent  on  the  in- 
fant's part,  after  coming  of  age,  are  held  sufficient  to  confirm 

'  Salinas  v.  Bennett,  83  S.  Car.  285  ;  Roberts  r.  Wiggin,  1  N.  H.  73 ;  Henry 
V.  Root,  33  N.  Y.  526,  553;  Kitchen  v.  Lee,  11  Paig3  (N.  Y.),  107;  Robbins  w. 
Eaton,  10  N.  H.  561 ;  Badger  v.  Phinney,  15  IMass.  359 ;  Callis  v.  Day,  38  Wis. 
()43. 

2  Allen  V.  Poole,  54  Miss.  323;  Boston  Bank  v.  Chamberlin,  15  ISIass.  220. 

» Phillips  V.  Green,  5  Mon.  (Ky.)  344. 

*  Nightingale  v.  Withington,  15  Mass.  272,  274 ;  Chandler  v.  Simmons,  97 
Mass.  508,  511 ;  Austin  i\  Charlestown  Seminary,  8  Met.  (Mass.)  196,  203 ; 
Mansfield  v.  Gordon,  14-i  Mass.  168. 

^Palmer  v.  INIiller,  25  Barb.  (N.  Y.)  399. 
Glenn  r.  Clark,  53  Md.  580. 

'  Dill  V.  Bowen,  54  Ind.  204  ;  Walsh  v.  Young,  110  Mass.  396. 

»Cronise  v.  Clark,  4  Md.Ch.  403  ;  Chandler  r.  MeKinney,  6  Mich.  217. 

'Story  V.  Johnson,  2  You.  &  Call.  Ex.  607  ;  Phillips  v.  Green,  5  Mon.  (Ky.) 
355;  Lynde  v.  Budd,  2 Paige  (N.  Y.),191. 


372  NATURE    AND    REQUISITES    OF   THE    CONTRACT. 

leases  made  by  a  guardian  beyond  the  power  of  his  authority.* 
And  where  a  loan  of  money  was  made  to  an  infant,  for  which 
he  executed  a  bond  and  mortgage,  and  in  a  will  made  after  he 
became  of  age  directed  the  payment  of  "  all  his  just  debts," 
and  died,  it  was  held  that  the  will  confirmed  the  mortgage.^ 
The  retention,  after  reaching  majority,  of  the  proceeds  of  land 
purchased  and  afterward  sold  by  the  person  while  an  infant, 
is  not,  of  itself,  sufficient  to  render  him  liable  upon  his  cove- 
nant to  pay  an  outstanding  mortgage  upon  the  land  which  he 
had  assumed  as  part  of  the  consideration  of  his  purchase.^ 

§  353.  Married  Woman's  Mortgage. — Under  the  common 
law  a  married  woman  could  not  take  a  conveyance  of  real 
estate  and  give  back  a  mortgage  to  secure  the  purchase-money,^ 
and  a  mortgage  given  for  such  a  purpose  and  the  deed  together 
with  the  notes  were  void.^ 

But  the  common-law  rule  has  been  changed  by  statutory 
provisions,  and  now  a  married  woman  may  mortgage  as  well 
as  alienate  her  real  estate  by  joining  her  husband  in  the  con- 
veyance and  making  due  acknowledgment,  and  this,  too,  though 
no  consideration  pass  to  her.'' 

But  when  her  rights  are  not  the  same  as  a  feme  sole,  a  deed 
or  mortgage  by  her,  without  joinder  of  her  husband  therein, 
is  void  as  to  her,  though  of  her  separate  estate ;  if,  however,  the 
mortgage  be  for  purchase-money  of  the  wife's  separate  estate, 
executed  by  her  alone,  it  creates  a  lien  enforceable  in  equity, 
against  her  and  her  grantees.^ 

She  may  create  a  valid  power  in  the  mortgage  to  sell  in  de- 

'  Smith  V.  Lowe,  1  Atk.  489. 

^Merchants'  Fire  Ins.  Co.r.  Grant,  2  Edw.  Ch.  (N.  Y.)  544. 

3  Weed  V.  Beebe,  21  Vt.495. 

*  Savage  v.  Holyoke,  59  Me.  345. 

*Newbegin  t).  Langley,  39  Me.  200. 

^Moorew.Titman,  33  111.  358;  Eaton  v.  Nason,  47  Me.  132;  Swan  ?^  Wia- 
wall,  15  Pick.  (Mass.)  126;  American,  etc.,  Ins.  Co.  v.  Owen,  15  Gray  (Mass.), 
491 ;  Whiting  v.  Stevens,  4  Conn.  44 ;  Siter  v.  McClanachan,  2  Gratt.  (Va.) 
280 ;  Demarest  v.  Wynkoop,  3  Johns.  Ch.  (N.  Y.)  144 ;  Philbrooks  v.  McEwen, 
29  Ind.  347 ;  McFerrin  v.  White,  G  Cold.  (Tenn.)  499. 

'  Thompson  v.  Scott,  1  111.  App.  641.  See,  also,  Roberts  v.  Jenks,  5  111. 
App.  484  ;  Acts  of  1861  and  1869. 


THE  PARTIES  TO  TFE  MORTGAGE.  373 

fault  of  payment/  And  in  general  she  may  convey  upon  con- 
dition and  prescribe  the  terms.^ 

When  the  wife  joins  her  husband  in  a  mortgage  of  her  own 
property  to  secure  his  debts  or  the  payment  of  money  loaned  to 
him,  she  is  merely  the  suret}^  of  her  husband,  and  is  entitled 
to  all  the  rights  and  privileges  of  a  surety.^ 

In  many  States  the  wife's  legal  capacity  is  so  enlarged  that 
she  is  able  to  bind  herself  and  her  property  as  if  she  were 
sole} 

When  her  rights  are  the  same  as  if  she  were  feme  sole,  she 
is  bound  as  principal  when  she  makes  a  mortgage  to  secure 
her  husband's  debts,  and  not  as  surety.' 

In  New  Jersey  a  mortgage  by  a  wife  on  her  own  property, 
to  secure  the  debt,  the  husband  not  joining  in  the  mortgage,  is 
a  nullity ;  but  equity  will  regard  the  bond  as  an  acknowledg- 
ment of  a  debt  which  was  created  for  the  benefit  of  the 
property  of  the  married  woman,  and  the  mortgage  as  an  ap- 
pointment of  the  property  described  in  it  for  the  payment  of 
that  debt,  and  will  decree  the  debt  a  charge  upon  the  property 
thus  appointed,  and  the  property  may  be  sold  to  pay  it." 

So  it  does  not  become  a  lien  upon  the  estate  until  made  so 
by  the  decree  of  the  court,  a  matter  which  might  become  very 
important  in  the  case  of  a  subsequent  conveyance  by  the 
married  woman  and  her  husband,  lawfully  executed. 

§  354.  Mortgaging  Her  Property  To  Secure  Her  Hus- 
band's Debts. — In  many  of  the  States  the  wife  may  mort- 
gage her  estate  to  secure  her  husband's  debts.  Thus,  a  mort- 
gage given  by  a   married    woman,    in    which    her   husband 

'  Vartie  v.  Underwood,  IS  Barb.  (N.  Y.)  561. 

^  Demarest  v.  Wynkoop,  3  Johns.  Ch.  (N.  Y.)  129. 

^Neimcewicz  v.  Gahn,  3  Paige  (N.  Y.),  614  ;  Vartie  v.  Underwood,  18  Barb. 
(N.  Y.)  561 ;  Hawley  r.  Bradford,  9  Paige  (N.  Y.),  200. 

*Nourse  v.  Henshaw,  123  Mass.  96;  Layman  v.  Shultz,  60  Ind.  541,  547; 
Thompson  v.  Scott,  1  111.  App.  641 ;  Edwards  v.  Schoeneman,  104  111.  278 ; 
Frickee  v.  Donner,  35  Mich.  151 ;  Northwestern  Mut.  Life  Ins.  Co.  v.  AUis, 
23  Minn.  337  ;  Hawkins  v.  Taylor,  61  Ga.  171. 

*  Alexander  v.  Bouton,  55  Cal.  15. 

«Perrine  v.  Newell  (N.  J.),  23  At.  Rep.  492. 


374  NATURE    AND    RECiUISITES    OF    THE    CONTRACT. 

joins,  is  binding  even  wlien  given  as  security  for  the  debts 
of  her  husband/  So  in  Missouri  as  to  her  separate  property, 
»,  married  woman  is  to  be  regarded  as  a  feme  sole,  and  a 
court  may  decree  foreclosure  upon  her  land.^  And  so  in  New 
Jersey  a  voluntary  mortgage  by  wife  of  her  lands,  in  which  her 
husband  joins,  to  secure  her  husband's  debts  is  valid.^ 

Thus,  a  husband  and  wife  signed  a  bond  and  secured  it  by 
a  mortgage  on  the  property  of  the  wife  for  the  husband's 
debts,  and  it  was  held  valid.* 

So  in  Connecticut  a  mortgage  given  by  a  wife  on  her  realty, 
with  the  consent  of  the  husband,  to  secure  the  debt  of  the  latter, 
is  good,  no  attempt  being  made  to  hold  the  wife  on  the  note,^  and, 
in  some  States,  she  may  sell  her  separate  estate  to  pay  her  hus- 
band's debts.'^ 

So  in  Florida  she  may  with  her  husband  make  a  valid  mort- 
gage on  land  of  which  she  is  seized  in  fee  to  secure  the  prom- 
issory note  of  her  husband.^ 

In  South  Carolina  a  mortgage  on  her  separate  estate  to  se- 
cure a  debt  of  her  husband's  is  invalid.^  But  a  mortgage 
given  upon  her  own  estate  can  be  upheld  so  far  as  it  was  given 
to  secure  debts  contracted  for  the  benefit  of  her  estate,  and 
where  a  portion  of  the  debt  was  contracted  by  the  husband 
for  himself,  such  amount  must  be  deducted  from  the  mort- 
gage in  computing  foreclosure.^  She  can  borrow  money  on 
her  own  estate  for  her  debts,  and  when  she  borrows  money 

Kxable's  Appeal  (Pa.),  7  At.  Rep.  52. 

^  Rosenheim  v.  Hartsock,  90  Mo.  357. 

3  Campbell  v.  Tompkins,  32  N.  J.  Eq.  170;  Conover  w.  Grover,  31  N.J.  Eq. 
539 ;  Conway  r.  Wilson,  11  At.  Rep.  607. 

'Conway  v.  Wilson  (N.  J.),  11  At.  Rep.  607. 

''Stafford's  Savings  Bank  v.  Underwood,  54  Conn.  2. 

•'Scott  V.  Ward,  35  Ark.  480;  Sellmeyer  v.  Welch,  47  Ark.  485. 

'  Dzialynski  v.  Bank,  23  Fla.  346.  And  see  Collins  v.  Wassell,  34  Ark.  17, 
33 ;  Marlow  v.  Barlew,  53  Cal.  456 ;  Bull  v.  Coe,  77  Cal.  54 ;  Demarest  v.  Wyn- 
koop,  3  Johns.  Ch.  (N.  Y.)  129,  144 ;  Low  v.  Anderson,  41  Iowa,  476  ;  Smith 
V.  Osborn,  33  Mich.  410;  Comegys  v.  Clarke,  44  Md.  108;  Moore  v.  Fuller, 
6  Ore.  272. 

^Aultman  v.  Rush,  26  S.  Car.  517;  People's  Nat.  Bank  v.  Epstin,  44  Fed. 
Rep.  403.    See,  also,  Carrigan  v.  Drake,  15  S.  E.  Rep.  339. 

« Brown  v.  Prevost,  28  S.  Car.  123 ;  Salinas  v.  Turner,  33  S.  Car.  231 ;  Law 
V.  Lipscomb,  31  S.  Car.  504. 


THE  PARTIES  TO  THE  MORTGAGE.  375 

upon  representation  that  it  is  for  her  own  debt,  and  the  lender 
knows  nothing  to  the  contrary,  she  is  Hable  for  it.^ 

In  Rhode  Island  a  married  woman  can  create  a  charge  on 
her  real  estate  by  executor}''  contract,  only  by  incorporating 
such  contract  in  a  deed  executed  jointly  by  herself  and  hus- 
band. She  cannot  bind  her  real  estate  by  contract  made 
directly  with  her  husband.^ 

In  Alabama  a  distinction  is  made  between  her  equitable 
separate  estate  and  her  statutory  estate.  Her  separate  equitable 
estate  she  can  mortgage  for  the  debt  of  her  husband  or  for 
her  own  debts  as  if  she  were  a,  feme  sole? 

The  wife's  statutory  estate  cannot  be  mortgaged  to  secure  a 
debt  of  husband  and  wife.*  At  one  time  it  was  the  law  of 
Alabama  in  reference  to  the  married  woman's  law  creating  in 
the  wife  a  statutory  separate  estate  that  a  conveyance  of  lands 
from  the  husband  to  the  wife,  vested  in  the  wife  an  equitable 
separate  estate ;  and  this  was  the  effect  of  the  conveyance,  not- 
withstanding the  consideration  was  property,  the  corpus  of  her 
statutory  estate,  or  indebtedness  of  the  husband  on  account  of 
money,  the  corpus  of  her  statutory  estate  used  and  converted 
by  him.^  But  these  authorities  have  been  overruled,  and  the 
law  now  is  that  by  no  contract  between  husband  and  wife 
can  her  statutory  separate  estate  be  converted  into  an  equit- 
able estate  with  power  in  the  wife  to  charge  it,  which  expressly 
and  intentionally  overrules  the  former  decisions  which  hold  to 
the  contrary.^ 

In  Mississippi  the  wife  cannot  bind  her  property  to  pay  her 
husband's  debts  ^  beyond  the  amount  of  her  income.* 

•  Schmidt  v.  Dean,  31  S.  Car.  498 ;  Chambers  v.  Bookman,  32  S.  Car.  445. 
See,  also,  Gleaton  ;;.  Gibson,  29  S.  Car.  514 ;  Grieg  v.  Smith,  29  S.  Car.  426. 

"  Fallon  V.  McAlonen,  15  R.  I.  22.3 ;  Angell  v.  McCullough,  12  R.  I.  47. 
2  Short  I).  Battle,  52  Ala.  456. 

*  Gilbert  v.  Dupree,  63  Ak.  331 ;  Lansden  v.  Bone,  90  Ala.  446. 

5  Turner  V.  Kelly,  70  Ala.  85;  Goodlett  v.  Hansell,  66  Ala.  161;  Darden  v. 
Gerson,  91  Ala.  323 ;  McMillan  v.  Peacock,  57  Ala.  129. 

«Loeb  V.  McCullough,  78  Ala.  533;  Jordan  v.  Smith,  83  Ala.  302;  Parker 
V.  Marks,  82  Ala.  548. 

'  Klein  v.  McNamara,  54  Miss.  90. 

*Code  of  1871,  sect.  1778 ;  Reed  v.  Coleman,  51  Miss.  835.    See,  also,  Allen 


376  NATURE    AND    REQUISITES   OP    THE    CONTRACT. 

In  Illinois  a  wife  may  own  and  convey  real  estate  as  if 
sole/  but  under  act  of  1861  she  could  not  conveyor  mortgage 
without  her  husband  joining  with  her.^ 

Now  a  wife  can  mortgage  her  real  estate  on  same  terms  as 
her  husband  may  his.^ 

Prior  to  the  act  of  1874  a  wife  could  not  charge  her  realty 
by  mortgage  without  joinder  of  her  husband  therein.* 

The  acts  of  1861  and  1869  permitted  the  wife  to  charge 
her  separate  estate  for  debts  of  her  husband  by  mortgage, 
provided  he  joined  in  the  execution  of  it.^ 

In  Indiana,  act  of  1879,  page  160,  a  married  woman 
might  mortgage  her  separate  property  acquired  by  purchase 
to  secure  her  husband's  debts.^ 

But  such  mortgage  would  be  void  if  the  property  was  ac- 
quired by  descent,  devise,  or  gift/ 

The  act  of  1881,  sect.  5119,  prohibits  a  married  woman 
from  incumbering  her  property  as  security.  It  is  settled  that 
when  such  a  mortgage  is  upon  real  estate  which  she  owns  with 
her  husband  as  tenants  by  entireties,  it  is  voidable  not  only 
as  to  her  but  as  to  the  husband  also.* 

In  Louisiana  a  wife  cannot  bind  herself  for  her  husband's 
debts.^  And  such  transfer  by  the  wife  does  not  operate  to 
assign  to  the  wife  the  demand  against  her  husband  so  as  to 
give  validity  to  the  conveyance.^'' 

In  the  District  of  Columbia  a  bond  executed  by  husband  and 
wife  is  void  as  to  the  latter,  but  valid  as  to  the  husband,  and  a 

V.  Lenoir,  53  Miss.  321 ;  Harmon  v.  Magee,  57  Miss.  410 ;  Stephenson  v.  Miller, 
57  Miss.  48. 
1  Rev.  Stat,  ch.  68,  sect.  9. 

*  Lewis  V.  Graves,  84  111.  205.  See  Herdman  v.  Pace,  85  111.  345;  Elder 
V.  Jones,  85  111.  384. 

3  Edwards  v.  Schoeneman,  104  111.  278. 

*  Roberts  v.  Jenks,  5  111.  A  pp.  484. 

*  Washburn  v.  Roesch,  13  111.  App.  268. 
'Gardner  w. Case,  111  Ind.494. 

'Orr  V.  White,  106  Ind.  341. 

«Dodse  V.  Kinzy,  101  Ind.  102;  Bridges  v.  Blake,  106  Ind.  332;  Warey  v. 
Forst,  102  Ind.  205. 
"CivilCode,  art.  2398. 
w  Krouse  v.  Neal,  42  La.  Ann.  950 ;  Marchand  v.  Griffon,  140  U.  S.  516. 


THE    PARTIES   TO    THE   MORTGAGE.  377 

deed  of  trust  upon  her  separate  estate,  executed  by  the  wife  to 
secure  such  bond  is  valid.^  And  a  joint  note  of  a  husband 
and  wife  is  the  note  of  the  husband  alone,  and  when  it  is 
secured  upon  the  property  of  the  wife  her  evidence  w'ill  be  ad- 
missible to  impeach  it  on  the  ground  of  usury  w^henever  it  is 
sought  to  enforce  a  sale  of  her  property  to  satisfy  such  mort- 
gage.' 

In  Missouri  a  feme  covert  may  with  her  husband  execute  a 
valid  deed  of  trust  of  her  legal  real  estate  to  secure  her  hus- 
band's debts,^  and  the  court  may  appoint  a  trustee  to  make 
sale  of  the  property  in  default  of  payment  of  the  debt  se- 
cured/ 

Under  the  revised  statutes  of  Missouri  ^  a  mortgage  executed 
by  a  husband  and  wife  on  the  latter's  land  not  held  to  her 
separate  use  to  secure  a  debt  of  the  wife  is  valid,  though  the 
debt  is  evidenced  by  a  void  note  of  wife.*'  A  married  woman 
when  conforming  to  the  requirements  of  the  statute  has  the 
unquestioned  power  to  make  a  valid  mortgage  upon  her  real 
estate,  which  is  not  held  to  her  separate  use,  to  secure  her  hus- 
band's debt.^ 

§  355.  What  CoxsiDERxiTiON  Is  Valid. — The  rights  of  the 
wife  are  treated  with  great  respect  in  the  courts.* 

The  property  actually  mortgaged  by  her,  and  not  her  prop- 
erty in  general,  is  thus  subject  to  the  payment  of  her  hus- 
band's debts.^ 

The  granting  of  the  original  loan,  or  a  subsequent  extension 
of  the  time  of  payment  of  the  debt,  is  a  sufficient  considera- 

^Kleindienst  v.  Johnson,  7  Mackey  (Dist.  Col.),  356. 

'Keifer  v.  Carusi,  7  Dist.  Col.  156. 

'Ferguson  v.  Soden  (Mo.),  19  S.  W.  Rep.  727. 

*Rines  v.  INIansfield,  96  Mo.  394;  Wilcox  v.  Todd,  64  Mo.  390;  Hagerman 
V.  Sutton,  91  ]\ro.  519. 

*Rev.  Stat.  1889,  sect.  2396. 

«Meads  v.  Hutchinson,  19  S.  W.  Rep.  1111. 

'  Hagerman  v.  Sutton,  91  Mo.  519 ;  Rines  v.  Mansfield,  96  Mo.  394 ;  Wilcox 
V.  Todd,  64  Mo.  388. 

^Bayler  v.  Commonwealth,  40  Pa.  St.  37,  44. 

'  Wolf  V.  Van  Metre,  23  Iowa,  397  ;  Logan  v.  Thrift,  20  Ohio  St.  62 ;  Hobson 
V.  Hobson,  8  Bush  (Ky.),  665. 


378  NATURE   AND   REQUISITES   OF   THE    CONTRACT. 

tion  for  her  mortgages.'  And  when  a  married  woman  asks  to 
have  such  a  mortgage  set  aside  for  fraud  of  her  husband,  the 
notary,  and  the  mortgagee,  the  mortgage  will  not  be  set  aside 
without  the  clearest  proof  of  fraud.^ 

§356.  The  Wife's  Equity  of  Exoneration. — The  prin- 
ciple is  that  the  wife,  when  she  has  not  the  rights  of  a  feme 
sole,  when  mortgaging  her  property  for  her  husband's  debts, 
stands  in  the  position  of  a  surety,  and  therefore  may  claim 
indemnity  from  the  principal  for  whose  benefit  her  security  was 
interposed.^  And,  generally,  she  is  entitled  to  have  her  estate 
exonerated  out  of  the  estate  of  her  husband  when  practicable.* 

This  rule  of  exoneration  primarily  throws  the  burden  of  the 
debt  on  the  property  of  the  principal  or  husband,  and  exhausts 
that  fund  in  exoneration  of  the  estate  of  the  wife.^ 

Hence,  the  equity  of  the  wife  in  this  regard  is  paramount 
to  the  claims  of  creditors  who  have  a  general  lien  on  the  hus- 
band's property  subject  to  mortgage.^  But  it  is  not  enough 
that  it  is  known  to  the  one  loaning  money  that  the  mortgage 
is  on  the  property  of  the  wife,  and  that  the  security  was  given 
for  money  loaned  to  the  husband  ;  for,  as  the  money  may  have 
been  obtained  for  the  benefit  of  the  wife's  estate,  or  with  a  view 
of  a  gift  to  the  husband,  the  fact  of  the  suretyship  must  be 
affirmatively  established.^ 

Where  a  feme  covert  ioins  in  a  mortgage  of  her  estate  for  a 
debt  of  her  husband,  or  to  raise  money  to  pay  his  own  debts, 
she  will  be  entitled,  after  his  death,  to  have  her  estate  exoner- 
ated out  of  his  assets ;  and  the  same  rule  will  apply  to  any 
advances  of  money  to  her  husband,  which  is  the   separate 

^  Low  V.  Anderson,  41  Iowa,  476. 

^Spurgin  v.  Traub,  05  111.  170. 

3  Wooton  V.  Hele,  2  Saund.  175 ;  Robinson  v.  Gee,  1  Ves.  Sr.  252. 

*Shinn  v.  Smith,  79  N.  Car.  310  ;  Wilcox  v.  Todd,  64  Mo.  388  ;  Huntingdon 
V.  Huntingdon,  2  Bro.  P.  C.  1. 

s  John  V.  Reardon,  11  Md.  465  ;  Story's  Eq.  Jur.,  sects.  642,  1373  ;  Wright  v. 
Austin,  56  Barb.  (N.  Y.)  13 ;  Wilcox  v.  Todd,  64  Mo.  388. 

«Niemcewicz  v.  Gahn,  3  Paige  (N.  Y.),  614;  John  v.  Reardon,  11  Md.  465; 
Loomer  v.  Wheelwright,  3  Sandf.  Ch.  (N.  Y.)  135. 

'  Gahn  v.  Niemcewicz,  11  Wend.  (N.  Y.)  312. 


THE  PARTIES  TO  THE  MORTGAGE.  379 

property  of  the  wife,  to  pay  his  debts,  unless  it  shall  appear 
that  the  advances  were  made  as  a  gift.' 

So,  also,  when  a  wife  joins  in  a  mortgage  of  real  estate, 
partly  her  own  and  partly  her  husband's,  to  secure  a  debt  due 
by  the  husband,  she  stands  as  a  surety  of  her  husband  to.  the 
mortgagee,  and  has  a  right  to  have  the  husband's  interest  first 
applied  to  pay  the  debt,  in  exoneration  of  her  interest.^ 

If  it  appears  that  she  intended  to  make  a  gift  to  her  hus- 
band, she  cannot  then  redeem.^ 

On  the  other  hand,  it  is  held  in  Kentucky  that  a  married 
woman  does  not  become  a  surety  of  her  husband  by  executing 
a  mortgage  on  her  land  in  conjunction  with  her  husband,  to 
secure  a  note  of  his  to  which  she  was  not  a  party.  Such  a 
mortgage  operates  as  a  security  or  pledge.* 

However,  the  general  rule  is,  where  the  statute  does  not  con- 
trol, that  the  equity  of  redemption  remains  in  the  wife  and 
her  heirs.  So,  when  the  marriage  is  dissolved  by  the  death 
of  the  husband,  the  widow,  or  her  heirs,  may  put  this  equity 
in  operation.  Thus,  where  an  estate  belonging  to  the  wife 
was  mortgaged,  and  the  equity  of  redemption  was  in  words 
reserved  to  the  husband  and  his  heirs,  the  court  held  that  there 
was,  nevertheless,  a  resulting  trust  for  the  wife  and  her  heirs.^ 
And  so,  without  a  recital  of  special  circumstances  to  show  an 
intention  to  make  a  new  settlement  of  the  estate,  the  husband 
has  the  equity  of  redemption  only  jure  uxoris.^ 

But  the  widow  may  waive  her  right  of  exoneration  from  the 
estate  of  her  deceased  husband,  and  her  waiver  will  be  in- 
ferred from  circumstances.^ 

1  Knight  V.  Whitehead,  26  Miss.  245 ;  Pateriche  v.  Powlet,  2  Atk.  383 ;  Clin- 
ton r.  Hooper,  3  Bro.  C.  C.  201  ;  Robinson  v.  Gee,  1  Ves.  Sr.  252 ;  Sheidle  v. 
Weishlee,  16  Pa.  St.  134  ;  Weeks  v.  Haas,  3  W.  &  S.  (Pa.)  520. 

*  Johns  V.  Reardon,  11  Md.  465.  And  see  Ayers  v.  Husted,  15  Conn.  503; 
Fitch  r.  Cotheal,  2  Sand.  Ch.  (N.  Y.)  29. 

^  Duffy  V.  Ins.  Co.,  8  W.  &  S.  (Pa.)  413,  433 ;  Demarestw.  Wynkoop,  3  Johns. 
Ch.  (N.  Y.)  129. 

*Hobson  V.  Hobson,  8  Bush  (Ky.),  665. 

*,Tackson  v.  Jones,  1  Bligh,  115. 

*Ruscombe  v.  Hare,  6  Dow.l. 

'  Clinton  v.  Hooper,  1  Ves.  Jr.  188.    But  see  Lancaster  v.  Evors,  10  Beav.  154. 


380  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

In  New  York,  the  widow's  right  of  exoneration  is  expressly- 
admitted  ;  ^  and  in  most  of  the  States  the  wife's  right  as 
surety,  with  reference  to  the  debts  of  her  deceased  husband 
for  which  she  has  mortgaged  her  land,  is  generally  recog- 
nized when  not  controlled  by  statute.^ 

§  357.  The  Husband  Cannot  Extend  the  Wife's  Mort- 
gage Without  Her  Consent. — The  husband  cannot,  under 
this  rule,  extend  the  time  of  a  wife's  mortgage  without  her  legal 
consent.  So  when  a  wife  joins  with  her  husband  in  executing 
a  mortgage  on  her  land  to  secure  his  debts,  the  husband  is  not 
authorized  to  extend  the  time  without  her  legal  consent.  If  he 
does  extend  the  time,  her  land  will  be  discharged  from  the  lien 
of  the  mortgage  by  this  indulgence  to  the  principal  debtor.^ 
Thus,  where  a  wife  mortgages  her  land  as  a  continuing  security 
for  a  note,  to  be  indorsed  by  her  husband,  or  any  renewals  there- 
to, an  agreement  by  the  creditor  to  extend  the  time  of  payment 
for  the  debt  due  upon  such  note  without  her  renewal  thereto 
discharges  her  liability  as  surety.^  So  where,  without  her  con- 
sent, the  creditor  gives  time  to  the  principal  debtor,  those  parts 
of  the  mortgaged  premises  of  which  she  was  seized  in  fee  are 
released  and  discharged  from  the  lien  and  operation  of  the 
mortgage.^ 

§  358. — Lex  Rei  Sit^  Governs. — The  validity  of  a  mort- 
gage by  a  married  woman  is  determined  by  the  law  of  the 
place  where  the  property  is  situated.  Thus,  a  mortgage  exe- 
cuted in  Ohio  by  a  married  woman,  as  security  for  another, 
upon  land  owned  hy  her  in  Indiana,  is  void  under  the  law  of 
Indiana  of  1881.  Her  rights  to  mortgage  her  land  in  Indiana 
must  be  determined  by  the  laws  of  the  place  where  the  land  is 
situated.^ 

1  Vartie  v.  Underwood,  18  Barb.  (N.  Y.)  5G1. 

''Philbrook  v.  McEwen,  29  Ind.  347 ;  Hetherington  v.  Hixon,  46  Ala.  297. 
»Bank  v.  Burns,  2  Lans.  (N.  Y.)  52. 
*  Smith  V.  Townsend,  25  N.  Y.  479. 
^Gahn  v.  Niemcewicz,  11  Wend.  (N.  Y.)  312. 

« Swank  v.  Hufnagle,  111  Ind.  453.  See,  also,  Post  v.  Bank,  138  111.  559; 
Dawson  v.  Hayden,  67  111.  52. 


THE    PARTIES    TO    THE    MORTGAGE,  381 

§  359.  Administrators  and  Executors. — An  administra- 
tor or  executor  cannot  borrow  money  upon  a  mortgage  of  the 
real  estate  of  the  decedent.  Such  note  and  mortgage  are  plainly 
invalid  when  not  sanctioned  by  statutory  provisions,  and  the^ 
mere  fact  of  a  benefit  derived  will  not  sustain  them.'  But 
when  the  law  gives  a  court  jurisdiction,  which  grants  the  ad- 
ministrator license  to  mortgage  real  estate  of  the  decedent, 
the  mortgage  cannot  be  questioned  in  a  mere  collateral  pro- 
ceeding. The  parties  claiming  under  such  mortgage  are 
protected  without  investigating  the  truth  of  the  facts  upon 
which  it  was  granted.^  But  where  the  mortgage  is  executed 
by  the  executor  under  a  power  in  the  will  of  the  decedent, 
it  will  be  held  valid.'^  In  general,  the  power  of  an  executor, 
not  derived  from  the  will,  to  mortgage  the  land  of  the  decedent 
is  limited  and  purely  statutory.*  When  the  executor  has  full 
power  to  join  with  his  testator's  partner  in  the  business,  given 
by  will,  he  may  unite  with  such  partner  in  a  mortgage  to  cor- 
rect a  mistake  in  a  mortgage  given  by  the  partners  in  which 
the  land  conveyed  was  misdescribed.^  And  when  the  execu- 
tor has  full  power  to  deal  with  the  realty,  he  may  mortgage  a 
part  of  the  real  estate  to  raise  money  to  satisfy  pressing  claims 
against  the  testator's  estate.^ 

And  when  a  legatee  in  possession,  and  also  the  executor  of 
the  estate,  gives  to  a  stranger  a  mortgage  on  personal  property 
of  the  estate  to  secure  his  individual  debt,  the  mortgage  can- 
not be  questioned  by  the  mortgagee  for  want  of  title  in  the 
mortgagor,  for,  being  a  legatee  in  possession,  he  had  an  in- 
choate title,  and  none  but  persons  interested  in  the  estate  could 
dispute  his  right  as  executor  to  give  the  mortgage.^     In  New 

'  Smith  wick  v.  Kelly,  79  Tex.  564 ;  Black  v.  Dressell,  20  Kan.  153  ;  Smith  v. 
Hutchinson,  108  111.  662. 
■•^Griffin  v.  Johnson,  37  Mich.  87. 
'  Starr  v.  Moulton,  97  111.  525.    See,  also,  Wetherill  v.  Harris,  67  Ind.  452. 

*  Merritt  v.  Simpson,  41  111.  391.  See,  also,  2  Spencer  Eq.  Jur.  (4th  Am.  ed.) 
425. 

*  Brown  v.  Morrill,  45  Minn.  483. 

®In  re  Jones,  59  Law  J.  Ch-.^Jl.    See,  also,  Amea  v.  Holderbaum,  44  Fed. 
Rep.  224. 
'  Bocger  v.  Langenberg,  42  Mo.  App.  7. 


382  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

Jersey  the  Chancellor  may  allow  the  trustee  or  executor  to 
mortgage  the  estate.* 

When  there  is  a  direction  in  a  will  to  pay  debts  or  charges, 
nothing  being  said  as  to  how  the  money  shall  be  raised,  it  has 
been  held  that  this  implies  not  only  a  power  to  sell,^  but  also  a 
power  to  mortgage,  if  that  method  of  raising  money  be  more 
advantageous  to  the  estate  than  a  sale.^  But  if  the  intention 
of  the  testator  is  clearly  manifest  upon  the  face  of  the  will,  it 
must  be  followed.* 

But  it  seems  that  a  trust  to  sell  the  estate  for  the  payment 
of  debts  will  authorize  a  mortgage  for  that  purpose,  which  is  a 
conditional  sale  at  common  law,  unless,  indeed,  it  be  a  clear 
intention  of  the  testator  in  directing  the  sale  that  his  real  es- 
tate shall  be  absolutely  converted.^  Thus,  when  a  will  con- 
tains this  clause,  "  If  it  should  seem  necessary  at  any  time  to 
dispose  of  a  portion  of  my  real  estate  for  the  payment  of  my 
debts,  I  hereby  give  my  executors  power  to  do  so,  either  at 
public  or  private  sale,"  and  the  estate  included  a  large  tract  of 
land  which  it  was  difficult  to  sell  to  advantage,  it  was  held 
that  the  will  conferred  a  power  to  mortgage.®  So  where  a 
power  of  sale  is  authorized,  in  the  will,  to  raise  a  particular 
charge  only,  and  this  purpose  can  be  answered  better  by  mort- 
gage than  by  sale,  and  that  method  is  not  in  conflict  with  the 
intention  of  the  testator,  the  estate  should  be  mortgaged.'^ 

Pennsylvania  cases  go  further  than  this,  and  hold  that 
a  power  to  sell,  even  though  not  coupled  with  a  trust  to  pay 

» Acts  of  1891,  ch.  20,  sect.  31. 

2  Hill  Trustees  (4th  Am.  ed.),  345;  Perry  Trusts  (4th  ed.),  sect.  7GG. 

3 Hill  Trustees  (4th  Am.  ed.),  355. 

*Halden])y  v.  Spofforth,  1  Beav.  390;  Page  v.  Cooper,  16  Beav.  396; 
Devaynea  v.  Robinson,  24  Beav.  86. 

5  Hill  Trustees  (4th  Am.  ed.),  355 ;  Ball  v.  Harris,  4  Myl.  &  Cr.  264. 

«  Loebenthal  v.  Raleigh,  36  N.  J.  Eq.  169. 

^Fisher  on  Mort.,  sect.  435  ;  Stroughill  v.  Anstey,  1  De  G.  M.  &  G.  635; 
Page  V.  Cooper,  16  Beav.  396 ;  Ball  v.  Harris,  4  Myl.  &  Cr.  264 ;  Kent  v.  Mor- 
rison, 153  Mass.  137;  Waterman  v.  Baldwin,  68  Iowa,  255;  overruling 
in  effect,  Hubbard  v.  German  Catholic  Cong.,  34  Iowa,  31 ;  Faulk  v. 
Dashiell,  62  Tex.  642 ;  Steifel  v.  Clark,  9  Baxt.  (Tenn.)  466,  distinguishing 
Head  v.  Temple,  4  Heisk.  (Tenn.)  34. 


THE  PARTIES  TO  THE  MORTGAGE.  383 

debts  or  raise  charges,  implies  a  power  to  mortgage,  unless 
clearly  opposed  to  the  grantor's  intention.^ 

But  there  are  authorities  that  hold  that  a  power  to  mortgage 
cannot  be  implied  from  a  power  to  sell,  though  couj^led  with  a 
trust  to  pay  the  debts  out  of  the  proceeds.^ 

A  discretionary  power  to  sell  is  different  from  an  imperative 
direction  to  sell.^  And  a  power  to  sell  and  dispose  of  prop- 
erty implies  a  power  to  make  partition  of  it  between  the  bene- 
ficiaries, even  though  there  is  a  further  direction  to  invest  the 
proceeds.* 

When  the  executor  has  a  right  to  mortgage  the  property  of 
the  decedent,  his  power  to  mortgage  any  particular  tract  is  not 
exhausted  by  a  single  exercise  of  such  power  on  such  tract.^ 

§  360.  Guardian. — The  right  of  a  guardian  to  borrow 
money  on  a  mortgage  of  his  w^ard's  land  is  regulated  by  stat- 
ute, and  he  generally  must  petition  the  court  and  receive  per- 
mission to  execute  the  mortgage.'^  The  statutorj'-  j^rovisions 
must  be  closely  followed.  A  mortgage  given  by  a  guardian 
upon  the  property  of  his  ward  is  void  where  the  court  of  com- 
petent jurisdiction  nowhere  in  the  course  of  the  proceedings 
has  specified  or  determined,  as  required  by  statute,  the  amount, 
rate  of  interest,  or  length  of  time  for  which  the  mortgage  is 
authorized  to  be  given.'' 

And  so  if  a  guardian  executes  a  mortgage,  unauthorized  by 
the  statute,  it  cannot  be  enforced.^ 

But  such  statutes  do  not  oust  jurisdiction  of  Federal  courts 

>Zane  v.  Kennedy,  73  Pa.  St.  182. 

''Bloomer  v.  Waldron,  3  Hill  (N.  Y.),  361.  Compare  Mutual  Life  Ins.  Co.  v. 
Woods,  121  N.  Y.  302  ;  United  States  Trust  Co.  v.  Roche,  116  N.  Y.  120.  See, 
also,  lioyt  v.  Jaques,  129  Mass.  286 ;  Tyson  v.  Latrobe,  42  Md.  325  ;  Wilson  v. 
Ins.  Co.,  60  Md.  150  ;  Price  v.  Courtney,  87  Mo.  387 ;  Stokes  v.  Payne,  58  Miss. 
614 ;  Green  v.  Claiborne,  83  Va.  386. 

'2  Perry  Trust  (4th  ed.),  sect.  507. 

♦Phelps  V.  Harris,  101  U.  S.  370.  See,  also,  Frith  v.  Osborne,  L.  R.  3  Ch. 
Div.  618. 

^lowa  Loan  &  Trust  Co.  r.  Holderbaum  (Iowa),  52  N.  W.  Rep.  550. 

niorritt  V.  Simpson,  41  111.  3<)1 ;  Lovelace  v.  Smith,  39  Ga.  130. 

'Edwards  v.  Taliafero,  34  Mich.  13. 

"Mcrritt  v.  Simpson,  41  111.  391. 


r?84  NATURE    AND    REQUISITES    OF   THE   CONTRACT. 

over  foreclosure  of  these  mortgages,  where  they  would  other- 
wise have  jurisdiction.' 

It  appears  that  courts  of  general  equity  jurisdiction  in  a 
suit  brought  in  behalf  of  a  ward  by  the  guardian,  can  author- 
ize the  latter  to  borrow  money  to  improve  the  ward's  real 
property,  and  give  a  mortgage  to  secure  payment  of  the 
amount  borrowed.  Because  the  jurisdiction  of  the  court  of 
chancery  to  order  the  sale  of  the  whole,  or  a  portion  of  the 
estate  of  an  infant,  or  to  order  it  to  be  incumbered  by  mort- 
gage whenever  the  interest  of  the  infant  demands  it,  will  not 
be  denied,  whether  that  interest  be  of  a  legal  or  equitable 
nature.^ 

So  the  jurisdiction  of  a  court  sitting  in  equity,  in  a  suit 
brought  in  the  name  of  the  infant  by  his  guardian,  to  order 
the  sale  of  the  minor's  unimproved  lands  in  Illinois,  that  the 
proceeds  might  be  applied  in  removing  incumbrances  on  his 
improved  lands  in  Indiana,  was  sustained.^ 

The  Illinois  decisions  hold  that  a  court  of  chancery  has 
power,  in  the  absence  of  a  statute,  to  direct  a  sale  of  a  minor's 
real  estate  when  it  is  necessary  for  his  support ;  ■*  but  it  is  be- 
lieved that  this  authority  is  to  be  exercised  only  under  a  pres- 
sure of  a  demonstrated  necessity.^  It  is  generally  held  that  a 
court  of  chancery  has  no  power  to  authorize  money  to  be 
borrowed  for  the  purpose  of  erecting  buildings,  and  the  ward's 
estate  to  be  mortgaged  as  security  for  repayment ;  that  such 
court  had  no  such  power  at  the  common  law.^ 

Under  the  statute  of  Illinois  the  guardian  has  authority  to 
borrow  moneys  for  the  purpose  of  erecting  buildings  to  be 
rented,  or  to  mortgage  the  minor's  property  to  secure  the  pay- 
ment of  moneys  borrowed  for  that  or  any  other  purpose,  act- 

'  Davis  V.  James,  lOBiss.  C.  C.  51. 

*  Smith  V.  Sackett,  5  Gilm.  (111.)  534,  545. 

^Allman  v.  Taylor,  101  111.  185,  191;  Smith  v.  Sackett,  5  Gilm.  (111.)  534, 
545.    See,  also,  Frith  v.  Cameron,  L.  R.  12  Eq.  160. 

*  Smith  V.  Sackett,  5  Gilm.  (111.)  534,  545  ;  Allman  r.  Taylor,  101  111.  185, 191. 

*  Cummins  v.  Cummins,  15  111.  33. 

«  Rogers  i\  Dill,  6  Hill  (N.  Y.),  415  ;  WiUiamsonr.  Ball,  8  How.  (U.  S.)  566; 
Genet  v.  Tallmadge,  1  Johns.  Ch.  (N.  Y.)  561 ;  Taylor  v.  Philips,  2  Ves.  Sr.  23. 


THE    PARTIES    TO    THE    MORTGAGE.  385 

ing  under  the  direction  of  the  county  court ;  the  indebtedness 
secured  by  the  mortgage  must  arise  out  of,  and  have  some 
necessary  or  appropriate  connection  with,  the  management  of 
the  ward's  estate.  Thus  a  mortgage  executed  by  a  guardian 
in  IlHnois,  with  leave  of  the  county  court,  to  secure  the  pay- 
ment of  bonds  given  by  him  for  moneys  borrowed  to  pay  off 
existing  incumbrances  upon  the  ward's  real  property,  and  to 
improve  such  property  by  replacing  thereon  buildings  that 
liad  been  destroyed  by  fire,  is  not  invalid  under  the  statute.^ 
The  county  court  has  power  to  authorize  a  guardian  to  borrow 
money  for  the  purpose  of  erecting  new  and  costly  buildings 
upon  unimproved  real  estate,  and  secure  the  payment  by  mort- 
gage upon  the  real  estate.^ 

The  validity  of  such  mortgages  may  be  questioned  in  a 
foreclosure  proceeding.^ 

The  county  court  will  only  authorize  such  mortgages  when 
proof  is  offered,  that  such  a  course  is  necessary  for  the  preserva- 
tion of  the  minor's  estate  or  that  the  estate  would  be  benefited 
thereby.* 

In  case  a  mortgage  is  given,  the  time  must  not  exceed  the 
ward's  minority.  Interest  is  to  be  calculated,  after  the  ward's 
majority,  at  the  contract  rate,  and  not  at  the  legal  rate,  unless 
the  ward  immediately  upon  attaining  full  age,  pays  the  debt, 
or,  by  agreement  with  the  lender,  obtains  an  extension  of  the 
time  of  maturity,  and  a  less  rate  of  interest.  ^ 

§361.  Partners. — As  a  general  rule  one  partner  cannot 
execute  a  deed,  mortgage,  or  other  sealed  instrument  in  the 
partnership  name  so  as  to  bind  the  other  members  of  the  firm. 
But  he  can  bind  them  by  such  deed  or  mortgage  if  executed 
in  their  presence  and  by  the  express  consent  of  such  partners.^ 

1  United  States  Mort.  Co.  r.  Sperry,  138  U.  S.  313,  334. 

''Kingsbury  v.  Powers,  131  111.  182,  192.     Compare  Payne  v.  Stone,  7  Sm.  & 
M.  (Miss.)  367. 
^Kingsbury  v.  Sperry,  119111.  279. 
*Loyd  V.  Malone,  23  111.  43 ;  74  Am.  Dec.  179. 

*  United  States  Mort.  Co.  v.  Sperry,  138  U.  S.  313,  351.    See,  also,Phinney 
r.  Baldwin,  16  111.  108 ;  Etnyre  v.  McDaniel,  28  111.  201. 

*  Greer  v.  Ferguson  (Ark.),  19  S.  W.  Rep.  966;  Ferguson  v.  Hanauer  (Ark.), 

VOL.  r. — 25 


386  NATURE   AND   REQUISITES    OF   THE   CONTRACT. 

So  it  is  generally  held  that  the  execution  of  a  sealed  instru- 
ment by  one  partner  in  the  name  of  the  firm  under  a  prior 
tOiral  authority,  or  such  an  act  subsequently  ratified  by  the  other 
ipartners,  is  binding  upon  the  firm/  An  absent  partner  may 
be  biound  by  a  deed  executed  on  behalf  of  the  firm  by  one  of 
the  partnership,  provided  there  be  either  a  previous  parol 
authority  or  a  subsequent  parol  adoption  of  the  act.^  And 
still  other  cases  go  further,  and  hold  that  one  partner  may  exe- 
cute, in  the  name  of  the  firm,  an  instrument  under  seal,  nec- 
essary in  the  usual  course  of  business,  which  will  be  binding 
upon  the  firm,  provided  the  partner  had  previous  authority 
for  that  purpose,  and  such  authority  need  not  be  under  seal, 
nor  in  writing,  nor  specially  communicated  for  the  specific 
purpose,  but  it  may  be  inferred  from  the  partnership  itself  and 
from  the  subsequent  conduct  of  the  copartners  implying  an 
assent  to  the  act.' 

The  stern  doctrine  of  the  common  law,  however,  requires  a 
prior  authority  under  seal  or  a  subsequent  ratification  under 
seal  to  make  a  sealed  instrument,  executed  by  one  partner 
only,  binding  on  ihe  firm.  This  common-law  doctrine  has 
been  upheld  in  Tennessee,*  but  in  nearly  all  the  States  it  has 

19  S.  W.  Rep.  749 ;  Wilson  v..  Hunter,  14  Wis.  68.3  ;  Cady  v.  Shepherd,  11  Pick. 
(Mass.)  400  ;  Swan  v.  Stedmaia,  4  Met.  (Mass.)  548 ;  Smith  v.  Kerr,  3  N.  Y. 
144 ;  Gerard  v.  Basse,  1  PaU.  (U.  S.)  119  ;  Pierson  v.  Hooker,  3  Johns.  (N.  Y.) 
68  ;  McDonald  v.  Eggleston,  26  Vt.  154 ;  United  States  v.  Astley,  3  Wash.  C. 
C.  508 ;  Mackay  v.  Bloodgood,  9  Johns.  (N.  Y.)  285 ;  Price  v.  Alexander,  2 
Green  (Iowa),  427  ;  Massey  v.  Pike,  20  Ark.  92;  Ruffner  v.  McConnel,  17111. 
212. 

1  Baldwin  v.  Richardson,  33  Tex.  16;  Grady  r.  Robinson,  28  Ala.  289; 
Haynes  v.  Seachrest,  13  Iowa,  455 ;  Shirley  v.  Fearne,  33  Miss.  653 ;  Wilson  r. 
Hunter,  14  Wis.  683 ;  Drumright  v.  Philpot,  16  Ga.  424  ;  Pike  v.  Bacon,  21 
Me.  280 ;  Johns  v.  Battin,  30  Pa.  St.  84  ;  Fox  v.  Norton,  9  Mich.  207  ;  Smith 
r.  Kerr,  3  N.  Y.  144 ;  Ball  v.  Dunsterville,  4  Term.  R.  313 ;  Williams  v. 
Walsby,  4  Esp.  220;  Steiglitz  v.  Egginton,  1  Holt,  N.  P.  141;  Holbrook  v. 
Chamberlin,  116  Mass.  155. 

'  Skinner  v.  Dayton,  19  Johns.  (N.  Y.)  513 ;  Anderson  v.  Tompkins,  1  Brock. 
C.  C.  462. 

3  Gram  V.  Seton,  1  Hall  (N.  Y.),  262;  Smith  v.  Kerr,  3  N.  Y.  144,  150; 
Drumright  v.  Philpot,  16  Ga.  424  ;  McDonald  v.  Eggleston,  26  Vt.  154. 

*  Turbeville  v.  Ryan,  1  Humph.  (Tean.)  113.  See  Sutlive  v.  Jones,  61  Ga. 
676. 


THE    PARTIES    TO    THE    MORTGAGE.  387 

been  essentially  relaxed  by  recent  decisions,  if  not  by  the 
earlier  adjudications.  So  one  partner  can  execute  a  deed  in 
bankruptcy  when  necessary  in  the  proceedings.^ 

§  362.  Real  Estate  Held  by  a  Partnership. — Real  estate 
held  by  a  partnership  is  to  be  regarded  as  the  property  of  the 
firm  as  to  creditors  and  all  persons  dealing  with  it,  when 
necessary  to  protect  their  rights.  The  partnership -in  such  a 
case  holds  only  an  interest  in  the  stock  or  capital  of  the  part- 
nership, which  is  personal  property.  But  when  the  business 
of  the  partnership  is  closed,  and  its  debts  are  paid,  there  are 
no  equities  in  favor  of  third  persons  requiring  real  estate  of 
the  firm  to  be  held  subject  to  the  rights  of  third  parties ;  the 
partners  then,  or  their  legal  representatives,  hold  the  direct 
interest,  and,  as  between  them,  the  real  estate  is  to  be  regarded 
as  such,  subject  to  all  rules  applicable  thereto. 

The  conversion  of  real  estate  into  personalty  under  this  rule 
is  a  devise  of  equity  in  order  to  effectuate  all  settlements  of 
partnerships,  and  to  devote  all  their  property  to  the  payment 
of  the  firm  debts,  a  result  highly  equitable,  which  the  courts 
will  never  fail  to  attain.  The  reason  of  the  rule  ceases  in  the 
absence  of  creditors  of  the  firm,  or  others  having  like  equities.* 

§  303.  Taking  Mortgages  in  the  Firm  Name. — The  rule 
is  that  a  mere  partnership  name,  or  the  name  of  an  association 
as  a  grantee  in  a  mortgage,  is  insufficient,  unaided  by  a  court 
of  equity,  to  transfer  title.^  That  is,  a  grant  to  such  association 
eo  nomine,  will  pass  no  legal  title.* 

The  rules  of  equity,  however,  are  applied,  and  the  instru- 
ment is  generally  upheld.     Thus,  where  the  partnership  name 

*  Ex  parte  Hodgkinson,  19  Ves.  291. 

*  Wilcox  V.  Wilcox,  13  Allen  (Mass.),  252 ;  Buchan  v.  Sumner,  2  Barb.  Ch. 
(N.  Y.)  165 ;  Shearer  v.  Shearer,  98  Mass.  107 ;  Collumb  v.  Read,  24  N.  Y. 
505 ;  Coder  v.  Ruling,  27  Pa.  St.  84 ;  Jackson  v.  Stanford,  19  Ga.  14  ;  Greene  v. 
Graham,  5  Ohio,  264. 

^German,  etc.,  Asso.  v.  Scholler,  10  Minn.  331 ;  Foster  r.  Johnson,  39  Minn. 
378. 

*  Jackson  v.  Cory,  8  Johns.  (N.  Y.)  385  ;  Sloane  v.  McConahy,  4  Ohio,  157  ; 
Thomas  v.  Marshfield,  10  Pick.  (Mass.)  364. 


388  NATURE    AND    IlIiQUISITES    OF    THE    CONTRACT. 

thus  used  contains  the  name  or  names  of  one  or  more  of  the 
partners,  the  mortgage  will  have  legal  effect  as  a  conveyance 
or  mortgage  to  the  partner  or  partners  thus  named. ^  And  re- 
sort may  be  had  to  facts  for  the  purpose  of  applying  the  de- 
scription of  the  persons  named  to  the  persons  so  described.^ 

That  a  partnership  may  make  contracts  in  its  firm  name  is 
a  matter  of  elementary  law,  and  it  may  be  a  firm  to  deal  in 
land,  and  make  a  valid  contract  therefor ;  and  if  the  firm  can- 
not hold  the  legal  title,  the  vendor  will  hold  it  in  trust  for  the 
firm.'^  And  it  has  been  held  that  a  conveyance  to  a  firm  is  a 
conveyance  to  the  members,  as  tenants  in  common,  to  hold  the 
title  in  trust  for  the  firm.*  Hence,  a  mortgage  upon  real 
estate  made  by  the  owner  to  a  partnership  in  its  firm  name,  to 
secure  an  indebtedness  to  it,  constitutes  a  valid  lien  upon  the 
property  in  favor  of  the  firm  as  a  security  for  the  indebted- 
ness,'^ on  the  principle  that  such  grantor  holds  the  title  in  trust 
for  the  partnership." 

§  364.  Mortgage  of  Real  Estate  By  One  of  the  Firm. — 
If  a  member  of  a  firm  mortgages  his  apparent  interest  in  part- 
nership lands  as  tenant  in  common  of  such  land  for  a  consid- 
eration at  the  time,  the  mortgagee  having  no  notice  of  the 
character  of  the  property  in  equity  as  partnership  property,  is 
entitled  to  hold  it  under  his  mortgage  in  preference  to  the 
partnership  creditors.^ 

However,  if  the  mortgage  is  given  for  a  precedent  debt,  and 
the  mortgagee  parts  with  no  new  value,  or  if  he  has  knowl- 
edge of  the  facts,  he  takes  his  mortgage  with  notice  of  the 
character  that  equity  has  impressed  upon  the  property,  and 

^  Gille  V.  Hunt,  35  Minn.  357  ;  Foster  v.  Johnson,  39  Minn.  378 ;  Morse  r. 
Carpenter,  19  Vt.  613  ;  Beaman  v.  Whitney,  20  Me.  413  ;  Sherry  v.  Gilmore, 
58  Wis.  324  ;  Jones  v.  Neale,  2  Pat.  &  H.  (Va.)  339. 

*  Morse  v.  Carpenter,  19  Vt.  613 ;  Menage  v.  Burke,  43  Minn.  211. 
3  Sherry  v.  Gilmore,  58  Wis.  324,  332. 

^  Jones  V.  Neale,  2  Pat.  &  H.  (Va.)  339;  Beaman  v.  Whitney,  20  Me.  413. 
*New  Vienna  Bank  v.  .Johnson,  47  Ohio  St.  306. 

*  Lumber  Co.  v.  Ashworth,  26  Kan.  212. 

'Seeley  r.  Mitchell,  85  Ky.  508 ;  Hewitt  v.  Rankin,  41  Iowa,  35  ;  Hiscockt;. 
Phelps,  49  N.  Y.  97. 


THE    PARTIES    TO    THE    MORTGAGE.  389 

subject  to  the  equity  superior  to  his  own  of  any  and  all  per- 
sons' interests  in  the  property.^ 

If  the  mortgagee  has  notice,  his  lien  is  subject  to  the  pay- 
ment of  partnership  debts.^  And  when  he  has  notice  there  is 
no  distinction  between  debts  incurred  prior  to  the  mortgage 
and  those  subsequently  made;^ 

§365,  Rights  of  Mortgagee  With  Notice. — When  one 
of  a  partnership  mortgages  his  land  or  his  interest  in  the  land 
held  by  a  partnership,  and  the  mortgagee  takes  with  notice, 
his  lien  is  subordinate  and  he  cannot  have  priority  over  the 
rights  of  the  other  partners/  So  where  a  partner  executes  a 
mortgage  it  is  valid  against  a  party  who  with  notice  of  it 
takes  a  subsequent  mortgage  of  the  same  property.^  Such 
mortgagee  cannot  have  a  prior  lien  unless  he  is  in  the  position 
of  a  bona  fide  purchaser  without  notice  and  paid  a  present 
consideration.^  If  he  has  notice,  a  partners'  lien  prevails,  as 
they  have  a  better  equity.^ 

A  deed  does  not  necessarily  import  notice  of  the  rights 
and  interests  of  others  in  the  land  mortgaged,^  and  the  fact 
that  the  deed  describes  the  grantees  as  partners  is  not  evidence 
that  the  property  is  partnership  land.® 

But  when  partners  are  dealing  in  land  as  their  business,  the 
mortgagee  will  of  necessity  have  notice,^"  or  where  the  lands 
have  been  purchased  with  partnership  money  which  is  known 
to  the  mortgagee." 

»Hiscock  V.  Phelps,  49  N.  Y.  97. 

»  Beecher  v.  Stevens,  4.3  Conn.  587  ;  Seeley  v.  Mitchell,  85  Ky.  508. 

'Lovejoy  v.  Bowers,  11  N.  H.  404 ;  Fargo  v.  Ames,  45  Iowa,  491. 

*  Glynn  v.  Phetteplace,  26  Mich.  383  ;  Place  v.  Sweetzer,  16  Ohio,  142 ; 
Dyer  v.  Clark,  5  Met.  (Mass.)  562. 

*  Wilson  V.  Hunter,  14  Wis.  683  ;  Seaman  v.  Huffaker,  21  Kan.  254  ;  French 
V.  Lovejoy,  12  N.  H.  458. 

«Hiscock  V.  Phelps,  49  N.  Y.  97 ;  Lewis  v.  Anderson,  20  Ohio  St.  281 ;  Mil- 
ler ?'.  Proctor,  20  Ohio  St.  442. 
^Reeves  v.  Ayers,  38  111.  418. 

*  Van  Slyck  v.  Skinner,  41  Mich.  186. 
'Reynolds  v.  Ruckman,  35  Mich.  80. 
'"Gaihraith  i-.Gedcre,  16  B.  Mon.  (Ky.)  631. 
"  Dyer  v.  Clark,  5  Met.  (IMass.)  562. 


390  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

But  where  two  persons  hold  an  undivided  interest  in  the 
same  parcel  of  land  by  separate  deeds  of  different  dates  and 
from  different  grantors,  a  party  dealing  in  good  faith  with  one 
of  them  with  reference  to  his  interest,  is  not  bound  with  notice 
that  the  proj^erty  is  partnership  propert}^  from  the  knowledge 
merely  that  the  holders  thereof  are  partners  and  make  use  of 
the  premises  for  partnership  purposes,  where  nothing  on  the 
record  indicates  partnership  property.' 

§  366.  One  Partner  May  Become  Surety  for  the 
Firm. — One  partner  may  become  surety  for  the  firm.  Thus, 
where  a  partner  gives  a  mortgage  upon  his  separate  property 
to  secure  a  partnership  debt,  he  thereby  becomes  a  surety  for 
the  firm,  and  is  entitled  to  the  rights  and  privileges  of  that 
character.  His  separate  creditors  succeed  to  his  rights  and 
privileges  as  such  surety.  He  and  his  separate  creditors  there- 
fore have  a  right  to  insist  that  the  partnership  property,  being 
primarily  liable,  be  first  applied  toward  the  payment  of  a  debt 
secured  by  such  partner  before  resort  is  had  for  that  purpose 
to  the  separate  estate  of  the  surety.^ 

§  367.  After  Dissolution  of  Partnership. — As  between 
the  personal  representatives  and  the  heirs-at-law  of  a  deceased 
partner,  his  share  of  the  surplus  of  the  real  estate  of  the  part- 
nership, which  remains  after  paying  the  debts  of  the  partner- 
ship and  adjusting  all  the  equitable  claims  of  the  different 
members  of  the  firm  as  between  themselves,  is  to  be  considered 
and  treated  as  real  estate.^ 

The  real  estate,  after  dissolution,  is  to  be  converted  into  per- 
sonalty only  when,  and  so  far  as  necessary,  to  pay  claims 
against  the  partnership  which  are  in  the  nature  of  debts,  in- 
cluding balances  due  to  individual  partners  for  advances  to 
the  firm  or  payments  made  in  its  behalf,  and  capital  furnished 
by  a  partner,  which  it  is  to  be  repaid  in  specified  sums ;  and 

'  Reynolds  v.  Ruckman,  35  Mich.  80. 
^  Averill  v.  Loucks,  6  Barb.  (N.  Y.)  470. 

» Buchan  v.  Sumner,  2  Barb.  Ch.  (N.  Y.)  165 ;  Tillinghast  v.  Chaplin,  4  R.  I. 
173-207  ;  1  Am.  Lead.  Cas.  494. 


THE    PARTIES    TO    THE    MORTGAGE.  391 

equity  will  not  interfere  to  counteract  or  modify  the  law  of  de- 
scent or  distribution  on  the  estate  of  a  deceased  partner,  by 
converting  into  personalty,  and  dividing  as  such,  any  real 
estate  or  interest  therein,  which,  after  settlement  of  the  part- 
nership affairs,  remains  to  be  divided  between  the  representa- 
tives of  a  partner  and  the  other  partners.^ 

After  the  debts  are  paid,  and  no  equities  exist,  the  re- 
maining real  estate  will  no  longer  be  considered  as  person- 
alty. And  if  the  partner  survives,  it  will  be  regarded  as 
real  estate  of  the  partner  in  favor  of  his  individual  creditors. 
The  partners  or  their  representatives  hold  a  direct  interest 
in  the  real  estate,  and  it  is  subject  to  all  the  rules  applicable 
thereto.^ 

And  this  is  the  general  rule  after  settlement  or  dissolution 
of  the  partnership,  that  the  partners  or  their  representatives 
hold  a  direct  interest  in  the  real  estate,  and  such  interest  is 
subject  to  all  the  rules  applicable  to  realty,^ 

The  weight  of  American  authority  is  to  the  effect  that  real 
estate  of  a  partnership  will  only  be  regarded  as  personalty  so 
far  as  the  partnership  is  concerned.  If  it  becomes  necessary 
to  use  the  real  estate  in  partnership  business,  it  will  be  consid- 
ered as  personal  property.  But  if  one  partner  dies,  his  heirs 
can  claim  such  surplus  of  the  real  estate  as  may  remain  after 
settlement  of  all  partnership  affairs,  subject  to  the  right  of 
dower  if  a  widow  survives  the  deceased  partner.* 

§368.  Corporations — Power  to  Mortgage  Real  Estate. 
— A  corporation  has   power  to  borrow  money  for  the  transac- 

*  Shearer  v.  Shearer,  98  Mass.  107. 

*  Hewitt  V.  Rankin,  41  Iowa,  35 ;  Goodwin  v.  Richardson,  11  Mass.  469 ; 
Peck  V.  Fisher,  7  Gush.  (Mass.)  386 ;  Collumb  v.  Read,  24  N.  Y.  505  ;  Ensign 
V.  Briggs,  6  Gray  (Mass.),  329  ;  Jackson  v.  Stanford,  19  Ga.  14 ;  Greene  v.  Gra- 
ham, 5  Ohio,  264;  Whitman  v.  Boston,  etc.,  R.  R.  Co.,  3  Allen  (Mass.),  133 
Piatt  V.  Oliver,  3  McLean,  C.  C.  27;  Wilcox  ?'.  Wilcox,  13  Allen  (Mass.),  252^ 

'Foster's  Appeal,  74  Pa.  St.  391.  See,  also,  Burnside  ?;.  Merrick,  4  Met 
(Mass.)  537  ;  Dyer  v.  Clark,  5  IVIet.  (Mass.)  562. 

*Rice  V.  Barnard,  20  Vt.  479;  Buckley  v.  Buckley,  11  Barb.  (N.  Y.)  43. 
Holland  v.  Fuller,  13  Ind.  195  ;  Lang  v.  Waring,  25  Ala.  625;  Collins  v.  War- 
ren, 29  Mo.  236 ;  Scruggs  v.  Blair,  44  Miss.  406. 


392  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

tion  of  its  legitimate  business  and  to  secure  its  payment  by 
mortgage  independent  of  statutory  provisions.^ 

A  corporation  without  special  authority  in  its  charter  may 
dispose  of  lands  or  interest  in  the  same,  and  in  the  course  of 
its  legitimate  business  may  make  a  bond,  mortgage,  note,  or 
draft.^  This  principle  is  well  settled  that  corporations  have 
the  power  to  sell  their  property,  real  or  personal,  and  to  mort- 
gage it  for  the  security  of  their  debts.  This  is  incident  to  the 
power  to  acquire  and  hold  it.^ 

This  right  to  mortgage  their  property  existed  at  common 
law.*  They  may  borrow  money  when  the  power  is  not  ex- 
plicitly granted  by  the  charter  when  it  is  essential  to  the  trans- 
actions of  its  ordinary  affairs.     It  is  then  incidental.'^ 

It  appears  that  a  municipal  corporation  when  not  forbidden 
has  power  to  receive  as  payee  a  note  and  mortgage  for  a  debt 
lawfully  due  to  such  corporation.  Hence,  it  has  the  right  to 
execute  a  note  and  mortgage  for  a  debt  lawfully  due.  In  short, 
it  has  been  held  a  municipal  corporation  may  lawfully  take  a 
note  and  mortgage  when  not  in  contravention  of  statutory  law, 
and  may  assign  these  to  a  third  person.^  This  right  of  jus 
disponendi  may  be  limited  by  statute  and  charters,^  but  if 

1  Burt  V.  Rattle,  31  Ohio  St.  116 ;  Nat.  Bank  r.  Insurance  Co.,  41  Ohio  St. 
1 ;  Shaw  v.  Bill,  95  U.  S.  10  ;  Pennock  v.  Coe,  23  How.  (U.  S.)  117  ;  Phillips  v. 
Winslow,  18  B.  Mon.  (Ky.)  431 ;  Jones  v.  Guaranty  and  Indemnity  Co.,  101 
U.  S.  622;  Aurora  Agricultural  and  Hort.  Soc.  v.  Paddock,  80  III.  263. 

nVhite  Water  Valley  Canal  Co.  ?'.  Valletta,  21  How.  (U.  S.)  414  ;  Richard- 
son V.  Sibley,  11  Allen  (Mass.),  65;  Gibson  v.  Goldthwaite,  7  Ala.  282. 

3  Pierce  v.  Emery,  32  N.  H.  503 ;  Richards  v.  Railroad  Co.,  44  N.  H.  135. 

♦Fitch  V.  Lewiston  Steam  Mill  Co.,  80  INIc.  34. 

"Beers  r.  Phoenix  Glass  Co.,  14  Barb.  (N.  Y.)  358  ;  Smith  v.  Eureka  Flour 
Mills,  6  Cal.  1  ;  Smith  v.  Law,  21  N.  Y.  296, 299  ;  Clarke  v.  School  District,  etc., 
3  R.  I.  199  ;  Frye  v.  Tucker,  24  111.  180 ;  Rockwell  v.  Elkhorn  Bank,  13  Wis. 
653 ;  Hardy  v.  Merriweather,  14  Ind.  203. 

« Commissioners  v.  Day,  19  Ind.  450;  Bank  v.  Chapelle,  40  Mich.  447;  Va- 
narsdall  v.  State,  65  Ind.  176 ;  Alexander  v.  Knox,  6  Saw.  C.  C.  54. 

'Mass.  Stat.  1870,  ch.  224,  sect.  15,  requires  the  written  assent  of  a  majority 
of  the  stockholders.  New  York,  2  Rev.  Stat.,  p.  499,  sect.  18,  requires  assent 
of  two-thirds  of  the  stockholders.  Where  no  assent  of  the  stockholders  has 
been  given,  a  mortgage  is  invalid  and  creates  no  valid  lion  upon  the  prop- 
erty :  Vail  V.  Hamilton,  85  N.  Y.  453. 

But  where  such  mortgage  has  been  executed  without  such  assent,  it  is  vali- 


THE  PARTIES  TO  THE  MORTGAGE.  393 

not  limited  the  power  to  mortgage  exists  in  corporate 
bodies.^ 

When  the  president  of  a  manufacturing  corporation  gives 
notes  in  its  name  and  has  the  proceeds  placed  to  his  individual 
credit  when  the  corporation  has  no  bank  account  or  books  to 
enter  such  transaction,  it  will  be  presumed  that  he  is  acting 
for  the  corporation.^ 

Under  the  New  York  statute  ^  forbidding  insolvent  corpora- 
tions to  prefer  creditors,  a  mortgage  executed  by  the  corpora- 
tion will  not  be  held  invalid  when  it  does  not  appear  that  the 
corporation  was  insolvent.* 

Where  one  who  as  president  of  the  corporation  has  executed 
a  note  and  mortgage,  and  subsequently  indorses  the  note  in  his 
individual  capacity,  he  is  bound  by  all  the  stii:)ulations  in  the 
mortgage.^ 

A  mortgage  by  a  corporation  in  violation  of  a  temporary 
injunction  granted  in  a  suit  by  the  creditors  for  the  appoint- 
ment of  a  receiver,  is  an  absolute  nullity.^ 

The  mortgage  must  be  executed  according  to  the  provision 
of  the  statute  governing  the  corporation.  When  notice  is 
necessary  to  each  director  for  a  meeting  to  mortgage  the  prop- 
erty, it  must  be  given  to  all  the  directors,  and  the  omission  to 
do  this  avoids  the  mortgage.^ 

dated  by  a  subsequent  assent  when  there  are  no  intervening  rights.  Such 
assent  makes  the  instrument  as  to  the  time  it  is  given  a  valid  mortgage : 
Rochester  Savings  Bank  v.  Averell,  96  N.  Y.  467  ;  Lord  v.  Yonkers,  etc.,  Gas 
Co.,  99  N.  Y.  547. 

*  Detroit  V.  Mutual,  etc.,  Gas  Light  Co.,  43  Mich.  594;  Hopson  v.  Eatna, 
etc.,  Spring  Co.,  50  Conn.  597 ;  Saunders  v.  Commonwealth,  3  Gratt.  (Va.) 
214 ;  State  v.  Rice,  65  Ala.  83  ;  Memphis,  etc..  Railroad  Co.  v.  Dow,  19  Fed. 
Rep.  388 ;  Thompson  v.  Lambert,  44  Iowa,  239,  244. 

*  Martin  v.  Niagara  Falls  Paper  Co.,  122  N.  Y.  165,  affirming  44  Hun  (N. 
Y.),  130. 

»Rev.  Stat.,  pt.  1,  ch.  18,  tit.  4,  sect.  4. 

^Everson  v.  Eddy,  59  Hun  (N.  Y.),  620.  See,  also,  Rittenhouse  v.  Winch, 
57  Hun  (N.  Y.),  587 ;  Rollins  v.  Carriage  Co.,  80  Iowa,  380;  Star  Printing  Co. 
V.Andrews,  58  Superior  Ct.  188;  Powell  v.  Blair,  133  Pa.  St.  550;  Lay  r. 
Austin,  25  Fla.  933  ;  24  Am.  L.  Rev.  428. 

*  Georgia  Railroad  &  Banking  Co.  i-.  Pendleton,  87  Ga.  751. 
'Bissell  V.  Besson,  47  N.  J.  Eq.  580. 

^Bank?'.  McCarthy,  55  Ark.  473.  , 


394  NATURE   AND    REQUISITES    OF   THE    CONTRACT. 

In  some  States  the  statutory  law  prohibits  the  holding  of 
real  estate  in  perpetuity.  But  a  corporation  authorized  to  lend 
money  in  such  States  may  take  a  mortgage  on  real  estate  to 
secure  the  debt,  and  having  purchased  it  at  a  foreclosure  sale, 
may  convey  a  valid  title.^ 

The  execution  of  a  mortgage  to  a  corporation  is  an  admis- 
sion of  its  competency  to  take  it,  and  a  borrower  from  a  foreign 
corporation  is  estopped  in  foreclosure  proceedings  from  setting 
up  its  want  of  power  to  acquire  title  to  real  estate.^ 

Where  a  statute  prohibits  a  foreign  corporation  from  holding 
real  estate  it  cannot  evade  this  law  by  the  purchase  of  the 
franchise  of  a  local  corporation  authorized  to  hold  land.^  But 
where  a  mortgage  is  considered  as  merely  a  lien,  the  taking  of 
such  security  by  a  foreign  corporation  is  not  a  violation  of  the 
statute,  and  a  suit  may  be  maintained  to  enforce  it.'* 

So  a  foreign  corporation  having  power  under  its  charter  to 
engage  in  mercantile  transactions,  make  contracts,  lend  money, 
and  the  like,  may  take  conveyances  in  satisfaction  of  debts,^ 
or  as  security,^  and  may  take  title  upon  foreclosure.^ 

§369.  Religious  Corporations. — It  has  been  held  that 
where  the  law  does  not  expressly  prohibit,  religious  corpora- 
tions may  also  mortgage  and  create  liens  upon  their  real  es- 
tate. If  they  have  power  to  hold  and  enjoy  real  estate,  as  an 
incident,  they  have  the  power  to  mortgage  it,  unless  pro- 
hibited.* 

^  Stevens  v.  Pratt,  101  111.  206,  overruling  in  part  United  States  Mortg.  Co.  v. 
Gross,  93  111.  493. 

*  Pancoast  v.  Ins.  Co.,  79  Ind.  172. 

3  Commonwealth  v.  Railroad  Co.,  114  Pa.  St.  340. 

*Leasure  v.  Ins.  Co.,  91  Pa.  St.,  491.  See,  also,  Hards  v.  Ins.  Co.,  8  Biss.  C.  C. 
234  ;  Stevens  v.  Pratt,  101  111.  206  ;  United  States  Mortg.  Co.  v.  Gross,  93  111. 
483. 

5j;fp.^  York  Dry  Dock  v.  Hicks,  5  McLean,  C.  C.  Ill;  Lathrop  v.  Bank, 
8  Dana  (Ky.),  114. 

«I^banon  Sav.  Bank  v.  Hollenbeck,  29  Minn.  322;  Stevens  v.  Pratt,  101 
111.  206. 

^  Elston  V.  Piggott,  94  Ind.  14 ;  Lebanon  Sav.  Bank  v.  Hollenbeck,  29  Minn. 
322. 

^Walrath  'v.   Campbell,  28  Mich.  Ill;   Methodist   Episcopal  Church  v. 


THE  PARTIES  TO  THE  MORTGAGE.  395 

Under  the  New  York  law/  authorizing  religious  corpora- 
tions, on  leave  of  the  Supreme  Court,  to  mortgage  their  real  estate 
"  as  shall  be  provided  by  the  order  of  the  court,"  the  order 
granting  leave  to  give  a  mortgage  will  direct  the  application  of 
the  proceeds.^ 

§  370.  Corporate  Franchises. — Without  clear  and  explicit 
legislative  authority,  no  corporation  can  mortgage  its  fran- 
chises ;  ^  nor  can  a  corporation  sell  its  franchises.* 

A  corporation's  franchises  cannot  be  alienated,  and  its 
powers  and  privileges  conferred  by  its  own  act  upon  another 
person  or  body,  from  the  fact  of  its  own  corporation.  Such  a 
franchise  is  not,  in  its  own  nature,  transmissible.  It  can  only 
be  transferred  by  express  legislative  authority  for  it.^  How- 
ever, an  unauthorized  mortgage,  or  one  defectively  executed  by 
a  railroad  company,  may  be  subsequently  confirmed  by  the 
legislature.® 

The  mortgagees  or  purchasers  under  a  trust  deed  cannot 
take  up  the  road  and  dispose  of  the  material  so  as  to  deprive 
the  public  of  its  use,  whose  sovereign  powers  have  been  exer- 
cised in  the  condemnation  of  private  property  for  the  con- 
struction of  the  road.^ 

But  the  railroad  company  may  sell  and  convey  whatever 
property  it  may  hold,  not  acquired  under  the  delegated  right  of 
eminent  domain,  or  so  connected  with  the  franchise  to  operate 

Shulze,  61  Ind.  511 ;  Madison  Ave.  Church  v.  Oliver  St.  Church,  41  N.  Y.  Su- 
perior Ct.  369. 

1  Laws  of  1890,  ch.  424,  sect.  1. 

»In  re  Church,  25  Abb.  N.  C.  354. 

^Pullan  v.  Cincinnati,  etc..  Railroad  Co.,  4  Biss.  C.  C.  35  ;  Commonwealth  v. 
Smith,  10  Allen  (Mass.),  448;  Susquehanna  Bridge,  etc.,  Co.  v.  General  Ins. 
Co.,  3  Md.  305;  Richardson  v.  Sibley,  11  Allen  (Mass.),  65;  Atkinson  v. 
Marietta,  etc.,  R.  R.  Co.,  15  Ohio  St.  21 ;  Coe  v.  Columbus,  etc.,  R.  R.  Co.,  10 
Ohio  St.  372. 

*Bank  v.  Bond,  1  Ohio  St.  622;  Commonwealth  v.  Smith,  10  Allen  (Mass.), 
448. 

*  Commonwealth  v.  Smith,  10  Allen  (Mass.),  448,455. 

*Chapin  v.  Vermont,  etc.,  R.  R.  Co.,  8  Gray  (Mass.),  575 ;  Shaw  v.  Norfolk, 
etc.,  R.  R.Co.,  5  Gray  (Mass.),  162. 
V     '  Pabner  v.  Forbes,  23  111.  301. 


396  NATURE    AND    REQUISITES    OP    THE    CONTRACT. 

and  maintain  a  railroad  that  the  ahenation  would  tend  to  dis- 
able the  corporation  from  performing  the  public  duties  im- 
posed upon  it,  in  consideration  of  which  its  chartered  privi- 
leges have  been  conferred/  And  in  general  a  company  cannot 
mortgage  any  franchise  essentially  corporate  in  its  charter 
which  could  not  be  enjoyed  by  a  natural  person.^  So  it  may 
be  considered  as  settled  that  a  corporation  cannot  lease  or 
alienate  any  franchise,  or  any  property  necessary  to  perform  its 
obligations  and  duties  to  the  State,  without  legislative  au- 
thority.^ Where  a  railroad  company  has  express  authority  to 
mortgage  its  property,  a  mortgage  executed  by  it  covering  its 
property  and  franchises  will  not  be  void  as  to  the  property  by 
the  fact  that  there  was  no  authority  to  mortgage  the  fran- 
chises.* And  the  stock  that  a  railroad  company  owns  in  an 
elevator  near  the  terminus  of  the  railroad,  which  is  used  by  it 
for  the  storage  of  grain,  is  not  an  appurtenant  to  the  railroad, 
and  does  not  pass  under  a  mortgage  of  such  railroad  and  its 
appurtenances.^ 

§  371.  Validating  Defective  Mortgages — Source  of 
Power  to  Mortgage. — The  power  to  mortgage  is  lodged  in 
the  corporation — that  is,  in  the  stockholders.  So,  unless 
authorized  by  the  stockholders,  the  directors  have  no  authority 
to  execute  a  mortgage.  But  where  the  stockholders  sanction 
a  contract  in  which  moneys  were  loaned  to  a  corporation  by 
its  directors,  and  its  bonds  therefor,  secured  by  a  mortgage 
given,  and  the  moneys  have  been  properly  applied,  the  corpo- 
ration is  estopped  from  setting  up  that  the  bonds  and  mortgage 
were  void  by  reason  of  the  trust  relation  which  the  directors 

'Hendee  v.  Pinkerton,  14  Allen  (Mass.),  381. 

*  Joy  V.  Jackson,  etc.,  Plank-Road  Co.,  11  Mich.  156. 

*  Beman  v.  Rufford,  1  Sim.  (N.  S.)  550 ;  Johnson  v.  Shrewsbury,  etc..  Rail- 
road Co.,  3  De  G.,  Mac.  &  G.  91-t ;  Shrewsbury,  etc..  Railroad  Co.  v.  North- 
western Railroad  Co.,  6  H.  L.  Cas.  113;  Troy,  etc..  Railroad  Co.  v.  Kerr,  17 
Barb.  (N.  Y.)  GOl ;  York,  etc.,  Co.  v.  Winans,  17  How.  (U.  S.)  39 ;  Black  v. 
Delaware  and  Raritan  Canal  Co.,  22  N.  J.  Eq.,  130,  399. 

*  Gloninger  v.  Pittsburgh,  etc..  Railroad  Co.,  139  Pa.  St.  13 ;  27  Week.  N. 
Cas.  497. 

^Humphreys  v.  McKissock,  140  U.  S.  304. 


THE  PARTIES  TO  THE  MORTGAGE.  397 

sustain  to  it.  Having  received  the  benefit,  the  corporation  is 
estopped  from  denying  tlie  legality  of  the  mortgage.^  So  the 
corporation  can  validate  a  mortgage  of  the  directors  by  issuing 
bonds  and  paying  interest  on  them.^  Using  the  proceeds  of 
such  mortgage  is  a  ratification.^  In  short,  any  acts  of  the 
corporation  showing  that  such  mortgages  of  the  directors  have 
been  accepted,  is  a  sufficient  ratification.^ 

Under  a  by-law  authorizing  the  directors  to  act  for  the  cor- 
poration, such  mortgages  are  valid  without  ratification ;  ^  but 
the  by-law  must  be  made  in  pursuance  of  its  charter,  if  ex- 
pressed in  terms,^  though  the  power  to  make  by-laws  is  inci- 
dental to  the  very  existence  of  a  corporation.''  It  is,  however, 
seldom  left  to  implication,  but  is  usually  conferred  by  express 
terms  of  the  charter ;  and  such  power  given  by  the  charter  im- 
plies a  negative,  that  corporations  shall  not  make  by-laws  in  any 
other  cases,  nor  for  any  other  purposes,  than  those  specified.^ 

§372.  Corporate  Seal. — A  seal  is  incident  to  every  cor- 
poration.^ And  in  order  to  bind  a  corporation  by  specialty, 
the  corporate  seal  should  be  affixed  to  the  instrument ;  the 

1  Hotel  Co.  V.  Wade.  97  U.  S.  13  ;  Stark  v.  Coffin,  105  Mass.  328  ;  Credit  Asso- 
ciation r.  Coleman,  L.  Rep.,  6  Ch.  558  ;  Aurora  Agr.  &  Hort.  Soc.  v.  Paddock, 
80  111.  205 ;  Ottawa,  etc.,  Road  Co.  v.  Murray,  15  111.  336 ;  Bradley  v.  Ballard, 
55  111.  413 ;  Troup's  Case,  29  Beav.  353  ;  Hoare's  Case,  30  Beav.  225 ;  Smith  v. 
Lansin^^  22  N.  Y.  520 ;  Busby  v.  Finn,  1  Ohio  St.  409. 

^McCurdy's  Appeal,  05  Pa.  St.  290. 

3  Cooke  V.  Watson,  30  N.  J.  Eq.  345. 

*Holbrook  v.  Chamberlin,  116  Mass.  155. 

'Hendee  v.  Pinkerton,  14  Allen  (Mass.),  381 ;  Saltmarsh  v.  Spaulding,  147 
Mass.  224.  See  Hoyt  v.  Thompson,  19  N.  Y.  207  ;  Augusta  Bank  r.  Hamblet, 
35  Me.  491  ;  Bank  v.  Rutland,  etc.,  Railroad  Co.,  .30  Vt.  159,  169 ;  Sargent  v. 
Webster,  13  Met.  (Mass.)  497.  50:5 ;  Miller  v.  Rutland,  etc.,  Railroad  Co.,  36  Vt. 
452,  474 ;  Burrill  v.  Bank,  2  Met.  (Mass.)  163 ;  Forbes  v.  San  Rafael  Turnpike 
Co..  50  Cal.  340. 

"Anacosta  Tribe  v.  Murbach,  13  Md.  91;  Cumminga  ?>.  AVebster,  43  Me. 
192 ;  Flint  v.  Pierce,  99  Mass.  68. 

^City  of  London  r.  Vanackre,  1  Ld.  Raym.496;  Norris  v.  Staps,  Ilob.  211. 

« Child  r.  Hudson's  Bay  Co.,  2  P.  Wm.  207 ;  New  Orleans  v.  Phillippi,  9  La. 
Ann.  44. 

*  Porter  v.  Androscoggin,  etc..  Railroad  Co.,  37  Me.  .349;  Everett  r.  United 
States.  6  Port.  (Ala.)  166 ;  Dam  Foundry  r.  Hovey,  21  Pick.  (Mass.)  417 ; 
Ransom  r.  Stonington,  etc.,  Bank,  13  N.  J.  Eq..  212. 


398  NATURE    AND    REQUISITES   OF    THE    CONTRACT. 

private  seal  of  an  agent,  though  fully  authorized  to  make  the 
contract,  is  not  sufficient.^  And  the  corporate  seal  affixed  to  a 
contract  or  conveyance  does  not  render  the  instrument  a  cor- 
porate act,  unless  it  is  affixed  by  an  officer  or  agent  duly  au- 
thorized." 

But  where  the  seal  of  a  corporation  is  affixed  to  a  deed  by 
the  president,  it  will  be  presumed  that  he  was  authorized  to 
affix  it,  in  the  absence  of  proof  to  the  contrary.^  And  so  if 
the  president  of  a  corporation,  which  has  adopted  no  corporate 
seal,  executes  a  mortgage,  and  the  trustees  adopt  a  seal  that  he 
affixes  opposite  to  his  name,  as  the  seal  of  the  corporation  for 
the  time  being,  such  seal  is  sufficient.*  And,  generally,  a  cor- 
poration must  execute  a  mortgage  under  its  corporate  seal.^ 

The  ancient  rule  applied  to  corporations  existing  by  the 
common  law,  that  they  could  act  only  by  their  common  seal, 
has  no  application  to  corporations  created  by  statute.*' 

§  373.  Execution  by  Attorneys  in  Fact. — If  the  power  of 
attorney  is  to  convey  land  requiring  the  execution  of  an  in- 
strument under  seal,  the  power  must  be  executed  and  attested 
with  the  same  formalities  which  the  law  requires  in  the  execu- 
tion of  the  principal  instrument.  Where  the  power  is  special, 
and  the  authority  limited,  the  attorney  cannot  bind  his  prin- 
cipal by  any  act  in  which  he  exceeds  his  authority.  The 
authority  of  the  attorney  must  be  strictly  construed,  though  it 
is  to  be  taken  to  include  all  necessary  means  of  executing  it 
with  effect.  So  when  any  act  of  agency  is  required  to  be 
done  in  the  name  of  the  principal,  under  seal,  the  authority  to 

'  State  V.  Allis,  18  Ark.  2G9 ;  Elwell  v.  Phaw,  16  Mass.  42 ;  Haight  v.  Saliler, 
30  Barb.  (N.  Y.)  218;  Bank  v.  Patterson,  7  Cranch(U.  S.),  304. 

•^  Koehler  v.  Black  River  Co.,  2  Black  (U.  S.),  715  ;  Jackson  v.  Campbell,  5 
Wend.  (N.  Y.)  572 ;  Bank  v.  Evans,  5  H.  L.  Cas.  389 ;  32  Eng,  Law  &  Eq.  23. 

3  Hopkins  I'.  Gallatin  Turnpike  Co.,  4  Humph.  (Tenn.)  403. 

*  South  Baptist  Society  v.  Clapp,  18  Barb.  (N.  Y.)  36. 

*  Eagle  Woolen  Mills  Co.  v.  Monteith,  2  Ore.  277,  285 ;  In  re  St.  Helen  Mill 
Co.,  3  Saw.  C.  C.  88 ;  Hendce  v.  Pinkerton,  14  Allen  (Mass.),  381. 

^ Curry  v.  Bank,  8  Port.  (Ala)  361.  A  facsimile  of  a  seal  of  a  corporation 
printed  with  ink  on  the  paper  is  not  a  valid  seal,  where  a  scroll  is  not  a  valid 
seal :     Bates  v.  Boston,  etc.,  Railroad  Co.,  10  Allen  (Mass.),  251. 


■ 


THE  PARTIES  TO  THE  MORTGAGE.  399 

the  attorney  to  perform  the  act  must  generally  be  conferred  by 
an  instrument  under  seal.^ 

The  attorney  must  strictly  follow  his  authority.  Thus,  if 
he  is  authorized  to  sell  and  convey  real  estate,  he  is  not  there- 
by empowered  to  mortgage  it.^  And  so  a  mortgage  made 
under  a  power  for  a  greater  sum  than  is  actually  loaned  may 
be  repudiated  by  the  principal.^ 

The  two  transactions  of  a  sale  and  a  mortgage  are  essentially 
different.  So,  a  trust  with  a  power  to  sell  prima  facie  imports 
a  power  to  sell,  and  will  not  authorize  a  mortgage,  unless 
something  in  the  power  shows  that  the  mortgage  was  within 
the  intention  of  the  principal.* 

The  power  of  attorney  to  authorize  an  agent  to  lease  or 
mortgage  real  estate  for  the  purpose  of  procuring  money  in 
case  he  cannot  sell  the  property,  gives  the  agent  the  option  of 
procuring  the  money  either  by  lease  or  mortgage  in  the  event 
he  cannot  make  sale  at  a  reasonable  price ;  ^  and  where  an 
agent  adds  something  beyond  his  authority,  this  excess  will 
not  invalidate  that  which  may  well  stand  without  it."  And  a 
power  to  mortgage  includes  a  power  to  execute  a  mortgage 
containing  a  power  to  the  mortgagee  to  sell  the  premises  in 
default  of  payment ;  it  being  one  of  the  essential  and  lawful 
remedies  given  to  the  mortgagee,  known  to  the  law.'^  But  it 
would  be  otherwise,  if  the  law  of  the  State  did  not  permit  such  a 
sale,  and  it  was  not  in  general  use.^ 

'Worrall  v.  Munn,  5  N.  Y.  229;  Cooper  r.  Rankin,  5  Binn.  (Pa.)  613; 
Rowe  V.  Ware,  30  Ga.  278 ;  Shuetze  v.  Bailey,  40  Mo.  69 ;  ]McNaughten  v. 
Partridge,  11  Ohio,  223;  Cummins  v.  Cassily,  5  B.  Men.  (Ky.)  75;  Hibble- 
white  I'.  M'Morine,  6  Mees.  &  Wels.  200;  Preston  v.  Hull,  23  Gratt.  (Va.) 
COO. 

MVood  V.  Goodridge,  6  Cuph.  (Mass.)  117  ;  Bloomer  v.  Waldron,  3  Hill  (N. 
Y.),  361 ;  Morris  v.  Watson,  15  Minn.  212;  Colesbury  v.  Dart,  61  Ga.  620;  De 
Bouchout  V.  Goldsmid,  5  Ves.  211 ;  Haldenby  v.  Spofforth,  1  Beav.  390 ; 
Stroughill  V.  Anstey,  1  De  G.,  Mac.  &  G.  635.    See  section  359. 

^  Cleveland  Ins.  Co.  v.  Reed,  1  Biss.  C.  C.  180,  183. 

*  Ho>i;  V.  Jaques,  129  Mass.  286 ;  Coutant  v.  Servoss,  3  Barb.  (N.  Y.)  128. 
^Mylius  V.  Copes,  23  Kan.  617. 

*Jesup  V.  Bank,  14  Wis.  331. 

'Wilson  V.  Troup,  7  Johns.  Ch.  (N.  Y.)  25. 

*  Jesup  V.  Bank,  14  Wis.  331. 


400 


NATURE   AND   REQUISITES   OP   THE    CONTRACT. 


A  power  to  charge  an  estate  with  the  payment  of  money  for 
the  benefit  of  the  children  will  authorize  the  disposition  of  the 
estate  itself.^  So  a  power  to  sell  for  the  purpose  of  raising 
money  includes  a  power  to  mortgage.^ 

§  374.  Mode  of  Executing  the  Authority. — An  agent 
should,  as  a  general  rule,  transact  the  business  of  the  agency 
in  the  name  of  his  principal.*  Thus,  when  A.  is  the  princi- 
pal and  B.  is  the  agent,  the  latter  should  execute  the  instru- 
ment by  signing  it  A.  by  B.,  his  agent  or  attorney-in-fact. 
This  rule  is  most  strictly  enforced  as  to  sealed  instruments. 
So  a  sealed  instrument  when  executed  by  one  acting  as  an 
agent  or  attorney-in-fact,  should  be  in  the  name  of  the  princi- 
pal and  purport  to  be  sealed  with  his  seal,  or  the  person  named 
as  principal  will  not  be  bound  by  it.* 

If  the  contract  or  obligation  be  in  the  name  of  the  principal 
the  order  of  the  words  is  not  material,  since  the  deed  purports 
on  its  face  to  be  the  deed  of  the  principal,  and  the  intention 
is  to.  execute  it  in  his  name  and  as  his  deed.  So  a  deed  or 
mortgage  will  be  sufficient  if  signed  "  For  A.  B."  (the  princi- 
pal), "CD."  ^ 

If  the  instrument  in  the  granting  part  of  it  be  in  the 
name  of  the  agent  only  it  will  not  become  the  deed  of  the 

1  Long  V.  Long,  5  Ves.  445. 

2  Mills  V.  Banks,  3  P.  Wm.  1 ;  Page  v.  Cooper,  16  Beav.  396 ;  Ball  v.  Harris, 
4  Myl.  &  C.  267. 

While  the  general  rule  is  that  a  power  to  sell  and  convey  real  estate  does 
not  confer  a  power  to  mortgage,  yet  there  are  decisions  to  the  contrary.  See 
Lancaster  v.  Dolan,  1  Eawle  (Pa.),  231  ;  Zane  v.  Kennedy,  73  Pa.  St.  182  ;  Pa. 
Life  Ins.  Co.  v.  Austin,  42  Pa.  St.  257. 

'  Dennison  v.  Story,  1  Ore.  272 ;  Spencer  v.  Field,  10  Wend.  (N.  Y.)  87. 

*Townsend  v.  Hubbard,  4  Hill  (N.  Y.),  351 ;  Clarke  v.  Courtney,  5  Pet.  (U. 
S.)  319,  351 ;  Elwell  v.  Shaw,  16  Mass.  42 ;  Einstein  v.  Holt,  52  Mo.  340  ;  Mar- 
tin V.  Flowers,  8  Leigh  (Va.),  158 ;  Reed  v.  Latham,  40  Conn.  452 ;  Skinner  v. 
Gunn,  9  Port.  (Ala.)  305 ;  Brinley  v.  Mann,  2  Cush.  (Mass.)  337 ;  Grubles  v. 
Wiley,  9  Sm.  &  M.  (Miss.)  29  ;  Fire  Ins.  Co.  v.  Doll,  35  Md.  89  ;  Combe's  Case, 
9  Coke,  75 ;  Copeland  v.  Mercantile  Ins.  Co.,  6  Pick.  (Mass.)  198. 

5  Wilks  V.  Back,  2  East.  142  ;  Mussey  v.  Scott,  7  Cush.  (Mass.)  216;  Martin 
V.  Almond,  25  Mo.  313  ;  Hunter  v.  Miller,  6  B.  Mon.  (Ky.)  612  ;  Wilburn  v. 
Larkin,  3  Blackf.  (Ind.)  55. 


THE  PARTIES  TO  THE  MORTGAGE.  401 

principal  by  being  signed  and  sealed  "  C.  D.,  attorney  to 
A.  B." ' 

If  a  mortgage  of  a  corporation  is  executed  by  an  attorney 
or  an  officer  in  his  individual  name,  it  does  not  bind  the  corpo- 
ration except  in  equity.' 

By  the  common  law  an  agent  of  a  corporation  must  be 
appointed  under  a  corporate  seal.  At  the  present  time  it  is 
held  that  an  agent  of  a  corporation  may  be  bound  without 
the  use  of  seal  whatever  may  be  the  purpose  of  the  agency.^ 

§375.  Joint  Mortgagors. — Tenants  in  common  may  mort- 
gage their  lands  for  their  joint  debt,  and  either  of  them  may 
pay  the  mortgage  debt,  and  then  he  has  a  claim  against  his 
co-tenant  for  contribution.*  But  where  two  unite  to  mortgage 
their  lands  in  severalty,  each  is  presumptively  liable  for  half 
of  the  debt,  and  his  land  is  primarily  chargeable  to  that  ex- 
tent.' 

Article  2. 

Classification  and  Competency  of  Grantees. 

§  376.  Infants.  §  380.  Partners  in  Firm  Name— Cor- 

?  377.  ]\Iarried  Women.  porations. 

I  378.  Aliens.  ?  381.  National  Banks. 

I  379.  Receiver.  ^  382.  Joint  Mortgagees. 

§  376.  Infants. — A  mortgage  may  be  made  to  an  infant. 
If  the  mortgagor  or  his  assignee  would  redeem,  it  is  proper  to 
join  the  infant  and  his  guardian  in  a  bill  for  that  purpose,  and 
the  court  will  appoint  some  other  disinterested  person,  who 
has  no  interest  in  the  business,  as  guardian  ad  litem.^     And 

^  Martin  v.  Flowers,  8  Leigh  (Va.),  158 ;  Copeland  v.  Mercantile  Ins.  Co.,  6 
Pick.  (Mass.)  198,  203 ;  Squier  v.  Norris,  1  Lans.  (N.  Y.)  282 ;  Townsend  v. 
Hubbard,  4  Hill  (N.  Y.),  351 ;  Briggs  v.  Partridge,  7  Jones  &  Sp.  (N.  Y.)  339. 

^  Love  V.  Sierra  Nevada,  etc.,  Co.,  32  Cal.  639.  See  Fitch  v.  Lewiston  Steam 
Mill  Co.,  80  Me.  34. 

3  Bank  v.  Patterson,  7  Cranch  (U.  S.),  299 ;  Fleckner  v.  Bank,  8  Wheat.  (U. 
S.)  338 ;  Despatch  Line  Co.  v.  Bellamy,  etc.,  Co.,  12  N.  H.  231 ;  Fitch  v. 
Lewiston  Steam  Mill  Co.,  80  Me.  34. 

*  McLaughlin  v.  Curts,  27  Wis.  644. 

*  Hoj-t  V.  Doughty.  4  Sandf.  (N.  Y.)  462. 
^     *  Parker  v.  Lincoln,  12  Mass.  16. 

VOL.  I.— 26 


402  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

whatever  an  infant  is  bound  to  do  at  law,  the  same  shall  bind 
him,  although  he  does  it  without  suit.  Therefore,  where  an 
infant  reconveys  land  which  had  been  mortgaged  to  his  father, 
the  mortgage-money  having  been  paid,  the  conveyance  is 
valid.' 

So  where  a  father  had  purchased  land  in  the  name  of  his 
infant  son  for  the  purpose  of  defrauding  his  creditors,  and  had 
afterward  sold  the  land  to  a  purchaser  for  a  valuable  consid- 
eration, and  the  infant  had,  at  his  father's  instance,  conveyed 
the  title  to  the  purchaser,  it  was  held  that  he  could  not  after 
age  avoid  his  conveyance,  because  though  the  legal  title  was  cast 
upon  him  by  the  fraudulent  conduct  of  his  father,  he  had  no 
right  to  the  land  against  a  creditor  or  purchaser ;  therefore, 
when  conveyed  to  a  purchaser  from  his  father,  he  merely 
parted  with  a  naked  title,  and  only  did  that  which  a  court  of 
equity  would  have  compelled  him  to  do,  and  which,  if  dis- 
affimed,  he  would  be  compelled  to  do  again.^ 

§  377.  Married  Women. — The  status  of  a  married  woman  as 
a  mortgagee  is  now,  in  many  States,  controlled  by  statute.  But 
at  common  law,  while  she  might  become  a  mortgagee,  she 
could  not  enforce  a  foreclosure  of  the  mortgage,  the  equity  of 
redemption  being  held  by  the  husband.^  In  Illinois,  a  hus- 
band may  convey  or  mortgage  to  his  wife,  if  the  transaction  is 
in  good  faith.^  And  a  wife  who  has  loaned  her  husband 
money  stands  precisely  like  any  other  creditor  of  the  husband ; 
he  may  prefer  her  as  creditor  to  the  same  extent  as  he  may 
any  other  if  in  good  faith.^ 

As  the  law  now  is  in  Illinois,  a  wife  may  mortgage  her  real 
estate  on  the  same  terms  as  a  husband  may  his.^ 

^Zouch  V.  Parsons,  3  Burr.  1794  ;  4  Greenl.  Cruise  on  Real  Prop.,  title  32, 
ch.  2,  sect.  13  ;  2  Kent's  Com.  234. 

"Elliott  V.  Horn,  10  Ala.  348;  1  Am.  Lead.  Cas.  249.  See,  also.  Tucker  v. 
Moreland,  10  Pet.  (U.  S.)  67  ;  Jones  v.  Brewer,  1  Pick.  (Mass.)  313  ;  Prouty  v. 
Edgar,  6  Iowa,  353. 

3  Tucker  v.  Fenno,  110  Mass.  311. 

*  McManus  v.  Mills,  19  111.  App.  398.  ■• 

*  Rudershausen  v.  Atwood,  19  111.  App.  58. 
^Edwards  v.  Schoeneman,  104  111.  279. 


THE    PARTIES    TO   THE    MORTGAGE.  403 

In  Kentucky,  a  husband  may  borrow  money  from  his  wife 
and  secure  the  payment  thereof  by  executing  a  mortgage  to 
her,  but  the  title  to  the  mortgage  projierty  would  be  in  the 
husband  as  trustee.^  And  in  Wisconsin  a  mortgage  from  the 
husband  to  his  wife  is  in  equity  valid  and  may  be  enforced.^ 

§  378.  Aliens. — An  alien  may  take  a  mortgage  and  enforce 
its  foreclosure ;  he  may  maintain  a  bill  to  have  the  debt  paid 
by  sale  of  the  land  which  had  been  conveyed  to  him  as  se- 
curity therefor.  And  if  the  alien  mortgagee,  instead  of  seek- 
ing to  obtain  possession  of  the  land,  prefers  to  have  his  debt 
paid  and  the  property  pledged  for  its  security  sold,  for  the 
purpose  of  raising  the  money,  the  demand  in  reality  is  a  per- 
sonal one,  the  debt  being  considered  as  the  principal  and  the 
land  merely  as  an  incident ;  the  alienage  of  the  mortgagee,  if 
he  be  a  friend,  can,  upon  no  principle  of  law  or  equity,  be 
urged  against  him.^  So,  also,  the  alienage  of  the  mortgagor  is 
no  defense  to  a  writ  of  entry  by  the  mortgagee,  to  foreclose  the 
right  of  redemption.* 

§  379.  Receiver. — A  receiver  cannot  become  a  mortgagee 
of  property  which  he  holds  to  secure  a  loan  made  by  him  to 
the  owner  of  the  property.  The  property  is  in  the  custody  of 
the  law.  The  court  has  the  management  and  disposal  of  it 
in  accordance  with  the  rules  of  law,  and  to  answer  the  ends  of 
justice,  and  the  receiver  is  its  officer  to  execute  its  authority  in 
the  matter.  He  holds  the  property  for  whoever  may  establish 
a  title  to  it,  and  the  receiver  has  no  power  to  make  any  con- 
tract regarding  it,  unless  ratified  by  the  court.  Hence,  a  re- 
ceiver is  forbidden  from  taking  security  upon  the  property  in- 
trusted to  his  care,  under  the  same  principle  that  the  law  for- 
bids his  becoming  a  purchaser  of  it.^ 

'  Campbell  v.  Galbreath,  12  Bush  (Ky.),  459. 

^  Wochoska  v.  Wochoska,  45  Wis.  423 ;  Putnam  v.  Bicknell,  18  Wis.  333. 
'Hughes  V.  Edwards,  9  Wheat.  (U.  S.)  489.    See,  also,  Harden  v.  Fisher,  1 
Wheat.  (U.  S.)  300 ;  Orr  v.  Hodgson,  4  Wheat.  (U.  S.)  463. 

*  Waugh  V.  Riley,  8  Met.  (Mass.)  290. 

*  Thompson  v.  Holladay,  15  Ore.  55. 


404  NATURE   AND    REQUISITES   OF    THE   CONTRACT. 

He  occupies  a  fiduciary  relation  in  this  sense,  that  he  cannot 
be  allowed  to  purchase  for  his  own  benefit  property  connected 
with  or  forming  a  part  of  the  subject-matter  of  his  receiver- 
ship, or  in  his  possession  in  that  capacity/ 

§  380.  Partners  in  Firm  Name — Corporations. — A  mort- 
gage to  partners  in  the  firm  name  is  valid  in  equity.  Where 
by  the  terms  of  the  mortgagor's  deed,  he  reserves  a  lien  on  the 
land  as  a  security  for  the  unpaid  purchase-money,  it  operates 
as  a  mortgage.  Hence,  a  mortgage  to  real  estate,  made  by  the 
owner  to  a  partnership,  in  its  firm  name  to  secure  an  indebted- 
ness to  it,  duly  executed  and  filed  according  to  statute,  consti- 
tutes a  valid  lien  upon  the  property  in  favor  of  the  firm  as  a 
security  for  the  indebtedness  to  it.  The  objection  made  that  a 
partnership,  in  its  firm  name,  cannot  hold  the  legal  title  to  real 
estate  is  not  material,  because  the  mortgagor  would  hold  the 
legal  title  in  trust  as  security  for  the  firm.  And  in  such  case 
there  would  be  no  need  of  a  formal  reformation,  as  the  court 
in  the  exercise  of  its  equity  powers  would  treat  that  to  be  done 
which  ought  to  have  been  done,  and  give  effect  to  the  instru- 
ment in  a  proceeding  to  foreclose  the  mortgage,  by  awarding 
to  the  mortgagee  a  lien  upon  the  land  for  the  satisfaction  of 
the  amount  diie  the  partnership.^ 

Any  corporation  having  authority  to  convey  real  estate  may 
mortgage  the  same  for  the  payment  of  its  debts.^  So  a  county 
may  take  security  from  an  ex-treasurer  for  moneys  received  by 
him  and  not  accounted  for;  and  may  take  the  deed  in  the 
name  of  a  trustee.* 

If  a  corporation  has  the  right  to  loan  its  funds,  then  it  neces- 
sarily follows  that  it  has  the  right  to  take  security  for  the  re- 
payment of  the  moneys  loaned.^     Thus,  although  the  charter 

'  High  on  Receivers,  sects.  193,  194. 

''■  New  Vienna  Bank  v.  Johnson,  47  Ohio  St.  306. 

2  Jackson  v.  Brown,  5  AVend.  (N.  Y.)  590 ;  Gordon  v.  Preston,  1  Watts  (Pa.), 
385. 

*  Bank  v.  Chapelle,  40  Mich.  447.  See,  also,  Alexander  v.  Knox,  6  Saw.  C.  C. 
54 ;  Vanarsdall  v.  Watson,  65  Ind.  176. 

5  Bank  v.  North,  4  Johns.  Ch.  (N.  Y.)  373. 


THE  PARTIES  TO  THE  MORTGAGE.  405 

contains  no  express  provision  authorizing  the  taking  of  notes 
and  mortgages  or  other  security,  yet  by  authorizing  loans  to 
be  made,  its  charter  clearly  implies  authority  for  security  to  be 
taken  which  is  usually  taken  to  secure  loans.^  So  a  railroad 
company  when  not  restricted  or  forbidden,  tnay  take  mortgages 
of  real  estate  securing  notes  or  bonds  given  for  the  stock." 

And  a  corporation  may  take  a  mortgage  of  lands  in  another 
State  where  the  instrument  will  be  upheld,  although  the  charter 
may  not  authorize  the  corporation  to  take  such  mortgage.^  But 
if  a  statute  forbids  foreign  corporations  to  take  mortgages  in 
the  State,  such  mortgages  are  void,*  and  such  act  is  not  in  con- 
flict with  the  Federal  constitution.^  Under  such  act  mortgage 
of  land  to  a  foreign  corporation  is  void,  and  sale  under  a 
power  in  the  mortgage  is  void,  and  does  not  violate  condition 
against  alienation  in  insurance  policy ;  and  an  act  subsequently 
passed,  validating  such  mortgage,  does  not  so  far  make  such  sale 
valid  as  to  divest  mortgagor's  vested  rights  of  action  on  policy. 

§381.  National  Banks. — National  banks  can  take  mort- 
gages on  real  estate  to  secure  an  indebtedness  previously  con- 
tracted, for  which  new  notes  are  given  by  the  debtor,  and  such 
transaction  is  not  a  violation  of  the  national  banking  law.® 

^  Massey  v.  Building  Association,  22  Kan.  624 ;  Bank  v.  Tallman,  17  "Wis.  530. 

^  Clark  V.  Farrington,  11  Wis.  306  ;  Blunt  v.  Walker,  11  Wis.  334 ;  Lyon  v. 
Ewings,'  17  Wis.  61. 

» Nat.  Trust  Co.  v.  Murphy,  30  N.  J.  Eq.  408  ;  Leasure  v.  Union  Mut.  Life 
Ins.  Co.,  91  Pa.  St.  491. 

*  United  States  Mortar.  Co.  v.  Gross,  93  111.  483.  This  act  was  repealed  in  1875. 

=*  Gross  V.  U.  S.  Mortg.  Co.,  108  U.  S.  477. 

®  Farmers  and  Merchants'  National  Bank  v.  Wallace,  45  Ohio  St.  152,  168, 
opinion  by  Dickman,  J. ;  Shinkle  r.  First  Nat.  Bank,  22  Ohio  St.  516 ;  Allen 
V.  First  Nat.  Bank,  23  Ohio  St.  97 ;  Upton  v.  National  Bank,  120  Mass.  153 ; 
Omn  V.  Merchants'  Nat.  Bank,  16  Kan.  341 ;  Morse  on  Banking  (2d  ed.), 
566. 

Section  5137  of  the  U.  S.  Rev.  Stat,  provides : 

A  national  banking  association  may  purchase,  hold,  and  convey  real 
estate  for  the  following  purposes,  and  for  no  other :  First,  such  as  may  be 
necessary  for  its  immediate  accommodation  in  the  transaction  of  business. 
Second,  such  as  shall  be  mortgaged  to  it  in  good  faith  by  way  of  security  for 
debts  previously  contracted.  Third,  such  as  shall  be  conveyed  to  it  in  satis- 
faction of  debts  previously  contracted  in  the  course  of  its  dealings.    Fourth, 


406  NATURE    AND    REQUISITES   OF    THE    CONTRACT. 

This  is  the  doctrine  announced  by  the  United  States  Supreme 
Court,  and  must  prevail.  In  the  argument  the  court  con- 
sidered the  transaction  in  two  aspects  :  First,  as  not  being 
within  the  letter  of  the  statute,  because  the  deed  of  trust  w\as 
not  executed  to  the  bank ;  and,  second,  as  a  loan  upon  real 
estate  security. 

Under  the  first  head,  the  court  held  that  as  a  mortgage  the 
deed  of  trust  was  merely  an  incident  to  the  note,  and  a  right  to 
its  benefit,  whether  it  was  delivered  or  not  with  the  note,  passed 
with  the  transfer  of  the  latter.  If  the  loan  had  been  upon  the 
note  alone,  the  benefit  of  the  deed,  as  a  mortgage,  would  have 
inured  to  the  bank  by  operation  of  law.  Of  course  that 
which  the  law  would  give  independently  of  a  direct  transfer 
by  the  mortgage,  the  statute  did  not  intend  to  defeat  because 
such  transfer  was  made. 

Under  the  second  head,  as  a  loan  upon  real  estate  security, 
the  court  said  that,  so  treating  it,  the  consequence  insisted  upon 
did  not  follow ;  that  the  statute  did  not  declare  such  security 
void,  but  was  silent  on  the  subject;  that  had  Congress  so 
intended,  it  would  have  been  easy  to  say  so,  and  it  can  hardly 
be  presumed  that  this  would  not  have  been  done,  instead  of 
leaving  the  question  to  be  settled  by  the  uncertain  result  of 
litigation  and  judicial  decision.  Hence,  the  prohibitory  clause 
of  the  statute  did  not  vitiate  real  estate  securities  taken  for 
loans,  and  that  a  disregard  of  them  only  held  the  association 
open  to  proceedings  by  the  government.^ 

And,  hence,  a  mortgage  to  a  bank,  so  far  as  the  subsequent 

incumbrances  are  concerned,  is  to  be  regarded  as  a  valid  security 

for  the  future  advances  to  the  mortgagor.^      And  whatever 

objection  there  may  be  to  such  prohibitory  statutes,  the  objec- 

Buch  as  it  shall  purchase  at  sales  under  judgments,  decrees,  or  mortgages 
held  by  the  association,  or  shall  purchase  to  secure  debts  to  it.  But  no  such 
association  shall  hold  the  possession  of  any  real  estate  under  mortgage,  or 
the  title  and  possession  of  any  real  estate  purchased  to  secure  any  debts  due 
to  it  for  a  longer  period  than  five  years :  13  Stat.  99. 

1  Nat.  Bank  v.  Matthews,  98  U.  S.  621 ;  Heath  v.  Bank,  70  Ind.  106 ;  Scofleld 
V.  Bank,  9  Nebr.  316 ;  Thornton  v.  Bank,  71  Mo.  221 ;  Bank  v.  Elmore,  52 
Iowa,  541 ;  Wroten  v.  Armat,  31  Gratt.  (Va.)  228. 

^  Nat.  Bank  v.  Whitney,  103  U.  S.  99. 


THE  PARTIES  TO  THE  MORTGAGE.  407 

tion  can  only  be  urged  by  the  government.^  And  it  is  the 
general  rule  that  when  a  corporation  is  incompetent,  by  its 
charter,  to  take  a  title  to  real  estate,  a  conveyance  to  it  is  not 
void,  but  only  voidable,  and  the  sovereign  alone  can  object. 
The  conveyance  is  valid  until  assailed  in  a  direct  proceeding, 
instituted  for  that  purpose,  by  the  sovereign.^ 

§  382.  JoixT  Mortgagees. — Two  or  more  mortgagees  can 
take  land  jointly,  and  where  land  is  so  mortgaged  for  a  joint 
debt,  it  is  held  in  joint  tenantcy.^  And  a  note  to  two  mort- 
gagees may  be  paid  by  paying  either,  and  when  paid  to  either 
party,  the  mortgage  to  secure  its  payment  is  extinguished.^ 

Upon  the  death  of  one  of  the  mortgagees  the  legal  owmer- 
ship  of  the  mortgage  made  to  them  vests  in  the  survivor  ex- 
clusively, and  he  alone  is  entitled  to  its  possession,  and  to  sue 
for  and  receive  the  money  upon  it.  He  is  entitled  to  one-half 
of  the  money  due  upon  it  in  his  own  right,  and  he  takes  the 
other  half  as  trustee  for  the  representative  of  the  deceased  co- 
tenant.^  But  at  common  law,  upon  the  death  of  one  of  the 
mortgagees,  the  estate  in  the  land  vests  in  the  heir,  while 
the  debt  vests  in  the  administrator.®  If  a  conveyance  were 
made  to  two  mortgagees  in  fee  as  tenants  in  common,  as  security 
for  a  joint  debt,  they  would  so  hold  it  by  the  common  law ; 

^Fleckner  v.  Bank,  8  Wheat.  (U.  S.)  338,  355. 

'Leasure  ?;.  Hillegas,  7  Serg.  &  R.  (Pa.)  313;  Goundie  v.  Northampton 
Water  Co.,  7  Pa.  St.  233 ;  Runyan  v.  Coster,  14  Pet.  (U.  S.)  122 ;  The  Banks  v. 
Poitiaux,  3  Rand.  (Va.)  136 ;  Mclndoe  v.  City  of  St.  Louis,  10  Mo.  577 ;  Bank 
V.  North,  4  Johns.  Ch.  (N  Y.)  370.  See,  also,  Baird  v.  Bank,  11  Serg.  &  R.  (Pa.) 
411 ;  Graham  v.  Bank,  32  N.  J.  Eq.  804 ;  Gold  Min.  Co.  v.  Bank,  96  U.  S.  640. 

Before  this  question  was  settled  by  Nat.  Bank  v.  Matthews,  98  U.  S.  621, 
and  Nat.  Bank  v.  Whitney,  103  U.  S.  99,  several  of  the  State  courts  passed 
upon  the  question,  and  some  of  their  decisions  hold  a  contrary  doctrine. 
See  Crocker  v.  Whitney,  71  N.  Y.  161 ;  Fowler  v.  Scully,  72  Pa.  St.  456 ;  Woods 
V.  Bank,  83  Pa.  St.  57 ;  Kansas  Valley  Bank  v.  Rowelf,  2  Dill.  C.  C.  371 ;  Rip- 
ley V.  Harris,  3  Biss.  C.  C.  199 ;  Bank  v.  Young,  37  Mo.  398. 

'  Appleton  V.  Boyd,  7  Mass.  131.  Compare  Randall  v.  Phillips,  3  Mas.  0. 
C.  378. 

*  Wright  V.  Ware,  58  Ga.  150. 

*  Mutual  Life  Ins.  Co.  v.  Sturges,  32  N.  J.  Eq.  678 ;  Appleton  v.  Boyd,  7 
Mass.  131. 

"Petty  V.  Sly  ward,  1  Ch.  Rep.  31,  57. 


408  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

and  upon  the  death  of  one,  his  share  would  descend  to  his  heir, 
as  tenant  in  common,  and  the  survivor  would  hold  the  other 
moiety  as  tenant  in  common,  and  at  the  same  time  that  the 
debt  would  vest  solely  in  him  by  survivorship,  for  the  purpose 
of  the  remedy.^  The  survivor  may  enforce  the  debt,^  but  to 
foreclose  the  mortgage  he  must  make  the  representative  of  the 
deceased  co-tenant  a  party  also  to  the  suit.^ 

Payment  to  either  mortgagee  extinguishes  the  debt.*  And 
a  mortgagee  who  is  a  creditor  of  the  mortgagor  accepting  a 
mortgage  as  well  for  his  own  benefit  as  for  the  sureties  of  the 
mortgagor,  is  bound  to  appropriate  the  proceeds  of  the  mort- 
gage estate  pro  rata  to  the  debts  secured.^ 

Where  two  instruments  are  executed  at  the  same  time,  be- 
tween the  same  parties,  relative  to  the  same  subject-matter, 
and  to  effectuate  one  object,  they  are  to  be  taken  together ;  but 
where  two  deeds  are  given  to  different  persons  for  different  con- 
siderations, not  executed  at  the  same  time,  nor  relative  to  the 
same  subject-matter,  nor  to  effectuate  the  same  object,  nor  in 
pursuance  of  a  contract  made  by  the  grantees  jointly,  they 
will  be  considered  and  taken  as  separate  instruments.*'  And 
an  owner  of  land  by  mortgaging  an  individual  half  tliereof, 
and  allowing  the  mortgagee  to  enter  to  foreclose  before  condi- 
tion broken,  does  not  thereby  become  tenant  in  common  with 
him.'^  But  after  the  mortgage  has  been  foreclosed,  the  mort- 
gagees hold  the  land  as  tenants  in  common.^ 

A  mortgage  given  to  two  or  more  persons  to  secure  their 

'  Randall  r.  Phillip?,  3  Mas.  C.  C.  379.  Compare  Appleton  v.  Boyd,  7  Mass, 
131. 

'^  Blake  v.  Sanborn,  8  Gray  (Mass.),  154  ;  Webster  v.  Vanderwenter,  6  Gray 
(Mass.),  428. 

3  Traders'  Savings  Bank  v.  Freese,  26  N.  J.  Eq.  453  ;  Mutual  Life  Ins.  Co.  v. 
Sturges,  32  N.  J.  Eq.  678  ;  Williams  v.  Hilton,  35  Me.  547. 

*  Ruddock's  Case,  6  Co.  25  ;  Pierson  v.  Hooker,  3  Johns.  (N.  Y.)  68.  See,  also, 
Sherman  v.  Ballou,  8  Cow.  (N.  Y.)  304 ;  Decker  v.  Livingston,  15  Johns.  (N. 
Y.)  478. 

5  Willis  V.  Caldwell,  10  B.  Mon.  (Ky.)  199;  Adams  v.  Robertson,  37  111.  45. 

«  Bates  V.  Coe,  10  Conn.  280,  293. 

'  Norcross  v.  Norcross,  105  Mass.  265. 

8  Goodwin  v.  Richardson,  11  Mass.  469  ;  Tyler  v.  Taylor,  8  Barb.  (N.  Y.)  585 ; 


THE    PARTIES    TO    THE   MORTGAGE.  409 

several  debts  is  several  and  not  joint,  and  each  mortgagee  has 
a  right  to  enforce  only  his  claim/  But  if  there  be  a  joint 
mortgage  made  to  two,  to  secure  a  debt  due  to  one  of  them, 
the  legal  estate  vests  in  them  as  tenants  in  common,  the  one 
having  no  interest  in  the  mortgage  debt  being  trustee  of  the 
estate  for  the  benefit  of  him  who  owes  the  debt.^ 

In  a  suit  for  contribution,  by  one  of  several  mortgagees, 
against  another,  all  the  other  mortgagees  must  also  be  made 
parties  to  the  suit.^ 

It  has  been  held  that  a  mortgage  being  given  to  husband 
and  wife,  upon  the  death  of  the  husband  the  mortgage  vests 
in  the  wife.*  But  this  doctrine  is  controlled  by  statute.  Thus, 
in  Illinois,  a  deed  to  husband  and  wife  makes  them  tenants  in 
common,  and  not  tenants  by  the  entirety.^ 

Donnels  v.  Edwards,  2  Pick.  (Mass.)  617 ;  Rigden  v.  Vallier,  2  Yes.  Sr.  258 ; 
Burnett  v.  Burt,  22  Pick.  (Mass.)  546,  555  ;  Johnson  r.  Brown,  31  X.  H.  405. 

1  Brown  v.  Bates,  55  Me.  520;  Gilson  v.  Gilson,  2  Allen  (Mass.),  115, 117. 

2  Root  V.  Bancroft,  10  Met.  (Mass.)  44. 

3  Carr  v.  Waldron,  44  Mo.  .393. 

*  Draper  v.  Jackson,  16  Mass.  480. 

^  Cooper  V.  Cooper,  76  111.  57. 

But  in  Massachusetts  mortgages  are  expressly  excepted  from  the  provis- 
ions of  the  statute  that  conveyances  made  to  two  or  more  persons  shall  be 
construed  to  create  estates  in  common.  Gen.  Stat.,  ch.  89,  sect.  14.  In  Maine 
a  mortgage  to  two  or  more  persons  makes  themjoint  tenants  unless  otherwise 
expressed :  Rev.  Stat.,  ch.  73,  sect.  13. 


CHAPTER  XI. 

mortgagable  interests. 

Article  1. 

Present  Interests  or  Interests  in  Esse. 

I  383.  General  Statement.  I  390.  An  Equitable  Interest  May  be 
I  384.  Contracts  for  Purchase.  Mortgaged. 

§  385.  Adverse  Title.  §  391.  A    Mortgage    of   a   Building 
§  386.  A  Possibility  not  Coupled  with  Carries     the     Ground     on 

an  Interest.  which  it  Stands. 

I  387.  Remainders  and  Reversions.  §  392.  Erecting     Buildings    on    the 
§  388.  Trust  Estates  Cannot  be  Mort-  Land  of  Another. 

gaged.  §  393.  Rents  and  Profits. 

I  389.  Only  the  Mortgagor's  Interest  §  394.  What  Property  Included— In 

Passes.  General. 

§  383.  General  Statement. — Concisely  stated,  all  kinds 
of  property,  real  and  personal,  which  are  capable  of  absolute 
sale  may  be  mortgaged.^  Therefore,  rights  in  remainder 
and  reversion,  possibilities  coupled  with  an  interest,  rents, 
and  choses  in  action  are  capable  of  being  mortgaged,^  and 
everything  subject  to  contract  or  which  may  be  assigned  is 
capable  of  being  mortgaged.^ 

So  any  estate  in  fee  simple,  fee  tail,  for  life  or  years,  in  any 
lands,  or  in  any  rents  or  profits  out  of  the  same  may  be  mort- 


So  lands  subject  to  pre-emption  may  be  mortgaged,^  and  also 
mining  claims ;  ®  so,  also,  a  certificate  of  stock  in  an  unincor- 
porated company  representing  an  interest  in  land  ;  ^  or  the 

1  Dorsay  v.  Hall,  7  Nebr.  460 ;  4  Kent's  Com.  144. 

''Wilson  V.  Ross,  17  Fla.  691 ;  2  Story's  Eq.  Jur.,  sect.  1021. 

3  Bank  v.  Baumeister,  87  Ky.  6 ;  Neiigh  v.  Michenor,  3  Stock.  (N.  J.)  539. 

*  1  Powell  on  Mort.  18;  Miller  v.  Tipton,  6  Blackf.  (Ind.)  238;  Wilson  v. 
Wilson,  32  Barb.  (N.  Y.)  328 ;  In  re  John  and  Cherry  Streets,  19  Wend.  (N. 
Y.)  659. 

nVhitney  v.  Buckman,  13  Cal.  536  :  Bush  r.  Marshall,  6  How.  (U.  S.)  284. 

®  Alexander  v.  Sherman  (Ariz.),  16  Pac.  Rep.  45. 

'Durkee  v.  Stringham,  8  Wis.  1. 

410 


MORTGAGABLE    INTERESTS.  411 

interest  of  a  holder  of  school  land  certificates  so  long  as  valid.^ 
So  potential  interests  may  be  mortgaged.^ 

§  384.  Contract  for  Purchase. — The  interest  of  a  con- 
tract for  purchase  of  real  estate  can  be  mortgaged.  Thus,  pay- 
ing part  of  the  purchase-money  with  a  written  contract  of  pur- 
chase, and  having  possession  by  consent  of  the  vendor,  create 
an  interest  which  may  be  mortgaged.^  And  one  in  possession 
under  parol  contract  to  purchase  has  a  mortgagable  interest.^ 
So  has  one  who  holds  a  title  bond.^  So,  a  contract  for  an  op- 
tion to  purchase  real  estate  at  an  agreed  price,  within  a  speci- 
fied time,  upon  a  sufiicient  consideration,  creates  an  interest 
which  may  be  mortgaged.^ 

But  a  transfer  by  a  cestui  que  trust  to  his  creditor  of  all  his 
interest  in  the  proceeds  of  land  held  in  trust  for  himself  and 
others  does  not  constitute  a  mortgage  of  such  land.^  A  mort- 
gage of  property  executed  by  the  owner  of  the  legal  title  and  the 
owner  of  the  equitable  interest  is  valid.* 

§  385.  Adverse  Title. — A  mortgage  of  land  in  possession 
of  another  adverse  to  the  mortgagor  is  good  in  equity,  between 
the  parties  to  it.^  The  conveyance  is  only  void  as  to  a  person 
holding  adversely  and  those  that  subsequently  come  in  under 
him ;  as  to  all  others  the  conveyance  is  valid  and  passes  the 
title,  or  interest  from  the  grantor  or  lessor  to  the  grantee  or 
lessee.^^  But  a  mortgage  upon  land  executed  by  one  having  no 

'  Mowry  v.  Wood,  12  Wis.  413  ;  Jarvis  v.  Butcher,  16  Wis.  307. 

^  Grantham  v.  Hawley,  1  Hobart,  132. 

^  Balen  v.  Mercier,  75  Mich.  42. 

*  Sinclair  v.  Armitage,  12  N.  J.  Eq.  174  ;  Hagar  v.  Brainerd,  44  Vt.  294 ;  Bull 
r.  Sykes,  7  Wis.  449. 

^  Baker  v.  Bishop  Hill  Colony,  45  111.  264 ;  Laughlin  v.  Braley,  25  Kan.  147  ; 
Houghton  V.  Allen,  75  Cal.  102 ;  Smith  r.  Patton,  12  W.  Va.  541 ;  Crane  v. 
T\irner,  7  Hun  (N.  Y.),  357  ;  Farmers'  Loan  and  Trust  Co.  v.  Curtis,  7  N.  Y.  466. 

*Bank  v.  Baumeister,  87  Ky.  6,  opinion  by  Lewis,  J. 

'  Hyman  v.  Bogue,  135  111.  9. 

« Brokaw  v.  Field,  33  111.  App.  138. 

9  Hall  V.  Westcott,  15  R.  I.  373. 

'"  University  v.  Joslyn,  21  Vt.  52,  61 ;  Edwards  v.  Roys,  18  Vt.  473 ;  Livings- 
^  ton  1'.  Peru  Iron  Co.,  9  Wend.  (N.  Y.)  511,523;  Wade  v.  Lindsay,  6  Met. 
(Mass.)  407 ;  Stockton  v.  Williams,  1  Doug.  (Mich.)  546 ;  Betsey  v.  Torrance, 
34  Miss.  132, 138. 


412  NATURE    AND    REQUISITES   OF   THE    CONTRACT. 

title  of  any  kind  thereto  is  void/  and  it  is  not  even  a  cloud 
upon  the  title.^ 

§  386.  A  Possibility  not  Coupled  with  an  Interest. — A 
possibility  is  not  mortgagable  if  not  coupled  with  an  interest. 
Thus,  the  right  of  pre-emjjtion  of  public  lands  is  not  mortga- 
gable.^ So  when  a  party  has  neither  title  nor  possession  of 
the  land,  and  the  deed  is  held  back  subject  to  a  payment  of 
the  purchase  price  there  is  no  interest  susceptible  of  a  mort- 
gage.* And,  in  short,  a  mere  possibility  or  expectancy,  not 
coupled  with  an  interest  in  or  growing  out  of  the  estate,  is  not 
subject  of  a  mortgage.  Such  an  interest  is  not  subject  of  sale 
and  therefore  not  of  mortgage.^ 

§387.  Remainders  and  Reversions. — A  vested  interest  in 
remainder  may  be  mortgaged.^  And  a  possibility,  coupled 
with  an  interest  created  by  a  devise  to  a  designated  person, 
upon  a  single  contingency  not  remote  or  dependent  upon  the 
volition  of  another,  can  be  bound  or  charged  by  a  mort- 
gage.^ 

So  a  life  tenant  can  mortgage  whatever  interest  he  has, 
though  he  cannot  prejudice  the  rights  of  the  remainderman.* 
And,  in  general,  all  remainders  and  reversions  capable  of  as- 
signment may  be  the  subject  of  mortgage.^ 

Where  a  certain  undivided  interest  in  real  estate  was  be- 
queathed to  a  son,  and  a  life  interest  in  certain  other  real  es- 
tate to  the  widow,  with  directions  that  after  her  death  it  be 
sold  and  a  distributive  share  given  the  son,  it  was  held  that  a 
mortgage  executed  by  the  son  before  the  death  of  the  widow, 

'  Pierce  v.  Emery,  32  N.  H.  484 ;  Cornish  v.  Frees,  74  Wis.  490. 

^  Cornish  v.  Frees,  74  Wis.  490. 

3  Penn  v.  Ott,  12  La.  Ann.  233 ;  Gilbert  v.  Penn,  12  La.  Ann.  235. 

*  Bright  V.  Buckman,  39  Fed.  Rep.  243. 

*  Low  V.  Pew,  108  Mass.  347 ;  Skipper  v.  Stokes,  42  Ala.  255 ;  Purcell  v. 
Mather,  35  Ala.  570. 

6  Flanders  r.  Greely,  64  N.  H.  357  ;  3  Washb.  Real  Prop.  88-90,  301,  302. 
'Jones  V.  Roe,  3  Term  Rep.  88,  93 ;  Wilson  v.  Wilson,  32  Barb.  (N.  Y.)  328, 
343.     Compare  I^mpert's  Case,  10  Rep.  46. 
8  Hosmer  r.  Carter,  (58  111.  98. 
»  Curtis  V.  Root,  20  111.  520,  522. 


MOETGAGABLE    INTERESTS.  413 

embracing  all  the  right,  title,  and  interest  in  the  property  be- 
queathed to  him  by  the  father,  did  not  embrace  the  property 
included  in  the  widow's  life  estate.^  So  the  share  of  the  grand- 
child of  one  of  the  daughters  of  the  declarant,  to  which  he  was 
entitled  as  heir-at-law  of  his  sister,  under  a  certain  declaration 
of  uses,  was  held  not  to  be  embraced  by  the  terms  of  a  deed 
of  mortgage  from  him  to  other  parties  where  those  terms  were 
confined  to  "  all  the  interest  he  may  or  will  possess,  either  in 
his  OMTi  right,  or  as  heir-at-law  of  his  mother,  by  reason  of  all 
or  any  of  the  deeds,  conveyances,  and  declaration  of  uses  " 
mentioned  in  the  deed  of  mortgage.^ 

Where  the  grant  is  a  life  estate  to  one  and  of  a  fee  to  another, 
and  mortgage  back  is  executed  by  the  life  tenant,  the  mort- 
gage attaches  only  to  the  life  estate,  and  does  not  affect  the 
fee.  Judge  Shope  says  that  if  by  deed  a  life  estate  is  conveyed 
to  one  and  the  fee  to  another,  as  part  of  the  same  transaction, 
and  the  life  estate  is  mortgaged  by  the  grantee  to  the  grantor, 
the  mortgage  would  attach  to  the  life  estate,  and  the  life 
tenant  would  take  subject  t-o  the  lien,  and  the  fee  would  pass 
unaffected  by  the  mortgage.^ 

Under  the  Michigan  statute  *  which  provides  that  "  no  ex- 
pectant estate  can  be  defeated  or  barred  by  any  alienation  or 
other  act  of  the  owner  of  the  intermediate  estate,  nor  by  any 
destruction  of  such  precedent  estate,"  a  mortgage  of  property 
by  one  whose  estate  therein  by  demise  would  go  to  other  de- 
visees, in  case  of  death  before  the  termination  of  a  life  estate 
of  another,  is  void  on  the  death  of  the  mortgagor  during 
such  life  estate.^ 

§388.  Trust  Estates  Cannot  be  Mortgaged. — The  law 
is,  if  a  trust  is  created  for  a  specific  purpose,  and  is  so  limited, 
if  it  is  not  repugnant  to  the  rule  against  perpetuities,  and  is 
in  other  respects  legal,  neither  the  trustee  nor  the  cestui  que 

'  Hauft  V.  Duncan,  40  Iowa,  254. 
'  McPherson  v.  Snowden,  19  Md.  197. 
^Lehndorf  i;.  Cope,  122  111.  317. 
*  How.  St.,  sect.  5548. 
,     *L'Etourneau  v.  Henquenet  (Mich.).  50  N.  W.  Rep.  1077. 


414  NATURE    AND    REQUISITES   OF    THE    CONTRACT. 

trust,  nor  his  creditors  or  assigns  can  divert  the  property  from 
the  appointed  purpose.  Any  conveyance,  whether  by  the 
operation  of  law  or  by  tlie  act  of  any  of  the  parties  which  dis- 
appoints the  purpose  of  the  settlor  by  diverting  the  property  or 
the  income  from  the  purpose  named,  would  be  a  breach  of  the 
trust.  Therefore,  it  may  be  said  that  the  power  to  create  a 
trust  for  a  specific  purpose  does,  in  some  sort,  impair  the  power 
to  alienate  property.^ 

So,  where  a  beneficiary  is  entitled  to  a  life  support  out  of 
an  estate  held  by  a  trustee,  he  has  no  power  to  mortgage  the 
estate ;  and  a  mortgage  executed  by  such  beneficiary  and  the 
remainderman  is  valid  only  as  against  the  latter,  except  so 
far  as  it  secures  money  used  in  paying  debts  resting  on  the 
estate.^  But  a  clause  in  a  deed  of  trust,  providing  that  the 
trustee,  at  the  request  of  the  cestui  que  trust  and  her  heirs, 
may  sell  the  estate  conveyed,  does  not  exclude  the  power  to 
mortgage  for  the  benefit  of  the  cestuis  que  trustent?  But  a  will 
of  the  testator,  empowering  the  trustee  to  continue  the  business 
and  to  increase  or  diminish  the  real  or  personal  estate  therein, 
does  not  give  the  trustee  power  to  create  a  paramount  charge 
upon  the  real  estate  by  mortgage  to  raise  moneys  for  the  dis- 
charge of  debts  incurred  by  him  in  carrying  on  the  testator's 
business.*  And  a  decree  authorizing  a  mortgaging  of  a  trust 
estate,  does  not  give  the  trustee  power  to  stipulate  in  the  mort- 
gage for  the  payment  of  semi-annual  interest  on  the  loan, 
and  that  in  default  of  payment  of  interest,  taxes,  or  insur- 
ance, the  whole  debt  shall  become  due  and  ten  per  cent,  attor- 
ney's fees  to  be  allowed  for  its  collection  by  law.* 

A  cestui  que  trust,  entitled  to  the  rents  and  profits  of  land  for 
life  can  mortgage  such  interest.® 

'  Perry  on  Trusts  and  Trustees  (2d  ed.),  sect.  386  a ;  Rife  v.  Geyer,  59  Pa.  St. 
396.  See,  also,  Keyser  v.  Mitchell,  67  Pa.  St.  473 ;  Perkins  v.  Hays,  3  Gray 
(Mass.),  405  ;  Van  Amee  v.  Jackson,  35  Vt.  173. 

'^  Barnes  v.  Dow,  59  Vt.  530. 

»Wood  V.  Kice,  103  Mo.  329. 

*In  re  Webb,  63  Law  T.  545.  See,  also,  Carr  v.  Branch,  85  Va.  597 ;  In  re 
Clarke's  Estate,  59  Hun  (N.  Y.),  557. 

*  Bolles  V.  Munnerlyn,  83  Ga.  727. 

«Perrine  v.  Newell  (N.  J.),  23  Atl.  Rep.  492. 


MORTGAGABLE   INTERESTS.  415 

§  389.  Only  the  Mortgagor's  Interest  Passes. — The  inter- 
est of  the  mortgagor  only  passes.  If  he  has  no  interest  no  es- 
tate is  conveyed.^  Thus,  a  conveyance  of  an  entire  tract  of 
land,  embracing  the  homestead  which  could  not  be  mortgaged 
by  the  husband  alone,  though  void  as  to  the  homestead  is 
valid  as  to  the  other  lands.^  And  a  deed  of  trust  executed  by 
the  holder  of  notes  for  the  purchase-money  of  land,  who  con- 
veyed the  land  on  which  the  notes  are  a  vendor's  lien,  does 
not  operate  to  transfer  such  notes,  if  there  be  no  mention  of 
them  in  the  deed.^ 

But  a  mortgage  of  land  which  is  subject  to  a  right  of  home- 
stead, conveys  the  reversionary  interest  of  the  mortgagor  after 
the  expiration  of  the  homestead  estate.*  And  so  a  mortgage 
of  land  which  the  mortgagor  had  previously  contracted  to  sell, 
passes  only  his  interest.^  And  so  an  imperfect  title,  claimed 
by  virtue  of  a  concession,  and  is  by  the  law  of  the  State  sub- 
ject of  sale,  is  subject  of  mortgage  for  a  debt."  A  clause  in  a 
mortgage  of  certain  tracts  of  land,  "  excepting  therefrom  so 
much  of  said  tracts  as  have  been  conveyed  by  deed  and  to 
different  individuals,"  does  not  reserve  from  the  operation  of 
the  mortgage  a  portion  of  said  lands  conveyed  by  a  prior  un- 
recorded mortgage.^  And  a  deed  of  mortgage  which  conveys 
all  of  the  land  and  right  and  claim  of  land  which  the  grantor 
has  in  a  certain  town,  does  not  include  land  therein  to  which 
he  has  only  a  possibility  of  reversion  on  the  non-performance  of 
a  condition  subsequent.^  And  a  mortgage  of  land  passes  the 
grantor's  title,  though  it  be  only  in  mortgage,^ 

§  390.  An  Equitable  Interest  May  be  Mortgaged. — 
A  mortgagor  can  mortgage  only  what  interest  he  has  in  the 

1  Pierce  v.  Emery,  32  N.  H.  484  ;  Cornish  v.  Frees,  74  Wis.  490. 
^  McGuire  v.  Van  Pelt,  55  Ala.  344. 
^  Bell  V.  Blair,  65  Miss.  191. 
*  Smith?).  Provin,  4  Allen  (Mass.),  516. 
^  Laverty  v.  Moore,  33  N.  Y.  658. 

« Massey  v.  Papin,  24  How.  (U.  S.)  362  ;  Bissell  v.  Penrose,  8  How.  (U.  S.) 
317  ;  Landes  v.  Brant,  10  How.  (U.  S.)  348. 
^  Eaton  V.  White,  IS  Wis.  517. 
®  Richardson  r.  Cambrid^-e,  2  Allen  (Mass.),  118. 
^Murdock  v.  Chapman,  9  Gray  (Mass.),  156. 


416  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

land.  Thus,  a  mortgage  purporting  to  convey  a  fee  simple 
title  to  real  estate,  the  mortgagor  having  only  an  equitable 
title,  is  effective  to  pass  such  equity.'  So  when  a  party  has  a 
bond  for  a  deed  and  land  contract  from  the  legal  owner  for 
payment  of  certain  installments,  is  in  possession  of  the  land, 
and  has  paid  interest  on  the  purchase-money,  he  has  an  equit- 
able interest  subject  of  mortgage.^ 

In  like  manner  where  a  party  erects  improvements  on  real 
estate  under  a  parol  contract  for  the  purchase  of  the  land,  he 
acquires  an  interest  in  the  land  to  the  extent  of  such  improve- 
ments, and  this  interest  is  mortgagable.^  So  a  building  erected 
under  an  agreement  with  the  owner  of  the  soil  to  buy  the 
land  at  a  certain  price,  within  a  limited  time,  becomes  a  fix- 
ture and  constitutes  a  part  of  the  realty,  and  is  an  equitable 
interest  in  the  realty  which  is  subject  of  mortgage  by  the 
vendee.* 

A  mortgage  by  a  tenant  in  common  of  a  moiety  of  land, 
passes  only  his  interest.^ 

A  mortgage  given  by  one  not  the  owner  of  the  land  will 
not  become  valid  unless  he  acquires  the  ownership  ;  and  join- 
ing the  owner  who  has  promised  to  sell  to  the  mortgagor  in 
the  sale  of  the  property,  is  not  an  acquisition  of  the  property, 
and  does  not  give  validity  to  the  mortgage.® 

§  391.  The  Mortgage  op  a  Building  Carries  the  Ground 
ON  Which  it  Stands. — Whenever  a  building  is  mortgaged, 
the  land  essential  to  the  use  of  the  building  will  pass  by  such 
mortgage,  if  it  appears  that  such  was  the  intention  of  the  parties. 
Thus,  a  mortgage  of  a  three-story  brick  building  occupied  as  a 
store  carries  the  land  on  which  the  store  is  situated.^  So  a 
conveyance  of  a  mill  with  appurtenances  passes  not  the  build- 

'  Lincoln  Building  and  Saviners  Association  v.  Hass,  10  Nebr.  581. 

'^  Jones  V.  Lapham,  15  Kan.  540;  Lauglin  v.  Braley,  25  Kan.  147. 

3  White  V.  Butt,  32  Iowa,  335. 

^  Eastman  v.  Foster,  8  Met.  (Mass.)  19,  26. 

^Shirras  v.  Caig,  7  Cranch  (U.  S.),  34. 

®  Sample  v.  Scarborough,  43  La.  Ann.  315. 

nVilson  V.  Hunter,  14  Wis.  683  ;  Gibson  v.  Brockway,  8  N.  H.  465. 


MORTGAGABLE    INTERESTS.  417 

ing  merely  but  the  land  under  and  adjoining,  which  is  neces- 
sary to  the  use  and  is  actually  used  with  it.^  So  a  mortgage, 
to  secure  advances  to  enable  the  mortgagor  to  erect  a  building 
of  "  all  of  his  right,  title,  and  interest  which  he  now  has  in 
the  foundation,  or  stone  work  of  said  building,  which  he  may 
have  and  unto  said  building  during  its  erection  and  comple- 
tion, and  after  it  is  completed,"  passes  the  land  on  which  the 
building  stands.^ 

§  392.  Erecting  Buildings  on  the  Land  of  Another. — 
By  erecting  a  house  on  the  land  of  another  it  becomes  a  part 
of  the  realty,  unless  expressly  agreed  that  it  shall  remain  per- 
sonalty. So,  where  a  party,  by  agreement  to  purchase  the 
land,  builds  a  house  on  it,  he  cannot  give  a  valid  mortgage  on 
it  until  the  conveyance  of  the  land  is  made  to  him.^ 

So,  if  the  assignee  of  the  mortgagor  removes  fixtures  from  the 
land,  though  erected  by  him,  the  assignee  of  the  mortgagee- 
may  have  an  action  of  trespass  against  him  for  their  value.* 

§393.  Rents  and  Profits. — Notwithstanding  the  general 
rule,  that  the  mortgagor,  until  some  action  by  the  mortgagee,^ 
is  entitled  to  the  earnings  and  profits  of  the  mortgaged  land^ 
yet  it  is  lawful  for  the  parties  to  agree  that  the  earnings  and 
profits  shall  be  held  in  equity  by  the  mortgagee ;  and  under 
such  a  contract,  such  income,  whenever  received,  is  operated 
upon  by  the  mortgage,  and  the  party  receiving  it  holds  it  in 
trust  for  whoever  in  equity  is  entitled  to  it.^     So  a  mortgagee 

'  Whitney  v.  Olney,  3  Mas.  C.  C.  280  ;  Esty  v.  Baker,  48  Me.  495  ;  Maddox 
".  Goddard,  15  Me.  224;  Forbush  v.  Lombard,  13  Met.  (Mass.),  109;  Moore  v. 
Fletcher,  IG  Me.  66 ;  Blake  v.  Clark,  6  Me.  436. 

'Greenwood  ?'.  Murdock,  9  Gray  (Mass.),  20.  See,  also,  Cheshire  v.  Shutes- 
bim',  7Met.  (Mass.)  566;  Johnson  v.  Rayner,  6  Gray  (Mass.),  110;  Doyle  v. 
Lord,  64  N.  Y.  433,  436. 

'Milton  V.  Colby,  5  Met.  (Mass.)  78. 

♦Smith  ?'.  Goodwin,  2  Me.  173;  Frothingham  v.  McKusick,  24  Me.  403; 
Pettengell  y.  Evans,  5  N.  H.  54;  Smith  v.  Moore,  11  N.  H.  55;  Sanders  r. 
"Reed,  12  N.  H.  561 ;  Hamlin  r.  Parsons,  12  Minn.  108.  See,  also,  Peirce  v. 
Goddard,  22  Pick.  (Mass.)  559. 

^  Pullan  V.  Cincinnati,  etc.,  C.  R.  R.  Co.,  5  Biss.  C.  C.  237  ;  Walthall  v.  Rives, 
84  Ala.  96 ;  Van  Rensselaer  r.  Dennison,  35  N.  Y.  393. 
VOL.  I.— 27 


418  NATURE    AND    REQUISITES   OF   THE    CONTRACT. 

imay  agree  with  the  mortgagor  for  the  rents  and  profits  of  a  ditch 
for  mining  purposes.^ 

After  condition  broken,  a  mortgagor  in  possession  may  cut 
firewood  and  timber  for  repairs,  for  use  upon  the  premises,  and 
for  ordinary  purposes.^  And  when  the  mortgage  is  paid,  the 
timber  which  has  been  cut  down  is  discharged  and  reverts  to 
the  mortgagor.^ 

§  394.  What  Property  Included — In  General. — A  mort- 
gage of  real  *estate  includes  all  articles  essential  to  the  use  of 
the  realty,  which  have  been  applied  exclusively  to  use  in  con- 
nection with  it,  and  are  necessary  for  that  purpose,  and  with- 
out which,  or  similar  articles,  the  realty  would  cease  to  be  val- 
uable.* Hence,  a  mortgage  given  on  a  ditch  or  flume  in  pro- 
cess of  construction  without  any  special  provision,  will  include 
all  improvements  or  fixtures  then  on  the  line  located  for  the 
flume,  as  well  as  those  which  may  hereafter  be  put  on.^ 

An  abstract  of  ,title  to  the  mortgaged  land  goes  to  the  mort- 
gagee until  the  debt  is  paid,  and  the  lien  therefore  discharged.'' 

The  mortgage  covers  all  improvements  subsequently  made 
by  the  mortgagor  or  purchaser  from  him.^ 

A  mortgage  given  to  secure  certain  notes  whereby  it  was 
made  a  lien  on  a  mill  and  machinery  in  said  mill,  till  the  pay- 
ment of  said  notes,  will  embrace  machinery  placed  in  the 
building  after  the  mortgage  was  given  and  before  the  notes 
were  paid.^ 

A  mortgagee  may  mortgage  his  interest  in  the  property 
under  his  mortgage,  whatever  that  is.' 

» Kidd  V.  Teeple,  22  Gal.  255. 

''Hapgood  V.  Blood,  11  Gray  (Mass.),  400. 

3  Hutching  v.  King,  1  Wall.  (U.  S.)  53. 

*Hoyle  V.  Plattsburg,  etc.,  R.  R.  Co.,  51  Barb.  (N.  Y. )  45  ;  Bond  v.  Coke, 
71  N.  Car.  97. 

2- Union  Water  Co.  v.  Murphy,  etc.,  Co.,  22  Oal.  620. 

6  Holm  V.  Wiest,  11  Abb.  Pr.  N.  S.  (N.  Y.)  113. 

'Rice  V.  Dewey,  54  Barb.  (N.  Y.)  455 ;  Martin  v.  Beatty,  54  111.  100 ;  Whar- 
ton V.  Moore,  84  N.  Car.  479 ;  Mitchell  v.  Black,  64  Me.  48.  See,  also,  Griffin 
V.  Marine  Co.,  52  111.  130. 

*  Johnston  v.  Morrow,  60  Mo.  339. 

»Murdock  v.  Chapman,  9  Gray  (Mass.),  156. 


MORTGAGABLE    INTERESTS.  419 

If  a  married  woman,  having  the  rights  of  a  feme  sole,  has  a 
mortgage  upon  her  husband's  real  estate,  and  then  joins  him  in 
a  subsequent  mortgage  merely  to  release  her  dower  and  home- 
stead, she  does  not  thereby  subject  her  mortgage  interest  to  the 
lien  of  the  subsequent  mortgage/  But  if  she  had  united  with 
him,  in  a  deed,  in  the  granting  part  and  in  the  covenants,  she 
would  thereby  convey  her  mortgage  interests.^  If  a  mortgagee 
mortgages  his  interest  in  the  land  and  then  acquires  an  absolute 
estate,  his  mortgagee,  by  foreclosing,  takes  an  absolute  title.^ 

A  part  of  the  heirs  sold  their  interest  to  the  other  heirs,  who 
gave  back  a  mortgage  describing  the  whole  estate,  and  it  was 
held  that  the  mortgage  covered  the  whole  estate/  So  the 
owners  of  land  conveyed  an  undivided  half  of  the  property  to 
the  vendee ;  about  two  years  thereafter  they  conveyed  the  other 
undivided  half,  and  the  vendee  gave  back  a  mortgage  for  part 
of  the  purchase-money  which  described  the  whole  tract,  and 
it  was  held  that  the  mortgage  covered  the  entire  land.^ 

Accretion  from  a  river,  after  the  mortgage  is  given,  goes 
with  the  land.^ 

'  Kitchell  V.  Mudgett,  37  Mich.  81. 

*  Gregory  v.  Gregory,  16  Ohio  St.  560. 
'Murdock  v.  Chapman,  9  Gray  (Mass.),  156. 

*  Potts  V.  Blanchard,  19  La.  Ann.  167. 

5  Carpenter  v.  Millard,  38  Vt.  9.    See  Shirras  v.  Caig,  7  Cranch  (U.  S.),  34. 
«Cruikshanks  v.  Wilmer  (Ky.),  18  S.  W.  Rep.  1018. 


420 


NATURE    AND    REQUISITES    OF    THE    CONTRACT. 


Article  2. 
Fixtures  Subject  to  a  Mortgage  Lien. 


Annexation  of  Fixtures  Before 
Execution  of  the  Real  Es^ 
tate  Mortgage. 

Annexation  of  Fixtures  After 
Execution  of  the  Real  Es- 
tate Mortgage. 

Machinery  Loaned  or  Sold  to 
Mortgagor  on  Condition. 

Things  Useful  and  Ornamen- 
tal. 

Trade  Fixtures. 

The  Lessee's  Right  to  Remove 
Fixtures. 

Estoppel  of  Lessee. 

Statutory  Provisions. 


?  395.  Irremovable  Character  of  Fix-    ?  402. 

tures. 
?  396.  Elementary  Rule  as  to  Things 

Fixed  to  the  Soil.  §  403. 

§  397.  Mutual  Agreement — Express  or 

Implied. 
§  398.  How  Far  Can  the  Lien  of  a    §  404. 

Chattel    Mortgage    be    Pre- 
served after   Annexation    of    ?.  405. 
'  Fixtures. 

§  399.  The  Real  Estate  Mortgage  Cov-     §  406. 

ers  the  Property  in  the  Con-    §  407. 

dition  In  Which  It  Comes  to 

the  Mortgagor's  Hands.  ?  408. 

1 400.  When  Designed  to  be  Perma-    §  409. 

nent. 
?  401.  Buildings  Erected  on  Mortgaged 

Realty. 

§395.  Irremovable  Character  op  Fixtures. — To  deter- 
mine the  irremovable  character  of  fixtures,  three  things  are, 
by  the  modern  authorities,  apphed :  1 .  Actual  annexation  to 
the  realty  or  something  appurtenant  thereto.  2.  Application  to 
the  use  or  purpose  to  which  that  part  of  the  realty,  with  which 
it  is  connected  is  appropriated.  3.  The  intention  of  the  parties 
making  the  annexation  to  make  a  permanent  accession  to  the 
freehold.^ 

The  clear  tendency  of  modern  authority  seems  to  give 
prominence  to  the  question  of  intention  to  make  the  article  a 
permanent  accession  to  the  freehold.^ 

It  may  be  stated  in  the  first  place,  that  whether  a  thing, 
which  may  be  a  fixture,  becomes  a  part  of  the  realty  by  an- 
nexation, depends  as  a  general  proposition  upon  the  inten- 
tion with  which  it  was  done.^ 

There   seems   to  be  a  great  unanimity  in  the  authorities 

'  Tyler  on  Fixtures,  114. 
*  Ewell  on  Fixtures,  p.  22. 
3  Washb.  Real  Prop.,  p.  8. 


MORTGAGABLE   INTERESTS.  421 

that  things  personal  in  their  nature  may  retain  their  character 
of  personalty  by  the  express  agreement  of  the  parties,  although 
attached  to  the  realty  in  such  a  manner  as  that,  without  such 
agreement,  they  would  lose  that  character,  provided  they  are 
so  attached  that  they  may  be  removed  without  material  injury 
to  the  article  itself,  or  to  the  freehold. 

Of  course  it  is  not  held  that  parties  may,  by  contract,  make 
personal  property,  realty  or  personalty  at  will,  but  where  an 
article  personal  in  its  nature,  is  so  attached  to  the  realty  that  it 
can  be  removed  without  material  injury  to  it  or  to  the  realty,  the 
intention  with  which  it  is  attached  will  govern ;  and  if  there  is 
an  express  agreement  that  it  shall  remain  personal  property, 
or  if  from  the  circumstances  attending,  it  is  evident  or  may  be 
presumed  that  such  was  the  intention  of  the  parties,  it  will  be 
held  to  have  retained  its  personal  character/ 

This  intention  can  be  inferred  from  the  nature  of  the  article 
affixed,  the  relation  and  situation  of  the  party  making  the  an- 
nexation, the  structure  and  mode  of  annexation,  and  the  pur- 
pose or  use  for  which  the  annexation  has  been  made.^ 

The  intent  and  use  have  much  to  do  in  determining  the 
character  of  a  fixture.^ 

§  396.  Elementary  Rule  as  to  Things  Fixed  to  the 
Soil. — The  elementary  rule  of  the  common  law  is  quicquid 
plantatur  solo,  solo  cedit.  This  is  a  rule  of  great  antiquity,  that 
whatever  is  affixed  to  the  soil  becomes,  in  contemplation  of 
law,  a  part  of  it,  and  is,  consequently,  subjected  to  the  same 
rights  of  property  as  the  soil  itself.*  But  it  must  be  borne  in 
mind  that  many  exceptions  have  become  engrafted  upon  this 
rule.     Kent  says  the  law  of  fixtures  is  in  derogation  of  the 

'Sword  V.  Low,  122  111.  487  ;  Ford  v.  Cobb,  20  N.  Y.  344  ;  Eaves  v.  Estes,  10 
Kan.  314;  Richardson  v.  Copeland,  6  Gray  (Mass.),  536;  Haven  v.  Emery,  33 
N.  H.  66. 

'TeaflFv.  Hewitt,  1  Ohio  St.  511,  530 ;  Thomas  v.  Davis,  76  Mo.  72  ;  43  Am. 
Rep.  756;  McRea  v.  Bank,  66  N.  Y.  489,  496 ;  Williamson  v.  Railroad  Co.,  29 
N.  J.  Eq.  311,  329 ;  Tillman  v.  De  I^cy,  80  Ala.  103  ;  Capen  v.  Peckham,  35 
Conn.  88 ;  Rogers  v.  Prattville  Manuf.  Co.,  81  Ala.  483. 

^Congregational  Society  v.  Fleming,  11  Iowa,  533. 
^    *  Broom's  Maxims,  268. 


422  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

original  rule  of  common  law,  which  subjected  everything 
affixed  to  the  freehold  to  the  law  governing  the  freehold ;  and 
it  has  grown  into  a  system  of  judicial  legislation,  so  as  almost 
to  render  the  right  of  removal  of  fixtures  a  general  rule,  instead 
of  being  an  exception.^ 

As  between  the  tenant  of  a  particular  estate  and  those  in 
reversion  or  remainder,  it  is  held  by  a  well-settled  line  of 
authorities  that  the  intention  of  the  tenant  making  the  an- 
nexation is  one  of  the  three  tests  already  named  in  ascertain- 
ing the  nature  of  the  property.  It  is  equally  well  settled  that, 
in  instances  aside  from  those,  the  mental  attitude  of  the  per- 
son making  the  annexation  cannot  modify  the  legal  effect 
resulting  from  an  incorporation  into  the  realty  of  that  which 
was  personal  property.^  Thus,  a  structure  erected  on  the  land 
of  another  will  become  the  property  of  the  owner  of  the  land, 
although  built  with  a  view  of  enforcing  an  adverse  right  in 
the  land.^ 

In  Illinois  chattels  reals  are  embraced  in  real  estate,^ 
and  the  statute^  provides  that  instruments  in  writing  relat- 
ing to  real  estate,  when  filed  for  record,  shall  be  notice 
to  subsequent  purchasers ;  so  when  a  grain  elevator,  perma- 
nent in  its  structure,  is  built  on  the  right  of  way  of  a  rail- 
road by  a  lessee,  under  a  lease  providing  that  the  lessor  might 
terminate  the  lease  on  sixty  days'  notice,  and  that  the  lessee 
might  remove  buildings  erected  thereon  by  him  at  any  time 
before  the  expiration  of  the  lease,  a  mortgagee  need  not  take 
possession  after  two  years  from  the  date  of  the  mortgage  as 
required  in  case  of  a  chattel  mortgage "  to  retain  priority  of  lien/ 

§  397.  Mutual  Agreement — Express  or  Implied. — An 
intent  existing  alone  in  the  mind  of  him  who  makes  the  an- 

'  2  Kent's  Com.  343. 
'Campbell  v.  Roddy,  44  N.  J.  Eq.  244. 

^Sudbury  v.  Jones,  8   Cush.  (Mass.)  184;  Lee  v.   Risdon,  7  Taunt.  188; 
Wilde  V.  Waters,  16  C.  B.  637  ;  Overton  v.  Williston,  31  Pa.  St.  155. 
*Rev.  Stat.,  ch.  30,  sect.  38. 
*  Rev.  Stat.,  ch.  30,  sect.  31. 
«Rev.  Stat,  ch.  95,  sect.  4. 
'  Knapp  V.  Jones  (111.),  28  N.  E.  Rep.  820. 


MORTGAGABLE    INTERESTS.  423 

nexation,  however,  differs  from  another  feature,  which  consists 
in  the  existence  of  a  mutual  agreement,  express  or  implied, 
between  the  owner  of  the  real  estate  and  the  chattel,  in  respect 
to  the  manner  in  which  chattels  shall  be  regarded  after  annex- 
ation. Such  an  agreement  seems  to  be  entirely  efficacious  in 
preserving  the  personal  character  of  the  annexed  chattels  as 
between  the  parties  thereto.^ 

However,  when  this  rule  is  applied  to  the  rights  of  third 
persons,  it  becomes  more  difficult.  It  must  then  be  settled 
how  far  such  agreement  can  affect  purchasers,  mortgagees,  or 
judgment  creditors  of  the  owner  of  the  real  estate  on  the  one 
hand,  or  of  the  chattels  on  the  other  hand.  Some  of  the 
courts  hold  that  such  an  agreement  is  valid,  not  only  against  a 
prior  mortgagee  of  the  land,  but  also  against  a  subsequent 
mortgagee  or  purchaser  without  notice.  Neither  a  precedent 
nor  a  subsequent  mortgagee  of  real  estate  can  claim  property 
which  has  been  annexed  to  the  mortgaged  premises  under  an 
agreement  between  the  owner  of  the  fee  and  the  owner  of  the 
chattels,  to  the  effect  that  the  latter  shall  remain  personalty." 
And  it  was  held  in  New  York  that  a  duly  filed  chattel  mort- 
gage upon  iron  salt-kettles  and  an  iron  arch-piece  preserved 
their  character  as  chattels  even  against  the  subsequent  pur- 
chaser of  the  land,  to  which  land  the  owner  had  annexed  the 
chattels.^ 

But  in  Massachusetts  a  different  view  prevails.  A  chattel 
mortgage  was  given  on  machinery  which  the  mortgagee  knew 
was  to  be  annexed  to  real  property,  and  after  it  had  been  an- 
nexed to  real  property,  a  mortgage  was  given  on  the  realty, 
and  it  was  held  that  the  real  estate  mortgagee  could  hold  the 
machinery  as  a  part  thereof.*  And  so  a  question  arose  in  re- 
spect to  the  effect  of  such  an  agreement  between  the  owner  of 
iron  rails  and  a  railroad  company  which  purchased  them. 
The  question  was  whether  the  agreement  would  preserve  the 

1  Pope  r.  Skinkle,  45  N.  J.  L.  39 ;  Harlan  v.  Harlan,  20  Pa.  St.  303 ;  Ewell 
on  Fix.  66. 
'Tifili'.  Horton,  53  N.  Y.  377. 
'Fordv.  Cobb,  20  N.  Y.  344. 
*  Pierce  v.  Geoi^e,  108  Mass.  78. 


424  NATURE    AND    REQUISITES   OF   THE    CONTRACT. 

character  of  the  rails  as  chattels,  after  they  had  been  affixed 
to  the  road-bed,  as  against  a  previous  mortgagee  of  the  road  or 
a  subsequent  purchaser  without  notice.  It  was  held  that  the 
agreement  to  which  they  were  not  parties  could  atTect  neither 
purchaser  nor  prior  mortgagee,  and,  as  to  them,  the  rails  be- 
came real  estate.^  So  in  Iowa  it  was  held  that  such  an  agree- 
ment would  not  affect  the  rights  of  a  purchaser  of  real  estate 
at  a  judicial  sale.^ 

§  398.  How  Far  Can  the  Lien  of  a  Chattel  Mortgage 
BE  Preserved  After  Annexation  of  Fixtures. — In  New 
York  the  cases  on  this  question  seem  to  be  in  confusion.  The 
doctrine  seems  to  be  that  the  existence  of  a  chattel  mortgage 
upon  the  personalty  at  the  time  of  the  annexation  by  the 
mortgagor  does  not  amount  to  an  agreement.^  This  is  ap' 
parently  recognized  in  another  case  *  and  left  in  doubt  in  a 
later  decision.^  When  there  is  no  mutual  agreement,  the  fact 
that  the  chattel  has  been  mortgaged  before  annexation, 
seems  to  control  some  decisions  that  such  mortgage  carries  the 
fixtures  as  against  a  mortgage  of  the  realty  already  existing  at 
the  time  of  annexation.® 

Judge  Reed  very  ably  presents  this  question,  and  says  :  "  As 
between  lienor  who  consents  to  have  the  subject-matter  of  his 
lien  transmitted  into  a  shape  by  which  subsequent  purchasers 
and  mortgagees  are  liable  to  be  subjected  to  deceptive  dealings, 
there  seems  to  be  no  equitable  ground  upon  which  the  lien 
should  be  recognized  against  an  innocent  subsequent  purchaser 
or  purchaser  for  value.  The  entire  spirit  of  our  registry  acts 
is  opposed  to  the  notion  that,  in  such  a  junction  of  affairs,  the 
real  estate  purchaser  would  not  be  regarded  as  a  bona  fide  pur- 
chaser against  whom  the  chattel  mortgage  would  be  void.    But, 

1  Hunt  V.  Bay  State  Iron  Co.,  97  Ma.s8.  279. 

'  Stillman  v.  Flenniken,  58  Iowa,  450. 

«  Voorhees  v.  McGinnis,  48  N.  Y.  278. 

*Tim  V.  Horton,  53  N.  Y.  377. 

» Sisson  V.  Hibbard,  75  N.  Y.  542. 

«Tibbetts  v.  Moore,  23  Cal.  208;  United  States  v.  Railroad  Co.,  12  Wall. 
(U.  S.)  362  ;  Nat.  Bank  v.  Elmore,  52  Iowa,  541 ;  Henry  v.  Von  Brandenstein, 
12  Daly  (N.  Y.),  480;  Hart  v.  Sheldon,  34  Hun  (N.  Y.),  38. 


MORTGAGABLE    INTERESTS.  425 

as  already  observed,  the  real  estate  mortgagees,  in  the  present 
case,  held  their  lien  before  the  attachment  to  the  realty  of  the 
chattels  mortgaged.  It  is  true  that  by  force  of  the  annexation 
they  would  become  subjected  to  the  lien  of  the  real  estate 
mortgage  absolutely,  unless  the  lien  of  the  chattel  mortgage 
intervenes.  Any  property  belonging  to  the  mortgagor,  which 
he  choose  to  annex  to  the  mortgaged  premises,  becomes 
realty.  But  it  is  difficult  to  perceive  any  equitable  ground 
upon  which  the  property  of  another,  which  the  mortgagor  an- 
nexes to  the  mortgaged  premises,  should  inure  to  the  benefit 
of  a  prior  mortgagee  of  the  realty.  The  real  estate  mortgagee 
had  no  assurance  at  the  time  he  took  his  mortgage  that  there 
would  be  any  accession  to  the  mortgaged  property.  He  may 
have  believed  that  there  would  be  such  an  accession,  but  he 
obtained  no  right,  by  the  terms  of  his  mortgage,  to  a  lien  upon 
anything  but  the  property  as  it  was  conditioned  at  the  time 
of  its  execution.  He  could  not  compel  the  mortgagor  to  add 
anything  to  it.  So  long  therefore  as  he  is  secured  the  full 
amount  of  the  indemnity  which  he  took,  he  has  no  ground  for 
complaint.  There  is  therefore  no  inequity  toward  the  prior 
real  estate  mortgagee,  and  there  is  equity  toward  the  mortgagee 
of  the  chattels,  in  protecting  the  lien  of  the  latter  to  its  full 
extent  so  far  as  it  will  not  diminish  the  original  security  of  the 
former.  As  already  remarked,  the  real  estate  mortgagee  is  en- 
titled to  any  annexation  made  by  his  mortgagor  of  his  own 
property,  but  is  not  entitled  to  the  property  of  others." 

Therefore,  when  a  vendor  of  an  engine,  boiler,  and  machinery, 
knowing  that  they  were  to  be  annexed  to  real  estate,  takes  a 
chattel  mortgage  upon  them  for  a  part  of  the  price,  but  fails 
to  register,  and  the  vendee  or  mortgagor  of  the  chattels  after- 
ward annexes  them  to  real  estate  upon  which  he  had  already 
given  a  mortgage,  the  hen  of  the  chattel  mortgagee  must  be 
protected,  so  far  as  it  will  not  diminish  the  security  which  the 
real  estate  mortgagee  would  have  had  if  the  annexation  had 
not  been  made.^ 

That  is,  an  existing  mortgage  of  realty  may  have  priority  of 
V    '  Campbell  v.  Roddy,  44  N.  J.  Eq.  244,  251. 


426  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

a  chattel  mortgage  of  machinery  subsequently  annexed,  as  a 
permanent  accession,  although  the  chattel  mortgage  be  made 
at  the  time  the  articles  were  attached/ 

The  current  of  authority  is  that  the  character  of  the  prop- 
erty, as  real  or  personal,  may  be  fixed  by  contract  with  the 
owner  of  the  real  estate  when  the  article  is  put  into  position ; 
but  such  contract  cannot  affect  the  rights  of  a  mortgagee,  or 
of  an  innocent  purchaser,  without  notice  of  it.^ 

§  399.  The  Real  Estate  Mortgage  Covers  the  Property 
IN  the  Condition  in  which  it  Comes  to  the  Mortgagor's 
Hands. — The  general  doctrine  is  that  the  mortgage  attaches 
itself  to  the  property  in  the  condition  in  which  it  comes  to  the 
mortgagor's  hands.  It  only  attaches  to  such  interest  as  the 
mortgagor  acquires ;  thus,  if  he  purchase  property  and  give  a 
mortgage  back  for  the  purchase-money,  the  deed  which  he  re- 
ceives and  the  mortgage  which  he  gives  are  regarded  as  one 
transaction,  and  a  general  lien  impending  over  him,  whether  in 
the  shape  of  a  general  mortgage,  or  judgment,  or  recognizance, 
cannot  displace  such  mortgage  for  purchase-money.^  But  there 
may  be  exceptions  to  this  rule  where  the  articles  upon  which 
the  lien  existed  become  incorporated  into  the  realty.  Thus, 
where  the  articles  are  of  such  a  character  that  their  detachment 
would  involve  the  dismantling  of  an  important  feature  of  the 
realty,  their  annexation  might  well  be  regarded  as  an  aban- 
donment of  the  lien  by  him  who  impliedly  assented  to  the  an- 
nexation. Shingles,  lumber,  or  brick  to  be  used  in  a  building, 
railroad  iron  or  ties  to  be  used  in  the  construction  of  a  rail- 
road are  apparent  examples  of  such  a  class  of  chattels.  The 
lien  on  the  chattels  must  give  way  to  the  previous  lien  upon 
the  real  property  in  this  degree  as  specified.     If  the  detach- 

'  Brass  Foundry  v.  Gallentine,  99  Ind.  525. 
>.  2  Hoi^ewell  Mills  v.  Tanton  Savings  Bank,  150  Mass.  519 ;  Case  Manuf.  Co.  v. 
Garven,  45  Ohio  St.  289 ;  Southbridge  Savings  Bank  v.  Exeter  Machine 
Works,  127  Mass.  542,  545 ;  Brennan  v.  Whitaker,  15  Ohio  St.  446 ;  Hunt  v. 
Bay  State  Iron  Co.,  97  Mass.  279 ;  Thompson  v.  Vinton,  121  Mass.  139.  Com- 
pare Ford  V.  Cobb,  20  N.  Y.  344  ;  Tibbetts  v.  Home,  65  N.  H.  242. 

*  United  States  v.  New  Orleans  Railroad  Co.,  12  Wall.  (U.  S.)  362,  opinion  by 
Justice  Bradley ;  Fosdick  v.  Schall,  99  U.  S.  235. 


MORTGAGABLE    INTERESTS.  427 

ment  of  the  articles  so  annexed  will  occasion  no  damage  to  the 
realty,  then  the  lien  upon  them  can  be  enforced  in  the  same 
degree  as  if  they  had  remained  chattels.  If  the  detachment 
would  result  in  the  diminution  in  the  value  of  the  freehold,  as 
it  would  have  stood  had  the  attachment  not  been  made,  then 
the  better  rule  seems  to  be  that  the  depreciation  must  first  be 
made  good  to  the  real  estate  mortgagee  before  the  right  of  the 
chattel  mortgagee  can  be  recognized.^ 

If  the  mortgage  enumerates  some  fixtures  and  not  others, 
which  afterward  come  into  dispute  as  to  right  of  the  two  mort- 
gagees, it  is  to  be  supposed  that  those  omitted  do  not  pass  by 
the  mortgage  deed.^ 

And  where  machinery  for  a  saw-mill  was  sold  on  condition 
that  it  should  remain  the  property  of  the  vendor  until  paid 
for,  and  part  is  incorporated  into  the  realty,  which  is  mort- 
gaged, the  part  incorporated  passed  under  the  mortgage,  but 
that  yet  lying  in  the  yard  did  not  come  under  the  mortgage 
lien.^ 

So  it  must  be  understood  that  the  intention  has,  within  cer- 
tain limits,  a  controlling  effect  in  determining  whether  the  fix- 
ture has  become  permanent;  as  much  so  as  the  way  and 
manner  of  its  annexation.* 

§  400.  When  Designed  to  be  Permanent. — ^Whatever  is 
placed  in  a  building  subject  to  a  mortgage,  to  carry  out  the 
purposes  for  which  it  was  erected,  and  permanently  to  increase 
its  value  for  occupation  or  use,  although  it  may  bo  removed 
without  injury,  as  between  mortgagor  and  mortgagee,  a  mort- 

1  Campbell  v.  Roddy,  44  N.  J.  Eq.  244,  253. 

*Trappes  v.  Harter,  2Cromp.  &  M.  153,  177. 

^  Davenport  v.  Shants,  43  Vt.  546.     And  see  Miller  v.  Wilson,  71  Iowa,  610. 

*Foote  ('.  Gooch,  96  N.  Car.  265 ;  Smith  Paper  Co.  v.  Servin,  1.30  Mass.  511 ; 
Quinby  v.  Manhattan  Cloth  &  Paper  Co.,  24  N.  J.  Eq.  260 ;  Rogers  v.  Pratt- 
ville  Manufg.  Co.,  81  Ala.  483 ;  McRea  v.  Bank,  66  N.  Y.  489 ;  Ottumway  v. 
Woolen  Mill  Co.,  44  Iowa,  57  ;  ]\Ian  waring  v.  Jenison,  61  Mich.  117  ;  Harmony 
Build.  Assn.  v.  Berger,  99  Pa.  St.  320 ;  Arnold  v.  Crowder,  81  111.  56 ;  25  Am. 
Rep.  260 ;  Kelly  v.  Austin,  46  111.  156 ;  Jones  v.  Ramsey,  3  111.  App.  303 ; 
Taylor  v.  Collins,  51  Wis.  123;  Hart  v.  Sheldon,  34  Hun  (N.  Y.),  38;  Hill  v. 
Went  worth,  28  Vt.  428 ;  Tilhnan  r.  De  Lacy,  80  Ala.  103  ;  Morris's  Appeal,  88 
^  Pa.  St.  368;  Sullivan  v.  Toole,  26  Hun  (N.  Y.),  203. 


428  NATURE   AND    REQUISITES    OF    THE   CONTRACT. 

gagee  cannot  remove  it  or  otherwise  dispose  of  it  wliile  the 
mortgage  is  in  force.' 

Being  thus  adapted  to  the  building  for  use,  clearly  indicates 
that  it  was  designed  to  be  permanent.^ 

In  regard  to  a  hydraulic  press  placed  in  a  factory,  but  not 
essential  to  the  work,  it  was  decided  that  if  an  intention  was 
manifest  that  the  chattel  should  remain  fixed  to  the  freehold, 
then  it  would  be  so  held,  but  without  such  an  appearing  it 
would  not  be  considered  as  a  part  of  the  realty.^ 

§  401.  Buildings  Erected  on  Mortgaged  Realty. — Un- 
less there  be  a  contract  to  the  contrary  all  buildings  erected 
by  the  mortgagor  are  parts  of  the  realty  and  therefore  subject 
to  an  existing  mortgage.*  And  when  the  building  is  a  chattel 
by  agreement,  fixtures  include  everything  which  would  come 
under  that  definition  had  the  building  been  real  estate. 

Thus,  a  chattel  mortgage  covered  a  certain  elevator,  "  with 
all  the  machinery  therein,  and  all  the  fixtures  thereto  belong- 
ing." This  elevator  was  on  leased  land  and  was  a  chattel, 
and  a  track  scale  was  put  in  by  permit  of  the  lessor,  by  the 
lessee.  The  connection  of  the  scale  with  the  elevator  by 
means  of  a  hopper  was  open,  visible,  and  could  easily  be  kiiown 
by  all.  It  was  held  that  the  elevator  was  a  chattel,  and  the 
term  "  fixture  "  was  used  in  law  to  signify  something  attached 
to  real  estate,  yet,  as  the  term  was  used  in  the  mortgage,  it  in- 
cluded everything  which  would  have  been  a  fixture  to  the 

^  Southbridge  Savings  Bank  v.  Mason,  147  ]Mass.  500 ;  Smith  Paper  Co.  v. 
Servin,  130  Mass.  511. 

*  Equitable  Trust  Co.  v.  Christ,  2  Flipp.  C.  C.  599  ;  Milliken  v.  Armstrong, 
17  Ind.  456  ;  Keve  v.  Paxton,  26  N.  J.  Eq.  107  ;  Hoskin  v.  Woodward,  45  Pa. 
St.  42  ;  Brennan  v.  Whitaker,  15  Ohio  St.  446  ;  Ex  parte  Montgomery,  etc.,  4 
Irish  Ch.  520 ;  Tillman  v.  De  Lacy,  80  Ala.  103  ;  Quinby  v.  Manhattan  Cloth 
&  Paper  Co.,  24  N.  J.  Eq.  260. 

» Parsons  v.  Hind,  14  W.  R.  860;  Reg.  v.  Lee,  L.  R.  1  Q.B.  241.  See,  also, 
Phelan  v.  Boyd  (Tex.),  14  S.  W.  Rep.  290 ;  Padgett  v.  Cleveland,  33  S.  Car.  339. 

■*Dorr  V.  Dudderar,  88  111.  107;  Baird  v.  Jackson,  98  111.  78;  Wood  v. 
Whelen,  93  111.  153 ;  Matzon  v.  Griffin,  78  111.  477  ;  Burnside  v.  Twitchell,  43 
N.  H.  390 ;  Guernsey  v.  Wilson,  134  Mass.  482 ;  New  Orleans  Nat.  Bank  v. 
Raymond,  29  La.  Ann.  355 ;  Frankland  v.  Moulton,  5  Wis.  1 ;  Sweetzer  v. 
Jones,  35  Vt.  317.    See,  also,  Horn  v.  Indianapolis  Nat.  Bank,  125  Ind.  381. 


MORTGAGABLE   INTERESTS.  429 

elevator  had  it  been  real  estate  ;  that  the  track  scale,  so  located 
and  adjusted  for  use  with  the  elevator,  was  a  fixture  within 
the  meaning  of  the  mortgage,  and  must  pass  thereunder  to  the 
mortgagee.' 

If  a  building  is  erected  for  temporary  use,  either  by  agree- 
ment, or  the  manner  of  attachment  to  the  real  estate  indicates 
this,  it  does  not  become  subject  to  the  mortgage.^  If,  however, 
the  building  is  erected  for  permanent  use,  as  the  erection  of  it 
for  an  office  by  the  side  of  a  mill,  then  it  becomes  incorjDorated 
with  real  estate  and  is  a  part  of  it.^ 

Where  the  mortgage  is  regarded  as  a  conveyance  of  the 
legal  title  to  the  j)roperty,  giving  the  mortgagee  the  right  of 
possession,  then  his  legal  ownership  and  actual  or  construc- 
tive possession  give  him  the  right  to  follow  and  recover  the 
property  if  severed  from  the  realty.  The  principle  applied  is, 
that  the  property  severed  from  the  realty  so  as  to  become  a 
chattel  belongs  to  the  legal  owner  of  the  land.  But  when  the 
mortgage  is  regarded  merely  as  a  lien  for  security  and  the 
mortgagor  has  the  right  of  possession  until  ejectment,  or  fore- 
closure, then  the  mortgagee  has  merely  the  right  to  restrain 
the  removal  of  the  property  by  injunction,  to  protect  his  lien ; 
or,  after  the  removal,  a  right  to  recover  damages  for  the 
wrongful  diminution  of  his  security. 

When  the  mortgagor  moves  a  dwelling  on  an  adjoining  lot 
belonging  to  his  wife,  without  the  knowledge  of  the  mortgagee, 
but  with  the  knowledge  of  the  wife,  the  lien  will  follow  the 
house.^  But  this  case  appeared  to  turn  on  the  fact  that  the 
wife  colluded  with  the  husband. 

But  when  the  buildings  are  incorporated  with  other  realty, 
the  mortgaged  lien  is  lost.  Thus,  a  petition  was  filed  in 
equity  to  subject  to  the  lien  created  by  the  mortgage  a  number 
of  cottage  buildings  which  had  been  removed  to  other  land 

'  McGorrisk  v.  Dwyer,  78  Iowa,  279.  See,  also,  Congregational  Society  v. 
Fleming,  11  Iowa,  533. 

^  Kelly  V.  Austin,  46  111.  156. 

'Wight  V.  Gray,  73  Me.  297;  State  Savings  Bank  v.  Kercheval,  65  Mo. 
682.    See,  also,  Powers  t-.  Dennison,  30  Vt.  752. 
'  *  Hamlin  v.  Parsons,  12  Minn.  108. 


430  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

and  affixed,  and  it  was  held  that  when  the  buildings  were 
severed  from  the  mortgaged  premises,  and  had  become  part 
of  another  freehold,  the  lien  upon  them  was  gone.^ 

And  so  when  the  materials  of  a  dwelling-house  on  mort- 
gaged land  were  used  in  the  construction  of  a  house  upon 
another  lot  of  land,  the  right  of  the  property  vested  in  the 
grantee  of  that  land.^  So  where  mill-stones  were  severed  from 
the  mill  and  sold  by  the  mortgagor,  they  pass  to  the  pur- 
chaser.^ Where  a  house  subjected  to  a  mortgage  was  floated 
off  by  a  flood  into  the  street,  and  was  bought  while  in  that 
position,  the  severance  affected  the  right  of  the  lien,  and  the 
purchaser  held  the  property  divested  of  the  lien.* 

So  if  a  mortgagor  in  possession  removes  a  building  to  an- 
other lot  of  land,  and  sells  the  lot  to  a  bona  fide  purchaser,  the 
lien  is  lost  and  the  remedy  of  the  mortgagee  is  at  law,  for 
the  removal  of  the  building,* 

There  is  no  difficulty  in  applying  this  rule  while  fixtures 
remain  attached  to  the  realty,  and  so  long  as  the  mortgagor 
continues  in  possession  ;  or  when  the  property  severed  passes 
into  the  possession  of  a  person  in  collusion  with  him  to  defeat 
the  lien  and  security  of  the  mortgagee,  whether  upon  or  off 
the  mortgaged  premises,  it  would  seem  that  the  right  of  the 
mortgagee  would  be  unaffected.  But  when  the  property  is 
severed  and  sold  by  a  mortgagor  in  possession,  having  the 
legal  title,  to  an  innocent  purchaser,  the  lien  in  equity  is  gone, 
and  the  remedy  of  the  mortgagee  is  by  an  action  at  law 
against  the  mortgagor  and  those  who  act  with  him  to  impair 
or  defeat  the  security  of  the  mortgage. 

§402.  Annexation  of  Fixtures  Before  Execution  of 
THE  Real  Estate  Mortgage. — Chattels  annexed  to  the  realty 

^  Harris  v.  Bannon,  78  Ky.  568. 

*  Peirce  v.  Goddard,  22  Pick.  (Mass.)  559. 

'  Cooper  V.  Davis,  15  Conn.  556. 

*Buckout  V.  Swift,  27  Cal.  433. 

n^erner  v.  Betz,  46  N.  J.  Eq.  256.  See,  also,  Clark  v.  Reyburn,  1  Kan.  281 ; 
Kimball  v.  Darling,  32  Wis.  684 ;  Hutchins  «.  King,  1  Wall.  (U.  S.)  53  ;  Gore 
V.  Jenness,  19  Me.  53 ;  Gooding  v.  Shea,  103  Mass.  360  ;  Wilson  v.  Maltby,  59 
N.  Y.  126.    Compare  Hoskin  v.  Woodward,  45  Pa.  St.  42. 


MORTGAGABLE    INTERESTS.  431 

prior  to  the  execution  of  the  mortgage  on  the  real  estate,  and 
which  are  essential  to  its  value  and  beneficial  enjoyment,  are 
passed  by  the  deed,  and  will  be  covered  by  the  vendor's  and 
mortgagee's  lien,  although  not  mentioned  in  the  deed  or  mort- 
gage. Judge  Hines  says  it  may  be  consistent  that  the  rule  is 
the  same  between  the  vendor  and  vendee  and  mortgagor  and 
mortgagee  in  those  States  where  a  mortgage  passes  the  legal 
title  and  in  reference  to  articles  attached  to  the  realty  at  the 
time  of  the  execution  of  the  deed  or  mortgage ;  but  it  does  not 
follow  that  the  rights  of  the  mortgagee  are,  in  reference  to  sub- 
sequent accessions  made  by  the  mortgagor,  the  same  in  those 
States  where  the  legal  title  does  not  pass  and  the  mortgage  is 
a  simple  security  for  the  debt.^ 

So  machinery  in  a  canning  business,  part  of  which  is  at- 
tached to  the  soil,  and  other  parts  are  necessary  to  the  use  of 
the  part  attached,  is  a  fixture,  and  comes  under  the  lien  of  the 
mortgage.  If  the  principal  part  becomes  fixed  by  actual  an- 
nexation to  the  soil,  such  part  of  it  as  may  not  be  so  physically 
annexed,  but  which,  if  removed,  would  leave  the  principal 
thing  unfit  for  use,  and  would  not  of  itself  and  standing  alone 
be  well  adapted  for  general  use,  is  constructively  annexed.^ 

And  as  a  general  rule  a  mortgage  of  land  passes  all  the  fix- 
tures upon  the  land  mortgaged  without  any  special  mention  of 
them.^ 

Platform  scales  fastened  to  sills  laid  upon  a  brick  wall  set  in 
the  ground  are  fixtures.* 

The  stones,  tackling,  and  implements  of  a  mill  pass  under 
a  real  estate  mortgage.^ 

So  the  wires  of  an  electric  light  company  form  an  integral 
part  of  the  machinery,  and  pass  as  fixtures  to  the  mortgagee 

'Clore  V.  Lambert,  78  Ky.  224,  228;  Woolley  v.  Holt,  14  Bush  (Ky.),  788. 
See,  also.  Union  Bank  v.  Emerson,  15  Mass.  159 ;  Hamilton  v.  Huntley,  78 
Ind.  521 ;  41  Am.  Rep.  593. 

» Dudley  v.  Hurst,  67  Md.  44. 

'  Burnside  v.  Twitchell,  43  N.  H.  390  ;  Morris's  Appeal,  88  Pa.  St.  368. 

*  Arnold  v.  Crowder,  81  111.  56  ;  25  Am.  Rep.  260 ;  Bliss  v.  Whitney,  9  Allen 
(Mass.),  114. 

^  Place  V.  Flagg,  4  Man.  &  R.  277  ;  Citizens'  Bank  r.  Knapp,  22  La.  Ann.  117 ; 
Theuerer  v.  Nautre,  23  La.  Ann.  749 ;  Bond  v.  Coke,  71  N.  Car.  97. 


432  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

when  the  whole  plant  is  mortgaged/  So  hop-poles  of  a  farm 
are  covered  by  a  mortgage  of  the  land.^ 

In  order  to  exempt  the  machinery  from  the  lien  of  the  mort- 
gage, when  it  can  be  removed  without  injury,  it  must  be  so 
agreed  in  the  instrument? 

So  a  kettle  in  a  fulling-mill  set  in  brickwork  and  used  for 
dyeing  cloth,  passes  by  a  mortgage  of  the  land  upon  which  the 
mill  is  situated.*  And  machinery  fixed  to  a  building  is 
covered  by  the  mortgage.^ 

§  403.  Annexation  of  Fixtures  After  Execution  of  the 
Real  Estate  Mortgage. — Chattels  attached  to  the  freehold  by 
the  vendee  or  mortgagor  subsequent  to  the  execution  of  the  deed 
or  mortgage,  and  not  mentioned  therein,  will  not  be  subject  to 
the  lien  of  the  vendor  or  mortgagee,  unless  they  are  so  attached 
that  they  cannot  be  removed  without  detriment  to  the  original 
contract  lien  of  the  vendor  or  mortgagee.^  If  the  article  is 
attached  for  temporary  use,  with  the  intention  of  removing  it, 
the  mortgagee  cannot  interfere  with  its  removal  by  the  mort- 
gagor.'^ But  if  annexed  for  permanent  use,  it  is  part  of  the 
realty,  and  comes  under  the  lien  of  the  mortgage.^  So  it  is 
generally  held  that  all  articles  annexed  for  temporary  use,  with 
the  intention  of  being  removed  by  the  mortgagor  cannot  be 
interfered  with  or  taken  by  the  mortgagee.  If  they  are  placed 
on  the  realty  for  a  permanent  improvement  of  the  freehold, 
they  come  under  the  mortgage  lien.^     Thus,  the  motive  power 

iFechet  v.  Drake  (Ariz.),  12  Pac.  Rep. 694. 

2  Sullivan  r'.  Toole,  26  Hun  (N.  Y.),  203. 

nVaterfall  v.  Peniptone,  6  El.  &  Bl.  876. 

*  Union  Bank  v.  Emerson,  15  Mass.  159.  Compare  Hunt  v.  Mullanphy,  1 
Mo.  508.  See,  also,  Gale  v.  Ward,  14  Mass.  352,  356 ;  Fullam  v.  Stearnes,.  30 
Vt.  443  ;  Frey  v.  Drahos,  6  Nebr.  1. 

^Helmes  v.  Gilroy,  20  Ore.  517.  See,  also,  Calumet  Iron  &  Steel  Co.  v. 
Lathrop,  36  111.  App.  249;  Johnson  v.  Moser  (Iowa),  47  N.  W.  Rep.  996; 
Hathaway  v.  Orient  Ins.  Co.,  58  Hun  (N.  Y.),  602. 

«Clore  V.  Lambert,  78  Ky.  224,  229. 

'  Morris's  Appeal,  88  Pa.  St.  368. 

« Wood  V.  Wlielen,  93  111.  153  ;  Wight  v.  Gray,  73  Me.  297 ;  Bond  r.  Coke, 
71  N.  Car.  97 ;  Hubbard  v.  Bagshaw,  4  Sim.  326. 

8  Crane  v.  Brigham,  3  Stock.  (N.  J.)  29;  Potter  r.  Cromwell,  40  N.  Y.  296, 


MORTGAGABLE    INTERESTS.  433 

of  a  cotton  mill,  consisting  of  a  boiler,  engine,  etc.,  passes  to 
the  mortgagee  when  placed  upon  land  after  a  mortgage  was 
executed/ 

Accordingly,  the  track  of  a  railroad  company,  laid  upon 
mortgaged  lands,  under  an  agreement  with  the  mortgagor,  with- 
out condemnation  under  the  right  of  eminent  domain,  is  sub- 
ject to  a  mortgage  lien,  and  may  be  sold  with  the  land  under 
foreclosure.^ 

But  the  mortgagee  of  a  stone  quarry  cannot  claim  as  fix- 
tures railroad  cars  used  in  transportation  of  the  stone  from 
the  quarry.  But  he  is  entitled  to  certain  appliances,  such  as 
a  steam  boiler,  engine,  derrick,  etc.,  which  had  been  actually 
fastened  to  the  ground  by  the  owner  of  the  fee,  and  were  used 
directly  in  the  carrying  and  shipping  of  stone,  the  purpose  for 
which  the  land  was  valuable.^ 

A  mortgage  of  a  gas  company  of  its  real  estate,  with  all  the 
appurtenances  thereto,  its  gas-mains,  sewer-pipes,  and  meters, 
covers  an  improvement  and  extension  of  its  work.* 

When  it  is  a  question  of  doubt  whether  the  chattel  is  a  fix- 
ture or  not,  it  generally  requires  stronger  evidence  of  intention 
that  such  article  annexed  to  the  realty  after  the  execution  of 
the  mortgage,  is  actually  a  fixture,  and  therefore  a  part  of  the 
realty,  than  is  required  when  the  annexation  was  before  the 
execution  of  the  mortgage  on  the  real  estate.^ 

If  the  mortgagor  improves  his  freehold,  by  erecting  new 
machinery  to  enlarge  his  operation,  and  such  improvements 
are  permanent,  he  cannot  remove  them.^ 

Or  if  he  mortgages  his  office  furniture  and  fixtures,  the  lien 

297 ;  M'Rea  v.  Nat.  Bank,  66  N.  Y.  489 ;  Ex  parte  Belcher,  4  Dea.  &  Chit. 
703  ;  Roberts  v.  Bank,  19  Pa.  St.  71. 

^  M'Kim  V.  Mason,  3  Md.  Ch.  186.  See,  also,  Winslow  v.  Merchants'  Ins. 
Co.,  4  Met.  (Mass.)  306. 

*  Price  V.  Weehawken  Ferry  Co.,  31  N,  J.  Eq.  31.  See,  also,  Meriam  v. 
BrowTi,  128  Mass.  391. 

^Speiden  v.  Parker,  46  N.  J.  Eq.  292. 
*Wood  V.  Whelen,  93  111.  153. 

*  Tillman  v.  De  Lacy,  80  Ala.  103 ;  Gardner  v.  Finley,  19  Barb.  (N.  Y.)  317 ; 
Clorc  r.  Lambert,  78  K.  224. 

V  «Foote  V.  Gooch,  96  N.  Car.  265 ;  Wood  v.  Whelen,  93  111.  153. 
VOL.  I.— 28 


434  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

extends  to  additions  made  thereto  from  time  to  time,  as  the 
necessity  of  the  work  requires.^ 

But  a  portable  saw  mill  is  not  annexed  when  placed  upon 
land,  it  being  moved  from  place  to  place,  on  the  mortgagor's 
land  and  on  other  premises.^ 

§  404.  Machinery  Loaned  or  Sold  to  Mortgagor  on 
Condition. — Where  machiner}^  is  sold  to  the  mortgagor  by  a 
third  party  on  condition  that  the  title  shall  not  pass  until 
paid  for,  and  the  mortgagor  incorporates  it  with  the  real  es- 
tate, it  does  not  thereby  become  realty.  Because  the  owner 
of  the  machinery  is  not  put  upon  inquiry  as  to  the  state  of  the 
mortgagor's  title  so  as  to  be  charged  with  constructive  notice 
of  the  mortgage,  and  he  does  not,  therefore,  assent  only  in  a 
qualified  way  that  the  machinery  shall  be  annexed.^  So  when 
boilers  are  put  into  a  mill,  after  the  execution  of  a  mortgage 
upon  the  mill,  under  an  agreement  with  the  mortgagor  that 
he  should  have  the  use  of  them  at  a  certain  rental,  and  that 
they  should  remain  the  property  of  the  third  person  who 
rented  them,  and  who  had  the  privilege  of  removing  them  at 
will,  they  do  not  become  a  part  of  the  realty,  and,  hence,  are 
not  subject  to  the  mortgage.* 

Accordingly  machinery  put  into  a  mill  under  like  circum- 
stances, merely  to  exhibit  it  to  the  public  by  a  third  person, 
is  not  incorporated  into  the  realty  and  is  not  subject  to  the 
mortgage  lien,'^  and  does  not  come  under  the  mortgage  lien, 
even  if  bought  by  one  of  the  real  estate  mortgagors,  if  he  does 
not  intend  to  use  it  in  connection  with  his  business  on  the 
premises  where  exhibited.® 

But,  in  Massachusetts,  it  is  held  that  a  boiler  placed  in  a 
machine  shop  by  a  third  person,  under  an  agreement  that  the 
owner  of  the  machine  shop  should  not  have  title  until  paid 

1  Wood  (;.  Whelen,  93  111.  153. 

2  Henkle  v.  Dillon,  15  Ore.  610 ;  Taylor  v.  Watkins,  62  Ind.  511. 

3  Cochran  v.  Flint,  57  N.  H.  514. 
*Hill  V.  Sewald,  53  Pa.  St.  271. 
^Stell  V.  Paschal,  41  Tex.  640. 
estell  V.  Paschal,  41  Tex.  640. 


MORTGAGABLE    INTERESTS.  435 

for,  does  not  bind  a  subsequent  mortgagee  without  notice,  when 
the  boiler  is  so  annexed  to  the  realty  as  to  become  a  part  of  it.^ 
But  if  the  mortgagee  agrees  that  a  machine  may  be  set  up  on 
the  mortgaged  premises,  under  a  contract  that  the  machine 
shall  remain  the  vendor's  until  paid  for,  or  if  the  mortgagee, 
being  in  possession,  treats  it  as  personalty,  and  consents  to  its 
removal,  a  subsequent  assignee  of  the  mortgage  cannot  in- 
sist that  under  it  he  became  the  owner  of  the  machine,  as 
property  annexed  to  the  realty  by  the  mortgagor,  because  the 
agreement  of  the  mortgagee  supersedes  the  general  law  as  to 
fixtures  between  mortgagor  and  mortgagee.^  So,  also,  this  rule 
applies  where  a  person  places  machinery  upon  land  owned  by 
another,  under  an  agreement  that  he  may  remove  it  at  any  time, 
and  afterward  takes  a  mortgage  of  the  land  from  the  owner  of  it. 
The  machinery  never  became  the  property  of  the  mortgagor,  or 
fixture  to  the  land,  and  is  not  covered  by  the  mortgage.^ 

§  405.  Things  Useful  and  Ornamental. — When  a  build- 
ing becomes  a  chattel,  the  same  rule  applies  as  to  fixtures  as 
if  it  was  realty.  Hence,  track  scales  go  with  an  elevator.*  As 
to  things  useful  and  ornamental,  the  right  of  the  tenant  to  re- 
move them  was  expressly  denied  in  some  of  the  old  cases.^  But 
at  the  present  time  it  is  well  settled  that  many  ornamental  and 
useful  fixtures  can  be  removed  by  the  tenant,  such  as  a  hanging 
and  looking-glass,  when  not  made  into  the  wall.^  When  mirrors 
are  not  set  in  the  walls,  and  put  up  after  the  house  was 
erected,  and  capable  of  detachment  without  interfering  with  or 
injuring  the  walls,  they  are  as  much  furniture  as  pictures  hung 
in  the  usual  way,  and  do  not  become  subject  to  a  real  estate 
mortgage  of  the  premises.^      But    if   the    mirror-frames    are 

^Southbridge  Savings  Bank  v.  Exeter  Machine  Works,  127  Ma?9.  542; 
Southbridge  Savings  Bank  v.  Stevens  Tool  Co.,  130  Mass.  547. 

^  Bartholomew  v.  Hamilton,  105  Mass.  239  ;  Frederick  v.  Devol,  15  Ind.  357^ 
See,  also,  Wight  v.  Gray,  73  Me.  297. 

'Taft  V.  Stetson,  117  Mass.  471. 

*McGorrisk  v.  Dwyer,  78  Iowa,  279. 

*Herlakarden's  Case,  4  Co.  64;  Poole's  Case,  1  Salk.  368. 

«Beck  V.  Rebow,  1  P.  Wm.  94. 

^McKeage  v.  Hanover  Fire  Ins.  Co.,  81  N.  Y.  38. 


436  Nature  and  requisites  op  the  contract. 

actually  annexed  to  the  realty  they  become  subject  to  such 
mortgage.  Thus,  the  mirror-frames  were  so  annexed  during 
process  of  building,  and  as  part  of  that  process,  and  formed 
part  of  the  structure.  Those  in  the  hall  filled  up  and  occupied 
a  gap  left  in  the  wainscoting,  and  all  such  mirrors  were  an  es- 
sential part  of  the  inner  surface.  Those  in  the  parlor  fitted 
into  a  gap  purposely  left  in  the  base-board.  All  were  fastened 
to  the  walls  with  hooks  and  screws.  Their  removal  would 
have  left  unfinished  walls  and  require  work  upon  the  house  to 
supply  and  repair  their  absence.  Such  mirrors  became  realty 
and  could  not  be  removed.^ 

Tapestry  may  be  removed,^  wainscot,^  and  ornamental  chim- 
ney-pieces ;  *  stoves  and  grates  annexed  to  the  chimney  with 
brickwork,  and  cupboards  supported  by  hold-fasts,  may  be 
removed  by  the  tenant;^  also  cooking-coppers,  mash-tubs, 
blinds,  and  the  like.^ 

The  mortgage  of  the  realty  covers  the  presses,  cupboards, 
glazed  doors,  movable  partitions,  grates,  ranges,  and  other  like 
fixtures ;  ^  also  the  windows  and  blinds,  and  door-keys.^  It  covers 
a  sun-dial  erected  on  a  permanent  foundation.^  And  a  furnace 
placed  in  a  house  so  that  it  cannot  be  removed  without  dis- 
turbing the  brickwork  of  the  house  adjoining  the  furnace,  and 
without  probably  causing  a  portion  of  the  ceiling  to  fall,  is  a 
fixture,  and  passes  with  the  realty.^** 

But  a  portable  iron  furnace  standing  in  the  cellar,  and 
capable  of  being  removed  without  injury,  is  not  a  fixture."    If 

1  Ward  V.  Kilpatrick,  85  N.  Y.  413,  419. 

"  Harvey  v.  Harvey,  1  Strange,  1141 ;  Lee  v.  Risdon,  7  Taunt.  188. 

^  Lawton  v.  Lawton,  3  Atk.  13. 

*  Leach  v.  Thomas,  7  Car.  &  P.  328 ;  Bishop  v.  Elliott,  11  Exch.  113. 

5  Rex  V.  St.  Dimstan,  4  Barn.  &  C.  686. 

^  Colegrave  v.  Dias  Santos,  2  Barn.  &  C.  76. 

'  Longstaff  v.  IMeagoe,  2  Ad.  &  El.  GO. 

^Liford'sCase,  11  Co.  50. 

»Snedeker  r.  Warring,  12  N.  Y.  170. 

i»Main  v.  Schwarzwaelder,  4  E.  D.  Smith  (N.  Y.),  273 ;  Stockwell  r.  Camp- 
bell, 39  Conn.  302.  And  see  Colegrave  v.  Dias  Santos,  2  Barn.  &  C.  76; 
Longstaff  v.  Meagoe,  2  Ad.  &  El.  60. 

"  Rah  way  Sav.  Inst.  v.  Irving  St.  Bap.  Church,  36  N.  J.  Eq.  61. 


MORTGAGABLE   INTERESTS.  437 

set  in  brick,  then  it  is  a  question  of  fact  whether  it  is  a  part  of 
the  realty/ 

Lamps,  chandeliers,  candlesticks,  candelabra,  sconces,  and 
the  various  contrivances  for  lighting  a  house  by  means  of 
candles,  oil,  or  other  fluids,  have  never  been  considered  as  irre- 
movable fixtures,  and  as  forming  part  of  the  freehold.  Nor 
does  it  appear  that  the  ordinary  apparatus  for  lighting  has 
ever  been  classed  as  fixtures.^  So  it  is  well  settled  that  gas- 
fixtures,  although  fastened  to  the  building,  are  not  fixtures, 
and  may  be  removed  ;  ^  and  so  of  a  gasometer  and  apparatus 
for  generating  gas."^  Gas-stoves  connected  with  gas-pipes  are 
not  fixtures.^ 

Water  and  gas-pipes  laid  in  the  ground  are  generally  con- 
sidered fixtures,  and  as  belonging  to  the  realty.^ 

Articles  of  furniture  movable  in  their  nature  are  not  fix- 
tures, although  attached  by  screws,  nails,  or  brackets.  Such 
things  are  hangings,  pier-glasses,  chimney-glasses,  book-cases, 
carpets,  blinds,  and  curtains.'' 

The  removal  of  gas-fixtures  is  analogous  to  the  removal  of 
a  stove  temporarily  annexed  to  the  floor  and  to  the  chimney, 
by  means  of  the  pipe,  and  which  would  not  pass  by  convey- 
ance as  part  of  the  realty.^ 

A  show-case  with  drawers  and  sash,  fastened  down  by  nails, 
is  not  a  part  of  the  realty.^  So  a  mortgage  of  a  plantation 
will  not  cover  the  wagons  and  implements  used  upon  it,  or  the 
stock  and  cattle,  unless  such  property  is  expressly  included.^" 

^  Allen  V.  Mooney,  130  Mass.  155  ;  Maguire  v.  Park,  140  Mass.  21. 

"  Vaughen  v.  Haldeman,  33  Pa.  St.  522. 

'Lawrence  v.  Kemp,  1  Duer  (N.  Y.),  363 ;  Shaw  v.  Lenke,  1  Daly  (N.  Y.), 
487  ;  Wall  v.  Hinds,  4  Gray  (Mass.),  256 ;  Montague  v.  Dent,  10  Rich.  (S.  Car.) 
135;  Jarechi  v.  Philliarmonic  Society,  79  Pa.  St.  403;  Rogers  v.  Crow,  40 
Mo.  91. 

*Hay8  V.  Doane,  11  N.  J.  Eq.  84. 

^Vaughen  v.  Haldeman,  33  Pa.  St.  522. 

"  Providence  Gas  Co.  v.  Thurber,  2  R.  1. 15 ;  Philbrick  v.  Ewing,  97  Mass.  133. 

'Walker  v.  Sherman,  20  AVend.  (N.  Y.)  645. 

*Freeland  v.  South  worth,  24  Wend.  (N.  Y.)  191. 

'Cross  V.  Marston,  17  Vt.  533. 

Wason  V.  Ball,  56  Ga.  268. 


438  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

It  may  be  stated,  however,  that  there  are  cases  where  the 
language  of  the  mortgage  may  be  such  that  upon  its  proper 
construction  the  mortgagor  will  be  allowed  to  remove  articles 
set  for  trade  or  other  purposes/ 

§  406.  Trade  Fixtures. — The  rule  applicable  to  trade  fix- 
tures is  very  liberal  to  the  tenant,  and  he  may  remove  whatever 
he  places  upon,  or  temporarily  annexes  to,  the  freehold.^  The 
tenant  may  remove  them  at  the  expiration  of  his  term,  when- 
ever the  removal  is  not  contrary  to  any  settled  custom,  and 
the  removal  will  not  materially  injure  the  realty.^  These  fix- 
tures, after  the  term,  if  not  removed,  become  a  gift  in  law  to 
him,  the  landlord,  in  the  reversion,  and  are  not  removable.* 

And  it  is  the  general  rule  that  articles  put  in  merely  as 
furniture,  are  removable,  though  more  or  less  substantially 
fastened  to  the  building.  So  machines  not  essential  to  the  en- 
joyment and  use  of  a  building,  occupied  as  a  manufactory,  nor 
especially  adapted  to  be  used  in  it,  are  removable,  though 
fastened  to  the  building,  when  it  is  clear  that  the  purpose  of 
fastening  them  is  to  steady  them  for  use,  and  not  to  make 
them  a  permanent  part  or  adjunct  to  the  building.^ 

Although  a  building  may  be  raised  on  a  brick  foundation 
and  have  a  brick  chimney,  yet  if  the  erection  on  such 
foundation  is  of  wood  and  the  building  is  used  for  the  sole 
purpose  of  trade,  the  tenant  may  remove  it  at  the  end  of 
the  term.^     But  if  the  building  is  of  brick,  with  brick  founda- 

^  Waterfall  v.  Penistone,  6  El.  &  Bl.  876.  See,  also,  Crippen  v.  Morrison,  13 
Mich.  23 ;  Burnside  r.  Twitchell,  43  N.  H.  390 ;  Crane  v.  Brigham,  3  Stockt. 
(N.  J.)  30 ;  Haley  v.  Hammersley,  3  De  Gex,  F.  &  J.  587  ;  9  W.  R.  562. 

^Climie  v.  Wood,  L.  R.  3  Exch.  257 ;  Capen  v.  Peckham,  35  Conn.  88. 

*  Coombes  v.  Beaumont,  5  Barn.  &  Ad.  38 ;  Holbrook  v.  Chamberlin,  116 
Mass.  155 ;  Hawtry  v.  Butlin,  L.  R.  8  Q.  B.  290 ;  21  W.  R.  633  ;  Day  i-.  Perkins, 
2  Sandf.  Ch.  (N.  Y.)  359 :  Maples  v.  Millon,  31  Conn.  598. 

*  Poole's  Case,  1  Salk.  368.  See,  also,  Weathersby  v.  Sleeper,  42  Miss.  732; 
Thomas  v.  Crout,  5  Bush.  (Ky.)  37 ;  Seeger  v.  Pettit,  77  Pa.  St.  437  ;  18  Am. 
Rep.  452.    Compare  Treadway  v.  Sharon,  7  Nev.  37. 

"Winsloww.  Merchants'  Ins.  Co.,  4  Met.  (Mass.)  306;  Hellawell  v.  East- 
wood, 6  Exch.  295 ;  The  Queen  v.  Lee,  L.  R.  1  Q.  B.  241 ;  McConnell  v.  Blood, 
123  Mass.  47. 

fiPenton  v.  Robart,  4  Esp.  33;  O'Donnell  v.  Hitchcock,  118  Mass.  401. 


MORTGAGABLE    INTERESTS.  439 

tion,  let  into  the  soil,  although  erected  for  the  sole  purpose  of 
trade,  it  cannot  be  removed  by  the  tenant,  while  machinery, 
engines,  vats,  and  utensils,  with  their  accessories,  may  be  re- 
moved/ So  furnaces,  cider  mills,  buildings  resting  on  blocks, 
salt-pans,  platform  scales,  factory  machines,  and  other  things 
of  like  nature,  used  in  trade,  are  removable  by  the  outgoing 
tenant.^ 

§  407.  The  Lessee's  Right  to  Remove  Fixtures. — The 
exercise  of  the  right  to  remove  trade  fixtures  is,  however,  re- 
stricted by  the  rule  that  the  principal  thing  shall  not  be  de- 
stroyed by  the  accessory.^  And  if  the  tenant  at  will  of  the 
mortgagor  add  fixtures  after  a  mortgage  is  executed  on  the 
realty,  his  right  to  remove  them  after  an  entry  by  the  mort- 
gagee for  the  purpose  of  foreclosure,  must  be  determined  by 
the  rule  which  prevails  as  between  mortgagor  and  mortgagee, 
and  not  by  that  which  prevails  as  between  landlord  and  tenant.* 

The  mortgagee  may,  if  he  chooses,  disavow  the  tenancy  and 
enter  and  evict  the  tenant  who  will  not  even  be  entitled  to 
emblements.^  A  mortgagor  cannot  make  a  lease  which  will 
be  valid  against  the  mortgagee  ;  and  if  the  mortgagee  enter, 
neither  the  mortgagor  nor  his  lessee  will  be  entitled  to  emble- 
ments.^ 

And  it  is  not  in  the  power  of  the  mortgagor,  by  any  agree- 
ment made  with  a  third  person,  after  the  execution  of  the 
mortgage,  to  give  to  such  person  the  right  to  hold  anything  to 
be  attached  to  the  freehold,  which  as  between  mortgagor  and 
mortgagee,  would  become  a  part  of  the  realty.  The  entry  of 
the  mortgagee  would  entitle  him  to  the  full  enjoyment  of  the 
premises  with  all  the  additions  and  improvements  made  by 

nVhitehead  v.  Bennett,  27  L.  J.  Ch.  474. 

"^  Holmes  V.  Tremper,  20  Johns.  (N.  Y.)  29  ;  Swift  v.  Thompson,  9  Conn.  63  ; 
Taffe  V.  Warnick,  3  Blackf.  (Ind.)  Ill ;  Hayes  v.  N.  Y.  Min.  Co.,  etc.,  2  Colo. 
273 ;  Hanrahan  v.  O'Reilly,  102  Mass.  201 ;  Graves  v.  Pierce,  53  Mo.  423 ; 
Lanphere  v.  Lowe,  3  Nebr.  131. 

'Lawton  v.  Lawton,  3  Atk.  13. 

*Lynde  v.  Rowe,  12  Allen  (Mass.),  100. 

5  Mayo  V.  Fletcher,  14  Pick.  (Mass.)  52.5 ;  1  Washb.  Real  Prop.  531, 
'  « Lane  i-.  King,  8  Wend.  (N.  Y.)  584. 


440  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

the  mortgagor,  or  by  his  authority ;  ^  but  a  tenant  under  a 
lease  may  redeem  to  protect  his  interest.^ 

Any  temporary  structure  may  be  removed  by  the  tenant 
during  his  term.^  Partnership  trade  fixtures  may  also  be  re- 
moved/ If  the  lessee  subsequently  purchases  the  reversion  of 
the  realty,  machinery  and  other  fixtures  placed  by  him  on  the 
land,  become  subject  to  an  existing  mortgage.®  But  his  fix- 
tures are  not  brought  within  a  subsequent  mortgage  of  the 
premises  by  his  neglect  to  remove  them  on  a  renewal  of  his 
lease  by  a  new  landlord ;  ^  and  if  he  remains  in  possession 
after  the  expiration  of  his  term,  and  performs  all  the  condi- 
tions of  the  lease,  it  amounts  to  a  renewal  of  the  lease  from 
year  to  year,  and  he  would  be  entitled  to  remove  the  fixtures 
during  the  year.^ 

The  law  requires  that  the  tenant  shall  remove  his  fixtures 
before  the  surrender  of  possession,  and  during  the  time  that  he 
has  a  right  to  regard  himself  as  ocupying  in  the  character  of 
tenant.^ 

In  Vermont  the  rule  is  that  fixtures  shall  in  all  cases  be 
substantially  attached  to  the  freehold,  and  it  is  not  sufficient 
to  make  personal  chattels  a  part  of  the  freehold  that  they  are 
attached  to  the  building  in  which  they  are  used  in  a  manner 
adapted  to  keep  them  steady,  or  that  they  are  essential  to  the 
occupation  of  the  building  for  the  business  carried  on  in  it ;  ^ 
and  while  a  steam  boiler  and  boilers  used  in  a  marble  mill 
are  fixtures  as  between  mortgagor  and  mortgagee,  yet  the  saw- 
frames,  though  fastened  to  the  building  by  bolts,  are  not  such 
fixtures.^" 

1  Clary  v.  Owen,  15  Gray  (Mass.),  522. 

'^  Bacon  v.  Bowdoin,  22  Pick.  (Mass.)  401  ;  Preston  v.  Briggs,  16  Vt.  124. 

3  Relly  V.  Austin,  46  111.  156  ;  Early  v.  Burtis,  40  N.  J.  Eq.  501. 

*  Robertson  v.  Corsett,  39  Mich.  777. 

6  Jones  V.  Detroit  Chair  Co.,  38  Mich.  92. 

'  Kerr  v.  Kingsbury,  39  Mich.  150. 

'  Davis  V.  Moss,  38  Pa.  St.  346,  353. 

8  Penton  v.  Robart,  2  East,  88 ;  Weeton  r.  Woodcock,  7  Mees.  &  Wels.  14. 

9  Hill  V.  Wentworth,  28  Vt.  429. 

'"  Sweetzer  v.  Jones,  35  Vt.  317.     See,  also,  Fullam  v.  Stearns,  30  Vt.  443  ; 
Bartlett  v.  Wood,  32  Vt.  372. 
Justice  Bennett  says  that  this  rule  may  be  regarded  as  an  exception  to  the 


A 


MORTGAGABLE    INTERESTS.  441 

§408.  Estoppel  of  Lessee. — A  lessee  who  has  erected  a 
building  upon  mortgaged  land,  under  an  agreement  with  the 
mortgagor,  by  leasing  the  building  to  the  mortgagee,  after  the 
latter  has  purchased  the  mortgage  land  upon  foreclosure  sale,  is 
estopped  from  claiming  title  in  himself.^  And  when  he  erects 
a  permanent  building  upon  the  mortgaged  realty,  he  cannot 
remove  it  without  the  consent  of  the  mortgagee.^ 

§  409.  Statutory  Provisions. — A  few  of  the  States  have 
enacted  laws  concerning  some  classes  of  fixtures.  Thus,  in 
Connecticut,  fixtures  of  a  manufacturing  or  mechanical  estab- 
lishment, or  of  a  printing  or  publishing  house,  the  furniture 
of  a  dwelling-house,  and  the  hay  in  the  barn,  may  be  mort- 
gaged with  the  realty,  when  these  articles  are  specifically  named 
as  included  in  the  mortgage ;  or  separate  from  the  realty  if 
particularly  described,  and  the  deed  be  executed,  acknowledged, 
and  recorded  in  all  respects  as  a  mortgage  of  land.^ 

So  in  Vermont,  machinery  attached  to  or  used  in  any  shop, 
mill,  printing  office,  or  factory  may  be  mortgaged,  the  deed  to 
be  executed,  acknowledged,  and  recorded  as  deeds  of  real 
estate,  and  such  mortgages  may  be  assigned,  discharged,  or 
foreclosed  like  mortgages  of  real  estate.* 

And  in  Rhode  Island  it  is  provided  that  the  water-wheels, 
steam-engines,  boilers,  main  belts,  which  first  give  motion  to 
the  shafting,  all  shafting,  whether  upright  or  horizontal,  and 
hangers  for  the  same,  except  such  as  are  used  to  drive  a  special 
machine,  all  drums,  pulleys,  wheels,  gearing,  steam  pipes,  gas 
pipes  and  gas  fixtures,  water  pipes  and  fixtures,  kettles  and 
vats  set  and  used  in  any  mechanical  or  manufacturing  estab- 
lishment, shall  be  declared  to  be  real  estate,  whenever  the  same 
belong  to  the  owner  of  real  estate  to  which  they  are  attached. 

general  doctrine,  or  else  as  cases  where  the  things  were  mere  incidents  to 
the  freehold,  and  became  a  part  of  it,  and  pass  with  it  upon  a  principle 
different  from  that  of  their  being  fixtures  :  Hill  r.  Wentworth,  28  Vt.  429. 

1  Betts  V.  Wurth,  32  N.  J.  Eq,  82. 

*  Kelly  V.  Austin,  46  111.  156. 

'  Gen.  Stat.  1888,  sect.  .3016. 
'     *Rev.  Stat.  1880,  sect.  1980. 


442  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

All  other  machinery,  tools,  and  apparatus  of  every  description, 
used  and  employed  in  any  manufacturing  establishment  are 
declared  to  be  personal  estate,  and  as  such  shall  be  considered, 
in  assignments  of  dower,  in  attachments,  and  in  all  cases 
whatsoever,  except  in  the  assessment  and  payment  of  taxes/ 

Article  3. 
Fixtures  in  Manufactories  and  Mills. 

I  410.  The  Rule  Applicable.  I  414.  Illustrations  Under  the  Mo- 
§  411.  The    Machinery  that  Supplies  tive  Power  Rule. 

the  Motive  Power.  I  415.  Illustrations  Embracing  Sepa- 
§  412.  Question  of  Intention.  rate  Articles, 

g  413.  No  Single  Criterion  Will  Apply  ^  416.  Bankrupts. 

to  Every  Case.  §  417.  Lex  Rei  Sitaj  Governs. 

§  410.  The  Rule  Applicable. — The  rule  in  determining 
what  are  fixtures  in  a  manufacturing  establishment  is,  that 
where  the  machinery  is  permanent  in  its  character,  and  essen- 
tial to  the  purpose  for  which  the  building  is  occupied,  it  must 
be  regarded  as  realty  and  pass  with  the  building ;  and  that 
whatever  is  essential  to  the  purposes  for  which  the  building  is 
used  will  be  considered  as  a  fixture,  although  the  annexation 
between  them  be  such  that  it  may  be  severed  without  phys- 
ical or  lasting  injury  to  either.^  The  permanent  and  habitual 
annexation  control,  and  not  the  manner  of  fastening.^ 

In  cases  of  this  description,  to  require  substantial  or  even 
nominal  annexation,  would  exclude  things  absolutely  essential 
to  the  enjoyment  or  use  of  the  freehold,  and  include  others 
which  are  comparatively  unimportant.  Therefore,  whatever 
is  essential  to  the  purpose  for  which  the  building  is  used  may 

iPub.  Stat.  1882,  eh.  171,  sects.  1,  9. 

""  Green  v.  Phillips,  26  Gratt.  (Va.)  752 ;  21  Am.  Rep.  323 ;  Farrar  v.  Chauf- 
fetete,  5  Denio  (N.  Y.),  527;  Price  v.  Jenks,  14  Phil.  (Pa.)  228;  Sheldon  v. 
Ficklin,  32  Gratt.  (Va.)  727 ;  Morris's  Appeal,  88  Pa.  St.  368 ;  McConnell  v. 
Blood,  123  Mass.  47  ;  Keeler  v.  Keeler,  31  N.  J.  Eq.  181 ;  Ferris  v.  Quimby,41 
Mich.  202 ;  Smith  Paper  Co.  v.  Servin,  130  Mass.  511. 

3  Brennan  v.  Whitaker,  15  Ohio  St.  446 ;  Laflin  v.  Griffiths,  35  Barb.  (N.  Y.) 
58  ;  McRea  v.  Cent.  Nat.  Bank,  66  N.  Y.  489  ;  Pierce  v.  George,  108  Mass.  82; 
Parsons  v.  Copeland,  38  Me.  537. 


MORTGAGABLE    INTERESTS.  443 

be  considered  as  a  fixture,  although  the  annexation  between 
them  is  such  that  it  may  be  severed  without  physical  injury 
to  either.^ 

Therefore,  when  a  building  is  erected  as  a  mill  or  manu- 
factory, and  the  water- works  or  the  steam-works  relied  upon  to 
move  it  are  erected  at  the  same  time,  and  the  machinery  to  be 
driven  by  them  are  essential  parts  of  it,  adapted  to  be  used 
with  it  and  in  it,  they  are  parts  of  it,  and  pass  by  a  convey- 
ance, by  attachment,  or  by  mortgage.^  While  there  is  not  en- 
tire uniformity  in  the  decisions  on  this  question,  the  tendency 
of  modern  decisions  is  in  favor  of  viewing  everything  as  a  fix- 
ture which  has  been  held  or  employed,  however  slight  or  tem- 
porary the  connection  between  the  realty  and  it.  This  is 
undoubtedly  required  by  the  growth  and  extension  of  manu- 
facturing industries,  that  the  requisites  of  physical  attachment 
in  or  to  the  soil  be  relaxed  to  the  extent  that  the  question  of 
fixtures  vel  non  shall  depend  on  the  nature  and  character  of 
the  act  by  which  the  structure  is  put  in  place,  the  policy  of  the 
law  connected  with  its  purpose  and  the  intention  of  those  con- 
cerned in  the  act.  Therefore,  the  permanency  of  the  attach- 
ment does  not  depend  on  the  strength,  or  force,  or  manner  of 
the  annexation  to  the  freehold  so  much  as  upon  its  constancy, 
and  upon  the  use  to  which  the  attached  chattel  is  adapted,  the 
purposes  for  which  designed,  and  the  intention  of  the  party 
annexing  it.^ 

§411.  The  Machinery  That  Supplies  the  Motive 
Power. — The  machinery  of  a  manufactory  that  supplies  the 
motive  power,  as  the  engine,  boiler,  and  their  attachments,  as 

'  Lawton  v.  Salmon,  1  H.  Bl.  259. 

"^  Winslow  V.  Merchants'  Ins.  Co.,  4  Met.  (Mass.)  306  ;  Yoorhees  v.  McGinnis, 
48  N.  Y.  278 ;  Hill  v.  HiU,  43  Pa.  St.  521 ;  Citizens'  Bank  v.  Knapp,  22  La. 
Ann.  117 ;  M'Kim  v.  Mason,  3  :\Id.  Ch.  186 ;  Davenport  v.  Shants,  43  Vt.  546 ; 
Trull  V.  Fuller,  28  Me.  545 ;  Burnside  v.  Twitchell,  43  N.  H.  390 ;  Rice  r. 
Adams,  4  Harr.  (Del.)  332  ;  Cooper  v.  Romeyne,  4  McLean,  C.  C.  384. 

*  Tillman  v.  De  Lacy,  80  Ala.  103  ;  Quimby  v.  Manhattan  C.  &  C.  Co.,  24  N. 
J.  Eq.  260 ;  Meig's  Appeal,  62  Pa.  St.  28  ;  Wight  r.  Gray,  73  Me.  297 ;  Rogers 
V.  Prattville  Manf.  Co.,  81  Ala.  483 ;  Maguire  v.  Park,  140  Mass.  21 ;  Carpen- 
ter V.  Walker,  140  Mass.  416. 


444  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

contradistiDguished  from  that  propelled  by  it,  where  perma- 
nently annexed  to  foundations  resting  upon  the  freehold,  is 
generally  held  to  be  a  fixture,  though  susceptible  of  being  re- 
moved without  any  material  injury  to  the  same  or  to  the  free- 
hold.^ In  this  case,  Judge  Minshall  says  that  "  it  has  gen- 
erally been  held  in  this  country  that  articles  used  in  a  factory 
for  manufacturing  purposes,  only  attached  to  the  building  to 
keep  them  steady  in  their  places,  so  that  they  may  be  more 
serviceable  when  in  use,  and  that  may  be  removed  without 
any  essential  injury  to  the  freehold  or  the  articles  themselves, 
are  personal  property,  and  do  not  pass  by  a  conveyance  or 
mortgage  of  the  freehold. 

"  On  the  other  hand,  steam-engines  and  boilers  with  their  ap- 
pliances, that  supply  the  motive  power  of  machinery,  and,  for 
purposes  of  use,  are  usually  stably  attached  to  the  realty,  pass 
by  a  conveyance  or  mortgage  of  the  land." 

Judge  Knowlton  speaks  of  the  conflict  of  authority  in  differ- 
ent jurisdictions,  in  regard  to  the  question  whether  machines 
placed  in  a  building  become  fixtures  which  pass  with  a  con- 
veyance of  the  real  estate,  and  says :  "  The  character  of  the 
property,  as  real  or  personal,  may  be  fixed  by  contract  with 
the  owner  of  the  real  estate  when  the  article  is  put  in  position ; 
but  such  contract  cannot  aff'ect  the  rights  of  the  mortgagee,  or 
of  an  innocent  purchaser  without  notice  of  it."  ^ 

The  machinery  furnishing  the  motive  power  is  generally 
more  closely  annexed  to  the  freehold,  and  of  a  more  perma- 
nent nature,  as  the  power  furnished  by  it  may  be  adapted  to 
the  propulsion  of  the  machinery  of  a  variety  of  mills  without 
any  substantial  change  in  the  motive  power  itself,  or  in  the 
building,  other  than  by  substituting  one  kind  of  machinery 
for  another ;  whilst  the  machinery  that  is  propelled  has  more 
of  the  general  character  of  personalty,  is  not  as  a  rule  so  closely 

1  Case  Manuf.  Co.  v.  Garven,  45  Ohio  St.  289.  See,  also,  1  Sch.  Per.  Prop. 
155 ;  Ewell  Fix.  290,  294  ;  1  Washb.  Real  Prop.  8. 

^  Hopewell  Mills  v.  Taunton  Savings  Bank,  150  Mass.  519 ;  Hunt  v.  Bay 
State  Iron  Co.,  97  Mass.  279 ;  Thompson  v.  Vinton,  121  Mass.  139 ;  South- 
bridge  Savings  Bank  v.  Exeter  Mach.  Works,  127  Mass.  542, 545 ;  Case  Manuf. 
Co.  V.  Gari^en,  45  Ohio  St.  289. 


MOKTGAGABLE    INTERESTS.  445 

annexed  to  the  freehold,  and  may  be  removed,  and  frequently 
is,  from  one  mill  to  another,  as  any  other  article  of  personalty ; 
and  is  more  properly  accessory  to  the  business  carried  on  upon 
the  realty  than  the  realty  itself/ 

Under  this  rule,  carding-machines  of  a  woolen  factory,  at- 
tached to  the  building  by  cleats  to  confine  them  to  their 
proper  places,  and  subject  to  removal  whenever  convenient  or 
business  required,  are  not  fixtures,  but  chattels  ;  whilst  the 
steam-engine  and  boiler,  used  to  supply  the  motive  power,  per- 
manently fixed  upon  a  foundation  laid  in  the  ground,  are 
realty.^ 

Judge  Minshall  says  that  "  the  difficulty  of  prescribing  a 
rule  that  may  be  applied  to  cases  in  general  has  been  confessed 
both  by  courts  and  writers  upon  the  subject;  various  tests 
have  been  adopted,  none  of  which  have  been  applied  with  any- 
thing like  uniformity.  It  may,  however,  be  admitted  that  the 
distinction  between  the  motive  power  of  a  factory  and  the  ma- 
chines driven  by  it  is  somewhat  arbitrary,  still  it  is  one  based 
upon  a  physical  difference  easily  perceived,  if  not  dictated,  by 
any  well-defined  principle,  and  is  no  more  illogical  than  many 
distinctions  to  be  found  in  other  branches  of  law.  That 
which  divides  all  property  into  real  and  personal  is  quite 
as  wanting  in  anything  like  scientific  classification ;  but,  from 
its  general  recognition  wherever  the  common  law  prevails,  is 
found  to  be  very  convenient  in  practice ;  and  it  is  such  con- 
siderations that  have  always  more  or  less  influenced  the  adop- 
tion of  definite  rules  of  property."  ^  This  learned  judge  has 
enunciated  the  principle  that  should  control. 

§  412.  Question  of  Intention. — When  no  contract  exists 
between  the  parties,  a  machine  placed  in  a  building  is  gen- 
erally found  to  be  real  estate  or  personal  property  from  the 
external  indications  which  show  whether  or  not  it  belongs  to 
the  building  as  an  article  designed  to  become  a  part  of  it,  and 
to  be  used  with  it  to  promote  the  object  for  which  it  was 

'  Fortman  v.  Goepper,  14  Ohio  St.  567. 

^Teaff  ?-.  Hewitt,  1  Ohio  St.  511. 

^Case  Manuf.  Co.  v.  Garven,  45  Ohio  St.  289,  301. 


446  NATURE    AND    REQUISITES   OF   THE    CONTRACT. 

erected,  or  to  which  it  has  been  adapted  and  devoted— an  ar- 
ticle intended  not  to  be  taken  out  or  used  elsewhere,  unless  by 
reason  of  some  unexpected  change  in  the  use  of  the  building 
itself.  The  tendency  of  modern  decisions  is  to  make  this  a 
question  of  what  was  the  intention  with  which  the  machine 
was  put  in  place.' 

The  intention  to  be  sought  is  not  the  undisclosed  purpose 
of  the  actor,  but  the  intention  implied  and  manifested  by 
his  act.  This  intention  must  settle  his  and  others'  rights. 
Others  cannot  know  the  secret  purpose  of  the  actor,  and 
their  rights  depend  not  upon  that  but  upon  the  inference  to 
be  drawn  from  what  is  external  and  visible.  Every  fact 
and  circumstance  should  be  considered  which  tend  to  show 
intention.^ 

Mere  physical  annexation  is  no  longer  the  test.^ 

Whether  the  mortgagor's  undisclosed  intention  can  con- 
tinue their  chattel  nature  after  actual  annexation  is  a  question 
upon  which  the  authorities  do  not  agree.  The  affirmative  has 
been  held  by  the  courts  of  some  of  the  States.* 

Where  parties  so  agree,  such  articles  will  retain  their  chattel 
nature,  and  to  this  end  an  agreement  implied  is  as  effective  as 
one  expressed.  A  custom  obtains,  in  some  localities,  where  a 
mortgagor  puts  articles  upon  the  land  for  temporary  use,  that 
he  can  remove  them  when  he  desires,  and  then  they  do  not  be- 
come fixtures.® 

§  413.  No  Single  Criterion  Will  Apply  to  Every  Case. — 
Whether  such  an  article  belongs  to  the  real  estate  is  primarily 
and  usually  a  question  of  mixed  law  and  fact."     The  varying 

1  Choate  v.  Kimball  (Ark.),  19  S.  W.  Rep.  108 ;  Ewell  on  Fixt.,  p.  22;  Ot- 
tumwa  Woolen  Mill  v.  Hawley,  44  Iowa,  57 ;  Hill  v.  Nat.  Bank,  97  U.  S. 
450 ;  Turner  v.  Wentworth,  119  Mass.  459 ;  McRea  v.  Central  Nat.  Bank,  66 
N.  Y.  489 ;  Maguire  v.  Park,  140  Mass.  21. 

^  Hopewell  Mills  v.  Taunton  Savings  Bank,  150  Mass.  519. 

3  Vail  V.  Weaver,  132  Pa.  St.  363 ;  Doughty  v.  Owen  (N.  J.),  19  Atl.  Rep.  540. 

*Tiffl  V.  Horton,  53  N.  Y.  377  ;  Clore  v.  Lambert,  78  Ky.  224. 

5  Wolford  V.  Baxter,  33  Minn.  12 ;  Choate  v.  Kimball  (Ark.),  19  S.  W.  Rep.  108. 

"Turner  v.  Wentworth,  119  Mass.  459;  Southbridge  Savings  Bank  v.  Ma- 
son, 147  Mass.  500. 


MORTGAGABLE   INTERESTS.  447 

circumstances  of  each  case  may  have  an  immediate  influence 
upon  the  determination  of  the  courts.  In  doubtful  cases  the 
intention  has  a  controlling  influence.^ 

So  it  is  obvious  that  in  most  cases  there  is  no  single  crite- 
rion by  which  the  question  can  be  decided.  The  nature  of 
the  article  and  the  object,  the  effect  and  the  mode  of  its  an- 
nexation are  all  to  be  considered.  Hence,  whatever  is  placed 
in  a  mill,  subject  to  a  mortgage,  by  a  mortgagor  or  those  claim- 
ing under  him,  to  carry  out  the  purpose  for  which  it  was 
erected,  and  permanently  to  increase  its  value  for  occupation 
or  use,  although  it  may  be  removed  without  injury  to  itself 
or  the  building,  becomes  part  of  the  realty.^  The  intention  is 
gathered  from  the  manner  of  annexation  and  the  character  of 
the  improvement,  and  whether  it  is  essential  to  the  proper  use 
of  the  realty.^ 

§  414.  Illustrations  Under  the  Motive  Power  Rule. 
— Whether  the  machinery  in  a  cotton  mill  is  a  fixture  or  not, 
as  between  mortgagor  and  mortgagee,  it  was  held  where  the 
facts  showed  that  the  machines,  most  of  which  were  large  and 
heavy,  and  were  all  procured  for  use  in  manufacturing  cotton 
cloth ;  where  there  were  changes  in  the  kinds  of  goods  manu- 
factured, and  the  machines  were  not  intended  to  be  moved 
from  place  to  place,  but  were  intended  to  be  put  in  position 
and  there  used  with  the  building  until  they  should  be  worn 
out,  or  until,  from  some  unforeseen  cause,  the  real  estate  should 
be  put  to  a  different  use  ;  where  the  most  of  them  were  fastened 

'Kelly  V.  Austin,  46  111.  156;  Morris's  Appeal,  88  Pa.  St.  368;  Smith 
Paper  Co.  v.  Servin,  130  Mass.  511 ;  Hopewell  Mills  v.  Taunton  Savings  Bank, 
150  Mass.  519. 

=  Harlan  v.  Harlan,  15  Pa.  St.  507;  Roddy  v.  Brick,  42  N.  J.  Eq.  218,  225; 
Southbridge  Savings  Bank  v.  Mason,  147  Mass.  500 ;  Parsons  v.  Copeland,  38 
Me.  537  ;  Holland  v.  Hodgson,  L.  R.  7  C.  P.  328  ;  Longbottom  v.  Berry,  L.  R. 
5  Q.  B.  123  ;  Ottumwa  Woolen  Mill  v.  Hawley,  44  Iowa,  57 ;  Hill  v.  Nat.  Bank, 
97  U.  S.  450 ;  Delaware,  etc.,  Railroad  Co.  v.  Oxford  Iron  Co.,  36  N.  J.  Eq.  452 ; 
Pierce  i'.  George,  108  Mass.  78;  Woodhan  v.  Bank  (Minn.),  50  N.  W.  Rep. 
1015 ;  McRea  v.  Central  Nat.  Bank,  66  N.  Y.  489. 

^Tillman  v.  De  Lacy,  80  Ala.  103 ;  Rogers  v.  Prattville  Manf.  Co.,  81  Ala. 
483 ;  Green  v.  Phillips,  26  Gratt.  (Va.)  752 ;  Shelton  v.  Ficklin,  32  Gratt.  (Ya.) 
727. 


448  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

to  the  floor  for  the  purpose,  among  others,  of  steadying  when 
in  use ;  where  apparently  they  had  been  attached  to  the  build- 
ing and  connected  with  the  motive  power  with  a  view  of  per- 
manence ;  and  where  certain  loom  beams,  which  were  laid  upon 
the  looms  when  in  use,  although  not  fastened  thereto,  were 
essential  parts  of  the  looms — that  all  the  machines  including 
the  loom  beams,  were  realty/ 

A  mortgage  of  a  woolen  factory  does  not  cover  the  looms, 
in  New  York,  when  merely  fastened  to  the  floor  by  screws  to 
keep  them  in  their  places.^ 

And  so  it  has  been  held  in  England  that  cotton  looms  are 
not  fixtures.^  So  in  New  Jersey  spinning  frames,  twisting 
frames,  and  like  machinery,  though  fastened  to  the  floor  by 
nails  or  screws,  or  held  in  position  by  cleats,  are  personal 
property.* 

A  mortgage  after  describing  the  mill  and  other  articles,  in- 
cluded "  and  all  other  machinery  and  fixtures  whatsoever 
there  erected  or  set  up,  or  to  be  thereafter,  etc.,  upon  the  said 
land,  plot  of  land,  mill,  and  premises,  with  the  appurtenances." 
It  was  decided  that  all  the  machinery  placed  in  the  mill, 
whether  creating  power  or  for  being  moved,  was  included  in 
the  mortgage.^  So  a  mortgage  of  an  iron  rolling  mill  passes 
the  entire  set  of  rolls  used  in  the  mill,  whether  in  place  and 
fixed  for  use  or  temporarily  detached.^ 

§  415.  Illustrations  Embracing  Separate  Articles. — 
The  wires  of  an  electric  company  pass  with  a  mortgage  on 

^  Hopewell  Mills  v.  Taunton  Savings  Bank,  150  Mass.  519.  Compare  Van- 
derpool  v.  Van  Allen,  10  Barb.  (N.  Y.)  157 ;  Potter  v.  Cromwell,  40  N.  Y.  287  ; 
Cresson  v.  Stout,  17  Johns.  (N.  Y.)  116. 

^  Murdock  v.  Gifford,  18  N.  Y.  28.  Compare  Murdock  v.  Harris,  20  Barb. 
(N.  Y.)  407. 

3  Hutchinson  v.  Kay,  23  Beav.  413. 

^  Keeler  v.  Keeler,  31  N.  J.  Eq.  181. 

°  Haley  v.  Hammersley,  3  De  Gex.  F.  &  J.  587.  See,  also,  Mather  v.  Fraser, 
2  Kay  &  J.  536';  Walmsley  v.  Miln,  7  C.  B.  (N.  S.)  115  ;  Wiltshear  v.  Cottrell, 
1  El.  &  B.  674. 

«  Voorhis  v.  Freeman,  2  Watts  &  S.  (Pa.)  116.  And  see  Ex  parte  Astbury, 
L.  R.  4  Ch.  Ap.  630. 


MORTGAGABLE    INTERESTS.  449 

the  plant/  The  entire  machinery  of  a  fruit-canning  factory 
passes  under  a  mortgage,  though  some  articles,  such  as  crates, 
capping-machines,  and  work-tables,  are  not  actually  annexed 
to  the  soil.^  A  shingle-machine  in  a  mill  is  part  of  the  realty.^ 
On  the  other  hand,  however,  a  shingle-machine  not  fastened 
to  the  floor,  except  so  far  as  necessary  to  keep  it  in  place,  was 
held  to  be  a  chattel.^  Mill-saws  in  a  saw-mill  are  a  part  of 
the  mill.^  Machinery  in  a  brewery  is  a  part  of  the  realty ;  ^ 
so  is  heavy  machinery  for  making  paper  fastened  to  the  build- 
ing,^ and  machinery  in  a  nail  factory  is  part  of  the  realty.* 
Machines  for  making  kegs  pass  under  a  mortgage  of  the  keg 
factory.^  But  stills  set  up  in  a  furnace,  in  the  usual  manner, 
for  making  whiskey,  are  personalty ;  ^'^  so  is  machinery  for 
spinning  flax  and  tow ; "  and  a  stone  for  grinding  bark,, 
affixed  to  a  bark  mill ;  ^^  likewise  a  kettle  or  boiler  put  up  in  a 
tannery  with  brick  and  mortar ;  ^^  also  leather  fastened  to  a 
bench  by  screws,  grindstones  resting  upon  frames  standing 
upon  the  floor,  anvils,  vises,  or  a  portable  forge.^* 

So  a  molding-machine  and  a  planing-machine,  placed  in  a 

'  Fechet  v.  Drake  (Ariz.),  12  Pac.  Rep.  694.    See,  also,  Regina  v.  North  Staf- 
fordshire Railway  Co.,  3  El.  &  El.  392. 
^  Dudley  v.  Hurst,  67  Md.  44. 
=>  Corliss  V.  McLagin,  29  Me.  115.    See,  also,  Trull  v.  Fuller,  28  Me.  545. 

*  Wells  V.  Maples,  15  Hun  (N.  Y.),  90. 

^Burnside  v.  Twitchell,  43  N.  H.  390.  See,  also,  Coleman  v.  Stearns  Manuf. 
Co.,  38  Mich.  30 ;  Robertson  v.  Corsett,  39  Mich.  777 ;  Johnston  v.  Morrow, 
CO  Mo.  339. 

«Scheifele  v.  Schmitz,  42  N.  J.  Eq.  700.  Compare  Wolford  v.  Baxter,  33 
Minn.  12;  53  Am.  Rep.  1. 

'  Quimby  v.  Manhattan  Cloth  &  Paper  Co.,  24  N.  J.  Eq.  260.  See,  also.  Fish 
V.  N.  Y.  Water-Proof  Co.,  29  N.  J.  Eq.  16. 

*  Delaware,  etc.,  Railroad  Co.  v.  Oxford  Iron  Co.,  36  N.  J,  Eq.  452. 
^Laflin  v.  Griffiths,  35  Barb.  (N.  Y.)  58.    See,  also,  Snedeker  v.  Warring,  12 

N.  Y.  170,  174 ;  Walker  v.  Sherman,  20  Wend.  (N.  Y.)  636,  639. 

'"Moore  v.  Smith,  24  111.  513 ;  Burk  v.  Baxter,  3  Mo.  207 ;  Terry  v.  Robins, 
13  Miss.  291.  Compare  Bryan  v.  Lawrence,  5  Jones  Law  (N.  Car.),  337; 
Feimster  v.  Johnson,  64  N.  Car.  259. 

"  Cresson  v.  Stout,  17  Johns.  (N.  Y.)  116. 

"  Heermance  v.  Vernoy,  6  Johns.  (N.  Y.)  5. 

"Hunt  V.  Mullanphy,  1  Mo.  508.  Compare  Union  Bank  v.  Emerson,  15 
Mass.  1.59. 

'  "  Pierce  v.  George,  108  Mass.  78 ;  11  Am.  Rep.  310. 
VOL.  I.— 29 


450  NATURE    AND   REQUISITES    OF    THE    CONTRACT. 

jsash  and  blind  factory,  one  of  which  was  bolted  to  the  floor  for 
jgreater  firmness,  and  the  other  left  standing  without  fasten- 
ing, are  to  be  deemed  personalty/  So  machines  used  in  a 
«hoe-shop,  attached  to  the  building  by  nails  and  bolts,  are 
deemed  personalty,  and  do  not  pass  by  a  mortgage  of  the 
realty.^  And  where  the  property  was  certain  pieces  of  ma- 
chinery known  as  "jibs,"  placed  in  the  building  with  other 
machinery,  and  which  cannot  be  displaced  without  injury  to 
themselves,  may,  by  their  mode  of  connection,  be  personalty.^ 

§  416.  Bankrupts. — In  case  of  bankruptcy,  the  right  to  re- 
move fixtures  which  belong  to  the  tenant,  passes  to  his  assignee, 
and  he  will  have  the  same  rights  against  the  landlord 
as  the  bankrupt  himself  had.  If,  however,  the  bankrupt  has, 
previousl}'^  to  his  bankruptcy,  parted  with  the  house  or  build- 
ing, he  has  prima  facie  at  least  parted  with  the  fixtures  ;  *  and 
it  can  make  no  difference  whether  the  conveyance  is  absolute 
or  only  by  way  of  mortgage.^ 

Of  course  in  settling  these  questions,  the  existing  bank- 
ruptcy statutes  must  be  consulted,  but  generally,  the  assignee 
of  a  bankrupt  tenant  would  be  entitled  to  whatever  interest  in 
the  fixtures  the  bankrupt  himself  possessed.^ 

§417.  Lex  Rei  Sit^e  Governs. — Where  personal  property 
is  sold  in  one  State  to  a  resident  of  another  State  for  the  pur- 
pose of  being  attached  to  the  realty  in  the  State  of  the  vendee's 
residence,  the  question  whether  such  property  will  pass  by  the 
conveyance  of  the  realty  where  so  attached,  must  be  de- 
termined by  the  laws  of  the  State  where  annexed,  and  not  by 
the  laws  of  the  State  where  sold.     Thus,  a  vendor  sold  per- 

^  Blancke  v.  Rogers,  26  N.  J.  Eq.  563.    See,  also,  Wells  v.  Maples,  15  Hun 
(N.  Y.),  90. 
2  McConnell  v.  Blood,  123  Mass.  47. 
^  Davis  V.  Jones,  2  B.  &.  A.  165, 167. 

*  Colegrave  v.  Dias  Santos,  2  Barn.  &  C,  76. 

*  Ex  parte  Barclay,  5  De  Gex,  M.  &  G.  403,  411. 

«Horn  V.  Baker,  9  East,  215 ;  3  Smith's  Lead.  Cas.  262 ;  Ex  parte  Astbury,  L. 
R.  4  Ch.  App.  630 ;  Ex  parte  King,  4  Jur.  510 ;  Williams  v.  Evans,  23  Beav. 
239. 


MORTGAGABLE    INTERESTS.  451 

sonalty  in  Vermont  to  a  resident  of  New  Hampshire,  for  the 
purpose  of  being  annexed  to  the  realty  in  the  latter  State,  un- 
der a  verbal  lien  that  it  should  remain  the  property  of  the 
vendor. 

The  question  whether  it  will  pass  by  a  conveyance  of  the 
realty  when  so  attached,  must  be  determined  by  the  laws  of 
New  Hampshire.' 

•  Article  4. 

Rolling  Stock  of  Railways. 

§  418.  Rolling  Stock.  §  419.  Constitutional  and  Statutory 

Provisions. 

§418.  Rolling  Stock. — Whether  the  rolling  stock  of  a 
railway  corporation,  when  used  by  a  railroad  company,  is  a 
fixture  or  not,  is  a  question  not  uniformly  answered  by  differ- 
ent courts.  It  is  held,  however,  that  the  materials  used  in 
the  construction  of  a  railway  become  annexed  to  the  soil  in 
the  process  of  construction,  and  a  railroad  track  is,  therefore, 
deemed  a  fixture.^ 

Thus,  a  marine  railway,  consisting  of  iron  and  wooden  rails 
and  sleepers,  endless  chain,  gear,  wheelers  and  ship  cradle, 
and  constructed  in  the  usual  manner,  is  a  fixture.^ 

So  a  railroad  track  laid  down  upon  the  land,  with  a  view  to 
its  permanent  improvement  or  beneficial  enjoyment  is  a 
fixture.* 

In  New  York  the  rolling  stock  of  railroad  companies  is  not 
a  part  of  the  realty,  but  retains  the  character  of  personalty. 
It  does  not  become  a  part  of  the  realty,  so  as  to  pass  by  a 
conveyance  of  the  land  as  part  thereof,  and  a  chattel  mortgage 
given  on  rolling  stock  is  valid.* 

'  Buzzell  V.  Cummings,  61  Vt.  213. 

^Strickland  v.  Parker,  54  Me.  263  ;  North  Cent.  Railroad  Co.  v.  Canton  Co., 
30  Md.  347 ;  Turner  v.  Cameron,  L.  R.  5  Q.  B.  306. 

'Strickland  V.  Parker,  54  Me.  263. 

n^an  Keuren  v.  Cent.  Railroad  Co.,  38  N.  J.  L.  165. 

*Hoyle  V.  Plattsburg,  etc.,  R.  R.  Co.,  54  N.  Y.  314  ;  13  Am.  Rep.  595 ;  Ran- 
dall V.  Elwell,  52  N.  Y.  521 ;  11  Am.  Rep.  747  ;  Stevens  v.  Buffalo,  etc.,  R.  R, 
Co.,  31  Barb.  (N,  Y.)  590. 


452  NATURE    AND    REQUISITES    OF   THE    CONTRACT. 

In  New  Hampshire  it  has  been  held  that  the  locomotive 
engines  and  freight  and  passenger  cars  of  a  railroad  company 
are  liable  to  attachment,  when  not  in  general  use,  like  other 
personal  property,^  thus  classing  them  with  personal  chattels. 
So,  it  is  the  rule  of  New  Jersey,  that  a  mortgage  by  a  railroad 
company  on  its  road-bed,  together  with  its  engines,  cars,  and 
rolling  stock,  so  far  as  regards  the  latter  class  of  property,  is 
a  chattel  mortgage ;  that  the  engines,  cars,  and  rolling  stock 
must  be  regarded  as  chattels,  which  have  not  lost  their  dis- 
tinctive character  as  personalty  by  being  affixed  to  and  made 
part  of  the  realty.^ 

And  this  is  tlie  view  taken  by  the  majority  of  the  courts 
when  not  controlled  by  the  constitution ;  that  where  the 
question  has  been  directly  presented,  rolling  stock  is  person- 
alty,^ and  must  be  mortgaged  as  such.  On  the  other  hand, 
rolling  stock  is  declared  a  part  of  the  realty.^ 

§419.  Constitutional  and  Statutory  Provisions. — 
Whether  rolling  stock  is  personalty  or  part  of  the  realty,  has 
been  regulated  in  some  of  the  States  by  constitutional  and  stat- 
utory provisions.  This  question  has  been  settled  in  New  York 
by  statute,  excepting  from  the  operation  of  the  chattel  mort- 
gage act,  mortgages  by  railroad  companies  on  real  and  personal 
property  which  have  been  recorded  as  mortgages  of  real  estate.* 
And  the  act  of  1876  made  similar  provisions.® 

1  Boston,  etc.,  Railroad  Co.  v.  Gilmore,  37  N.  H.  410. 

2  Williamson  v.  N.  J.  South  R.  R.  Co.,  29  N.  J.  Eq.  311 ;  State  v.  Somerville, 
etc.,  R.  R.  Co.,  4  Dutch.  (N.  J.)  21. 

3  Stevens  v.  Buffalo,  etc.,  R.  R.  Co.,  31  Barb.  (N.  Y.)  590;  Randall  v.  Elwell, 
52  N.  Y.  521 ;  Hoyle  v.  Plattsburg,  etc.,  R.  R.  Co.,  54  N.  Y.  314 ;  Chicago,  etc.. 
Railroad  Co.  v.  Ft.  Howard,  21  Wis.  44 ;  Boston,  etc.,  R.  R.  Co.  v.  Gilmore,  37 
N.  H.  410 ;  Coe  v.  Columbus,  etc.,  Railroad  Co.,  10  Ohio  St.  372 ;  City  of  Du- 
buque V.  111.  Cent.  R.  R.  Co.,  39  Iowa,  56. 

*  Meyer  v.  Johnston,  53  Ala.  237,  332 ;  Youngman  v.  Elmira,  etc.,  Railroad 
Co.,  65  Pa.  St.  278  ;  Coney  v.  Pittsburgh,  etc.,  R.  R.  Co.,  3  Phila.  (Pa.)  173 ;  Mor- 
rill V.  Noyes,  56  Me.  458 ;  State  v.  North  Cent.  R.  R.  Co.,  18  Md.  193 ;  Phillips 
V.  Winslow,  18  B.  Mon.  (Ky.)  431  ;  Douglass  v.  Cline,  12  Bush  (Ky.),  608,  630; 
Pierce  v.  Emery,  32  N.  H.  484.  See,  also,  Pullan  v.  Cincinnati,  etc.,  R.  R. 
Co.,  4  Biss.  C.  C.  35 ;  Galveston  R.  R.  Co.  v.  Cowdry,  11  Wall.  (U.  S.)  459. 
■  ^  N.  Y.  Stat.  1868,  ch.  779 ;  Rev.  Stat.  1875,  p.  555,  sect.  115. 

«N.  Y.  Laws  of  1876,  p.  307,  sect.  4. 


MORTGAGABLE    INTERESTS.  453 

Rolling  stock  is  declared  to  be  personal  property  in  Ala- 
bama, Arkansas,  Illinois,  Missouri,  Nebraska,  Texas,  and  West 
Virginia/ 

But  in  Wisconsin  rolling  stock  is  declared  to  be  fixtures.^  So 
in  Florida,^  and  in  Iowa.*     The  same  is  enacted  in  Montana.'^ 

The  recording  act  does  not  embrace  mortgages  of  personal 
property  of  railway  corporations  used  with  its  realty  for  rail- 
way purposes.® 

Article  5. 

Accessions  to  Mortgaged  Realty. 

§  420.  Crops.  §  422.  Trees  and  Shrubs. 

I  421.  Manure  and  Stock. 

§  420.  Crops. — The  landlord  has  no  such  interest  in,  or  title 
to,  crops  grown  on  the  rented  lands  as  can  be  made  the  sub- 
ject of  mortgage.'  A  mortgage  of  "growing  grain  "  does  not 
cover  grain  already  cut  or  severed  from  the  ground.^  In  some 
of  the  States  statutory  provisions  have  been  made  as  regards 
the  stage  of  growth  when  crops  may  be  mortgaged.^ 

A  mortgage  of  growing  timber  may  be  made — the  timber  to 
be  cut  and  removed.''* 

'  See  Wood  on  Railroads,  1625. 

^  Laws  of  1872,  ch.  119,  sects.  39,  40 ;  Laws  of  1877,  eh.  144,  sect.  1. 

^  Acts  of  1874,  ch.  1987. 

*  Code  of  1873,  sects.  1284, 1285. 
*Lawsof  1873,  p.  102. 

*  Hammock  v.  Loan  &  Trust  Co.,  105  U.  S.  77  ;  Cooper  v.  Corbin,  105  111. 
224.  See,  also,  Fosdick  v.  Schall.  99  U.  S.  235  ;  Fosdick  v.  Car  Co.,  99  U.  S. 
256 ;  Huidekoper  v.  Locomotive  Works,  99  U.  S.  258.  Compare  Hervey  v. 
Rhode  Island  Locomotive  Works,  93  U.  S.  664.    See,  also,  24  Am.  L.  Rev.  428. 

'  Broughton  v.  Powell,  52  Ala.  123. 

*  Ford  V.  Sutherlin,  2  Mont.  440. 

'  Arkansas,  act  of  1875,  p.  149  ;  New  Hampshire,  Gen.  Laws,  1878,  ch.  137, 
pect.  1 ;  Nevada,  act  of  1885,  ch.  54 ;  Washington,  Code,  sect.  1986 ;  Cook  v. 
Steel,  42  Tex.  53 ;  may  be  mortgaged  in  New  Mexico  after  harvested  :  Com. 
Laws,  sect.  1586  ;  in  Mississippi  mortgages  may  be  made  on  growing  crops, 
or  crops  to  be  grown  within  fifteen  months  from  making  of  the  mortgage, 
I>aws  of  1876,  pp.  100,  113 ;  in  Pennsylvania  a  mortgage  of  a  growing  crop  is 
fraudulent :  Lynch  v.  Welsh,  3  Pa.  St.  294. 
'  '"Boykin  v.  Rosenfield,  69  Tex,  115;  Claflin  v.  Carpenter,  4  Met.  (Mass.) 


454  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

Crops  are  vested  in  the  mortgagee  only  after  default,  when 
lie  is  entitled  to  them  as  part  of  the  security.' 

§  421.  Manure  and  Stock. — In  general  manure  made  in 
course  of  husbandry  upon  a  farm,  is  so  attached  to  and  con- 
nected with  the  realty  that,  in  the  absence  of  any  express 
stipulation  or  understanding  to  the  contrary,  it  passes  as  ap- 
purtenant to  the  land.  This  principle  is  applied  in  the  case 
of  manure  taken  from  the  barnyard  of  a  homestead,  and  piled 
upon  the  land  though  not  broken  up,  nor  rotten,  nor  in  a  fit 
state  of  incorporation  with  the  soil.^  The  same  rule  has  been 
applied  in  cases  between  landlord  and  tenant ;  ^  and  also  be- 
tween vendor  and  vendee.* 

The  manure  passes  as  appurtenant  to  the  farm,  and  is  ap- 
plicable to  a  mortgagor  in  possession.  He  has  no  right  when 
evicted  from  the  premises  to  remove  or  sell  such  manure,  for 
the  title  thereto  is  vested  in  the  mortgagee  as  the  owner  of  the 
freehold.^  But  stock  or  cattle,  or  the  increase  thereof,  or  plan- 
tation tools  subsequently  bought,  unless  expressly  stipulated 
to  the  contrary,  are  not  covered  by  a  mortgage  of  the  realty,^ 

§  422.  Trees  and  Shrubs. — Trees  and  shrubs  planted  in  a 
nursery  for  the  temporary  purpose  of  cultivation  and  growth, 
until  they  become  sufficiently  matured  to  be  fit  for  the  market, 
and  then  to  be  taken  up  and  sold,  pass  by  the  mortgage  of  the 
land  on  which  they  are  planted,  so  that  the  mortgagor,  or  his 
assigns,  cannot  remove  them  as  personal  chattels.^ 

580;  Sheldon  v.  Conner,  48  Me.  584;  Wood  v.  Lester,  29  Barb.  (N.  Y.)  145; 
Cudworth  V.  Scott,  41  N.  H.  456. 

1  Gihnan  r.  Wills,  Q6  Me.  273 ;  Reed  v.  Elwell,  46  Me.  270. 

2 Fay  V.  Muzzey,  13  Gray  (Mass.),  53,  55. 

3  Lassell  v.  Reed,  6  Me.  222 ;  Daniels  v.  Pond,  21  Pick.  (Mass.)  367. 

*  Kittredge  v.  Woods,  3  N.  H.  503. 

^  Chase  v.  Wingate,  68  Me.  204.  See,  also,  Middlebrook  v.  Corwin,  15 
Wend.  (N.  Y.)  169 ;  Plumer  v.  Plumer,  30  N.  H.  558 ;  Perry  v.  Carr,  44  N.  H. 
118 ;  Lewis  v.  Jones,  17  Pa.  St.  262;  Wetherbee  v.  Ellison,  19  Vt.  379. 

«  Vason  V.  Ball,  56  Ga.  268. 

^Maples  V.  Millon,  31  Conn.  598.  See,  also,  Batterman  v.  Albright,  122 
N.  Y.  484.  Between  landlord  and  tenant  this  rule  is  different,  and  the  ten- 
ant can  remove  them  during  the  term. 


MORTGAGABLE    INTERESTS.  455 

Accordingly  nursery  trees  planted  by  the  owner  of  realty 
become  part  of  the  realty,  and  pass  as  such  to  the  purchaser  in 
a  foreclosure  of  the  mortgage,  executed  by  such  owner  of  the 
real  estate,  notwithstanding  the  owner  may  have  executed  a 
chattel  mortgage  upon  the  trees,  which  was  recorded  prior  to 
the  judicial  sale.^  So  plants  and  shrubs,  the  growth  of  cut- 
tings from  plants  and  shrubs  mortgaged,  pass  to  the  mort- 
gagee by  accession.^ 

However,  a  tenant  who  has  set  out  wine  plants  during  his 
tenancy,  may  mortgage  them  by  a  chattel  mortgage,  and  the 
mortgagee  will  take  preference  to  the  vendee  of  the  land.' 
Growing  grass  is  a  part  of  the  realty  ;  yet,  where  it  is  owned 
by  one  who  does  not  own  the  land  it  is  personal  property,  and 
may  be  mortgaged  as  such.* 

Article  6. 

Enforcement  of  Lien. 

1 423.  Foreclosure  of  Mortgage.  I  425.  Trespass  and  Replevin. 

1 424.  Injunction  against  Mortgagor.        1 426.  Damages,  Measure  of. 

§  423.  Foreclosure  of  Mortgage. — Courts  of  equity  in 
many  cases  interpose  their  aid  by  means  of  injunction  to  pre- 
vent the  removal  of  fixtures,  when  it  is  made  to  appear  that 
the  mortgagor  has  the  intention  to  remove  them.^  Mortgagees 
are  entitled  to  everything  that  is  a  fixture.^  So  whenever  the 
mortgagor  endeavors  to  remove  the  fixtures  or  improvements 
upon  the  mortgaged  property,  he  may  be  enjoined,  or  the 
creditor  may  have  his  choice  of  an  action  for  damages,  or  re- 

>  Adams  v.  Beadle,  47  Iowa,  439.     See,  also,  Price  v.  Brayton,  19  Iowa,  309 ; 
Bank  v.  Crary,  1  Barb.  (N.  Y.)  542 ;  King  v.  Wilcomb,  7  Barb.  (N.  Y.)  263. 
''Bryant  v.  Pennell,  61  Me.  108. 
MVintermute  v.  Light,  46  Barb.  (N.  Y.)  278. 

*  Smith  V.  Jenks,  1  Denio  (N.  Y.),  580  ;  1  N.  Y.  90.  Between  vendor  and 
vendee,  wine  plants  growing  will  pass  to  the  vendee :  Wintermute  v.  Light, 
46  Barb.  (N.  Y.)  278.  See,  also,  Smith  v.  Price,  39  111.  28 ;  Bishop  v.  Bishop, 
11  N.  Y.  123. 

*  Gibson  v.  Smith,  2  Atk.  183;  Hanson  v.  Gardiner,  7  Ves.  309;  Keogh  v. 
Daniell,  12  Wis.  163. 

V     « ^^'alm8ley  v.  Milne,  7  C.  B.  (N.  S.)  115 ;  Millikin  v.  Armstrong,  17  Ind. 
456 ;  M'Kim  v.  Mason,  3  Md.  Ch.  186. 


456  NATURE    AND    REQUISITES    OP    THE    CONTRACT. 

plevin  after  he  has  become  the  purchaser  of  the  property  at 
sheriff's  sale.^  And  it  is  the  undoubted  right  of  the  mortga- 
gee, on  foreclosure,  not  only  to  sell  the  real  estate  and  fixtures 
but  also  any  improvements,  and  personal  property  perma- 
nently annexed  to  the  realty  in  such  a  way  as  to  make  it  a 
fixture.^  And  the  execution  creditor  of  the  mortgagor  may 
be  enjoined  from  taking  the  fixtures,  by  the  purchaser  at  a 
foreclosure  sale.^  Or  where  one  takes  possession  of  the  mort- 
gaged realty  under  an  agreement  with  the  mortgagor,  and 
makes  improvements  by  substituting  new  machinery,  and 
makes  additions  and  repairs  with  a  view  of  becoming  the 
owner  of  the  land,  such  additions,  substitutions,  and  repairs 
pass  with  the  real  estate  under  foreclosure/ 

But  a  mortgagee  cannot  convey  at  a  foreclosure  sale  only  the 
title  to  the  realty  with  the  fixtures,  which,  of  course,  are  a  part 
of  the  real  estate ;  he  can  convey  no  title  to  mere  chattels  on 
the  land.* 

§  424.  Injunction  against  Mortgagor. — Whenever  the 
mortgagor  endeavors  to  remove  fixtures  or  improvements  upon 
the  mortgaged  land,  he  may  be  enjoined,®  when  the  right  of  the 
mortgagee  rests  upon  the  claim  to  the  protection  of  the  entire 
security  unimpaired  during  the  life  of  the  mortgage,'^  and 
when,  as  between  mortgagor  and  mortgagee,  the  latter  is 
deemed  the  owner  of  the  fee,  and  as  such  entitled  to  protection.^ 
But  where  the  mortgagee  is  not  deemed  the  owner  of  the  fee, 
he  is  entitled  to  the  protection  of  equity  against  the  destruc- 
tion of  the  security.^     Thus,  where  the  mortgage  is  deemed 

^Dutro  V.  Kennedy,  9  Mont.  101. 

^  Sands  v.  Pfeiffer,  10  Cal.  259;  Merritt  v.  Judd,  14  Cal.  59;  Hoskin  v. 
Woodward,  45  Pa.  St.  42. 

3  Doughty  V.  Owen  (N.  J.),  19  Atl.  Rep.  540.  See,  also.  Usher  v.  Martin,  L. 
R.,  24  Q.  B.  Div.  272. 

*  McFadden  v.  Allen,  50  Hun  (N.  Y.),  361. 

"Buzzell  V.  Cummings,  61  Vt.  213. 

*Dutro  V.  Kennedy,  9  Mont.  101. 

'Nelson  v.  Pinegar,  30  111.  473. 

"Nelson  v.  Pinegar,  30  111.  473. 

9  Brady  v.  Waldron,  2  Johns.  Ch.  (N.  Y.)  148. 


1 


MORTGAGABLE    INTERESTS.  457 

only  a  security,  relief  will  be  allowed  to  prevent  tlie  destruc- 
tion of  the  security.' 

The  remedy  of  the  mortgagee  in  some  States  is  by  injunction 
to  restrain  the  commission  of  waste.^  An  injunction  is  the 
proper  remedy  on  behalf  of  a  vendee  in  possession  to  restrain 
the  vendor  from  the  removal  of  fruit  trees  and  ornamental 
shrubbery,  notwithstanding  vendor  claims  the  right  to  such 
removal  under  a  verbal  reservation.^ 

§  425.  Trespass  and  Replevin. — In  those  States  where  the 
mortgagee  has  the  legal  title  to  the  property,  he  may  maintain 
replevin  for  fixtures  removed  from  the  realty.*  And  the  mort- 
gagee, whether  in  possession  of  the  premises  or  not,  may  sue 
for  the  recovery  of  removed  fixtures  in  an  action  of  replevin,^  or 
may  sue,  in  an  action  of  trover  to  recover  their  value,  or  may 
sue  in  trespass  for  damages  done  the  freehold."  But  if  the 
mortgagee  is  not  in  actual  possession,  and  has  not  entered  to 
foreclose,  he  cannot  maintain  trespass  against  the  owner  of  the 
equity  of  redemption  for  cutting  grass  on  the  land.^ 

In  New  Jersey,  however,  where  the  mortgagee  has  the  legal 
title  for  the  purpose  of  asserting  and  maintaining  his  possession, 
after  default,  he  is  not  allowed  to  maintain  replevin  for  fix- 
tures wrongfully  removed,^  but  he  may  maintain  an  action  of 
trespass  on  the  case  for  the  injury  to  his  security.*  In  some 
States  where  a  mortgage  is  a  mere  lien,  the  mortgagee  cannot 
recover  the  fixtures  from  the  purchaser,  because,  by  the  re- 
moval, he  has  lost  the  right  to  the  property,  though  he  may 
have  an  action  for  the  waste.'** 

•Cooper  I'.  Davis,  15  Conn.  561 ;  Murdock's  Case,  2  Bland  (Md.),  461 ;  Sal- 
mon V.  Cla^ett,  3  Bland  (Md.),  126. 

'  Vanderslice  v.  Knapp,  20  Kan.  647. 

'Smiths.  Price,  39  111.  28. 

*  Carpenter  v.  Allen,  150  Mass.  281 ;  Matzon  v.  Griffin,  78  111.  477. 

*Laflin  v.  Griffiths,  35  Barb.  (N.  Y.)  58 ;  Harlan  v.  Harlan,  15  Pa.  St.  507. 

*Hitchman  v.  Walton,  4  Meea.  &  Wes.  409 ;  Burnside  v.  Twitchell,  43  N.  H. 
390;  Holland  v.  Hodgson,  L.  R.  7  C.  P.  328. 

'Woodward  v.  Pickett,  8  Gray  (Mass.),  617. 

*Kircher  v.  Schalk,  39  N.  J.  L.  335. 
V   'Jackson  v.  Turrell,  39  N.  J.  L.  329. 

"Clark  V.  Reyburn,  1  Kan.  281 ;  Harris  v.  Bannon,  78  Ky.  568 ;  Woehler  v. 
Endter,46  Wis.  301 ;  Citizens'  Bank  v.  Knapp,  22  La.  Ann.  117. 


458  NATURE    AND    REQUISITES    OF   THE   CONTRACT. 

§  426.  Damages,  Measure  of. — Where  the  mortgagee  has 
the  legal  title,  he  is  entitled  to  the  full  benefit  of  the  entire 
mortgaged  property  for  the  payment  of  his  debt.^  But  in  those 
jurisdictions  where  a  mortgage  is  a  mere  lien  and  not  a  title  to 
the  land,  an  action  by  the  mortgagee  for  any  injury  to  the 
land  must  be  based  not  upon  the  injury  to  the  premises,  but 
upon  the  loss  occasioned  to  him  by  impairing  his  security ; 
hence,  his  damages  are  limited  to  the  loss  he  may  sustain 
upon  his  security.^  The  mortgagee's  damages  under  this  rule 
would  be  limited  to  the  amount  of  injury  to  the  mortgage 
security,  however  great  the  injury  to  the  land  might  be.^ 

Judge  Van  Syckel  says  that  the  mortgagee's  action  must 
rest  upon  proof  that,  before  the  alleged  injury,  the  mortgaged 
premises  were  of  sufficient  value  to  pay  the  mortgage  debt  or 
a  part  of  it,  and  that,  by  the  reason  of  such  injury,  the  mort- 
gaged realty  is  inadequate  for  that  purpose.  "  In  that  view 
the  extent  of  the  loss  can  be  approximately  computed.  This, 
in  my  opinion,  is  the  better  rule,  and  one  which,  in  its  prac- 
tical application,  will  not  be  attended  with  any  serious  diffi- 
culty." " 

In  Wisconsin  after  foreclosure,  the  mortgagee  may  maintain 
an  action  for  an  injury  done  the  mortgaged  premises,  provided 
the  security  be  thereby  impaired  and  the  mortgagor  be  in- 
solvent.^ 

'  Byrom  v.  Chapin,  113  Mass.  308. 

2  Van  Pelt  v.  McGraw,  4  N.  Y.  110  ;  Schalk  v.  Kingsley,  42  N.  J.  L.  32.  See, 
also,  Gardner  v.  Heartt,  3  Denio  (N.  Y.),  232;  Lane  v.  Hitchcock,  14  Johns. 
(N.  Y.)  213. 

3  Van  Pelt  v.  McGraw,  4  N.  Y.  110. 
*  Schalk  V.  Kinp;sley,  42  N.  J.  L.  32. 
^  Jones  V.  Costigan,  12  Wis.  677. 


i 


CHAPTER  XII. 

after-acquired  property. 

Article  1. 

Potential  Interests. 

2  427.  At  Common  Law.  §  428.  Potential  Interests. 

§  427.  At  Common  Law. — At  common  law  a  mortgage  could 
only  operate  on  property  in  esse  at  the  time  of  its  execution, 
and  which  actually  belonged  to  the  mortgagor,  or  potentially 
belonging  to  him  as  an  incident  of  other  property  then  in 
existence,  and  belonging  to  him.  So,  under  the  common 
law,  all  mortgages  of  property  which  the  mortgagor  does 
not  own  at  the  time  of  the  execution  of  the  mortgage, 
though  he  acquires  it  afterward,  are  void  as  to  third  per- 
sons.^ 

To  constitute  a  valid  sale  or  mortgage  at  law,  the  vendor 
or  mortgagor  must  have  the  present  property  either  actually 
or  potentially  in  the  thing  sold.^ 

In  case  of  chattels,  if  the  instrument  be  so  framed  as  to 
give  the  mortgagee  a  power  of  seizing  such  future  chattels 
of  the  grantor  as  they  should  be  acquired  by  him  and 
brought  upon  the  premises,  they  will  pass,  after  such  seizure, 
where  there  is  already  a  foundation  of  interest  in  the  grantor. 
This  is  an  old  rule  in  the  law,  and  rests,  to  some  extent,  upon 
a  maxim  stated  by  Lord  Bacon :  "  Though  the  grant  of  a  fu- 
ture interest  is  invalid,  yet  a  declarative  precedent  may  be 

'  Borden  v.  Croak,  131  111.  68 ;  Jones  v.  Richardson,  10  Met.  (Mass.)  481 ; 
Looker  v.  Peckwell,  38  N.  J.  L.  253  ;  "Wilson  v.  Wilson,  37  Md.  1 ;  Hamilton  v. 
Rogers,  8  Md.  301 ;  Smithurst  v.  Edmunds,  14  N.  J.  Eq.  408 ;  Amonett  v. 
Amis,  16  La.  Ann.  225;  Ross  v.  Wilson,  7  Bush  (Ky.),  29. 

'Looker  v.  Peckwell,  38  N.  J.  L.  253 ;  Gale  v.  Burnell,  7  Ad.  &  El.  850 ;  Low 
y.  Pew,  108  Mass.  347 ;  Van  Hoozer  v.  Cory,  34  Barb.  (N.  Y.)  9 ;  Head  v.  Good- 
win, 37  Me.  181. 

459 


460  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

made  which  will  take  effect  on  the  intervention  of  some  new 
act."  ' 

As  an  enunciation  of  the  rules  governing  courts  of  law,  this 
statement  must  be  regarded  as  correct.^ 

The  general  idea  running  through  the  decisions  of  courts  of 
law  is  that  the  executory  agreement  operates  as  a  license,  au- 
thority, or  power,  revocable  in  its  nature,  until  the  creditor  is 
either  put  into  possession  of  the  chattels  at  the  time  or  after 
they  come  into  existence  or  are  vested  in  the  debtor.  As  soon 
as  that  new  act  has  intervened,  the  lien  of  the  creditor  becomes 
perfect,  and  in  the  absence  of  statutory  regulation  prevails 
over  the  liens  of  subsequent  executions.  Thus,  a  license  to 
search  for  and  raise  metals,  and  also  to  carry  them  away, 
operates  not  merely  as  a  license,  but  as  a  grant,  and  passes  an 
interest  to  the  grantee,  which  is  capable  of  being  assigned  by 
him.^  And  a  grant  of  the  future  produce  of  land  actually  in 
possession  of  the  grantor  at  the  time  of  the  grant  passes  an 
interest  in  such  future  crop  as  soon  as  it  comes  into  existence.* 

§  428.  Potential  Interests. — Lord  Hobart  says  :  "  Land  is 
the  mother  and  root  of  all  fruit.  Therefore,  he  that  hath  it 
may  grant  all  fruits  that  may  arise  upon  it  after,  and  the 
property  shall  pass  as  soon  as  the  fruits  are  extant.  A  person 
may  grant  all  the  tithe- wool  that  he  shall  have  in  such  a  year, 
yet  perhaps  he  shall  have  none ;  but  a  man  cannot  grant  all 
the  wool  that  he  shall  grow  upon  his  sheep  that  he  shall  buy 
hereafter,  for  then  he  hath  it  neither  actually  or  potentially. 
He  may,  therefore,  sell  or  mortgage  the  natural  and  expected 
products,  growth  or  increase  of  his  own  property ;  but  he  can- 
not sell  or  mortgage  the  crops  to  grow  upon  the  land  of  an- 

^"  Licet  disposUio  de  inter  esse  futuro  sit  mutilis,  tamen  potest  fieri  declaratio 
prsecedens  quae  sortiaiur  effectum,  interveniente  novo  adu." 

2  Congreve  v.  Evetts,  10  Exch.  298 ;  Carr  v.  AUatt,  3  Hurl.  &  Norm.  964 ; 
Hope  V.  Hayley,  5  Ell.  &  Black.  830 ;  Chidell  v.  Galsworthy,  G  C.  B.  (N.  S.)  471 ; 
Baker  v.  Gray,  17  C.  B.  462 ;  Moody  v.  Wright,  13  Met.  (Mass.)  29 ;  Chapman 
V.  Weimer,  4  Ohio  St.  481. 

'Wood  V.  Leadbitter,  13  Mees.  &  W.  838 ;  Wickham  v.  Hawker,  7  Meea.  & 
Wes.  63. 

*  Grantham  v.  Hawley,  Hob.  132. 


AFTER-ACQUIRED    PROPERTY.  461 

other,  or  the  wool  to  grow  upon  another's  sheep,  or  upon 
sheep  that  he  may  thereafter  buy."  ^  "  Leases  for  years,  be  they 
present  or  future,  wardships  of  tenants  in  capiie,  or  by  knight's 
service,  trees,  oxen,  horses,  plate,  household  stuff  and  the  like ;. 
also  trees,  grass,  and  corn  growing  and  standing  upon  the- 
ground,  fruit  upon  the  trees,  wool  upon  the  sheep's  back,  are 
grantable."  ^ 

The  doctrine  of  Lord  Hobart,  so  far  as  the  mortgaging  of 
unplanted  crops  is  concerned,  does  not  find  support  in  all  of 
the  English  cases.  Thus,  when  a  party  transfers  by  deed  all 
his  household  goods,  farming  stock,  crops,  and  personal  estate 
on  his  farm,  as  a  security,  crops  to  be  planted  do  not  pass  un- 
less taken  possession  of,  after  being  planted  by  the  mortgagor.^ 
So,  under  a  bill  of  sale,  growing  crops  passed  on  the  execution 
of  the  deed,  but  future  crops  did  not ;  the  mortgagee  would 
have  no  legal  or  equitable  title  to  crops  not  sown  at  the  execu- 
tion of  the  instrument/  But  this  principle  of  potential  inter- 
est was  recognized  in  another  case.  A  tenant  for  years  of  a 
farm,  being  indebted  to  his  landlord,  assigned  to  his  landlord, 
by  deed,  "  all  his  household  goods  and  all  his  tenant  right  and 
interest,  yet  to  come  and  unexpired,  in  and  to  the  farm  and 
premises."  Under  this  agreement,  it  was  held  that  the  ten- 
ant's interest  in  crops  grown  in  future  years  of  the  term  passed 
to  the  landlord.* 

*  Grantham  v.  Hawley,  1  Hobart,  132. 
'^Shep.  Touch.  241. 

'  Hope  V.  Hayley,  5  El.  &  Bl.  830. 

*  Congreve  v.  Evetts,  10  Exch.  298.  See,  also,  Gale  v.  Burnell,  7  Ad.  &  El.  850. 

*  Fetch  V.  Tutin,  15  Mees.  &  Wes.  110. 


462  nature  and  requisites  of  the  contract. 

Article  2, 
Unplanted  and  Growing  Orops. 

§  429.  Crops  not  Sown.  ^  441.  New  Hampshire. 

^  430.  Alabama.  §  442.  New  Mexico. 

^  431.  Arkansas.  §  443.  New  York. 

I  432.  California.  §  444.  North  Carolina. 

I  433.  Kansas.  ^  445.  North  Dakota. 

I  434.  Kentucky.  I  446.  South  Dakota. 

§  435.  Illinois.  ?  447.  Tennessee. 

§  436.  Iowa.  ?  448.  Texas. 

§  437.  Minnesota.  §  449.  Wisconsin. 

§  438.  Mississippi.  ?  450.  Growing  Crops. 

§  439.  Nebraska.  §  451.  Growing  Timber. 

§  440.  Nevada.  §  452.  Growing  Grass. 

§  429.  Crops  Not  Sown. — Whether  a  party  can  make  a 
valid  mortgage  of  an  unsown  crop  is  a  question  not  decided  the 
same  by  all  courts.  Some  authorities  hold  that  the  owner  of 
the  soil  may  make  a  valid  mortgage  of  a  crop  to  be  grown/  and 
others  hold  that  it  must  be  sown  before  it  can  mortgaged  as 
a  crop.^  Many  of  the  States,  however,  have  regulated  this 
question  by  statutory  provisions. 

After  sowing  grain  upon  shares  with  the  owner  of  the  land, 
the  tenant  may  make  a  valid  mortgage  of  his  share.^ 

§  430.  Alabama. — In  Alabama,  though  a  mortgage  on  an 
unplanted  crop  creates  only  an  equity,  unless  possession  is 
taken  or  received  after  it  is  planted,  or  there  is  some  new 
act  effectual  to  pass  the  legal  title,  yet  the  mortgagee  may 
maintain  an  action  on  the  case  against  a  stranger  who  has 
converted  or  disposed  of  the  crop  with  notice  of  the  mort- 
gage.* 

Such  a  mortgage  does  not  convey  the  legal  title  on  which 

^  Butt  V.  Ellett,  19  Wall.  (U.  S.)  544 ;  Apperson  v.  Moore,  30  Ark.  56 ;  Arques 
t'.  Wasson,  51  Cal.  620 ;  Lehman  v.  Marshall,  47  Ala.  362 ;  Jones  v.  Webster, 
48  Ala.  109. 

''Stowell !'.  Bair,  5  111.  App.  104;  Gittings  v.  Nelson,  86  111.  591 ;  Millimanr. 
Neher,  20  Barb.  (N.  Y.)  37. 

'Shuart  v.  Taylor,  7  How.  Pr.  (N.  Y.)  251 ;  McGee  v.  Fitzer,  37  Tex.  27. 

*  Eees  V.  Coats,  65  Ala.  256. 


AFTER-ACQUIRED    PROPERTY.  463 

the  mortgagee  may  maintain  an  action  of  trover  for  the  conver- 
sion of  the  crop,  unless  he  has  acquired  possession.* 

It  is  essential  to  the  creation  of  such  incumbrance  that  the 
subject-matter  should  have  a  potential  existence,  as  distin- 
guished from  a  mere  possibility  or  expectancy  on  the  part  of 
the  contracting  parties  that  it  will  come  into  being.  While 
the  being  itself  need  not  have  identity  or  separate  entity, 
yet  it  must,  at  least  be  a  product,  or  growth,  or  increase 
of  property  which  has  at  the  time  a  corporeal  existence, 
and  in  which  the  mortgagor  has  a  present  interest — not 
a  mere  belief,  hope,  or  expectation  that  he  will,  in  future, 
acquire  such  an  interest.^ 

§  431.  Arkansas. — A  mortgage  of  unplanted  crops  execu- 
ted prior  to  the  act  of  Feb.  11,  1875,  was  void  in  law.^  But 
a  lien  attached  in  equity  as  soon  as  the  subject  of  the  mortgage 
came  into  existence.*  The  statute  provides  that  mortgages 
may  be  made  on  crops  already  planted,  or  to  be  planted,  and 
are  binding  upon  such  crops  and  their  products.  A  laborer  may 
mortgage  his  interest  in  a  crop  for  supplies  furnished  to  him.* 

§  432.  California. — The  court  holds  that  the  general  rule 
undoubtedly  is,  that  a  person  cannot  convey  a  thing  not  in  esse, 
or  in  which  he  has  no  present  interest.  But  if  the  thing  has 
a  potential  interest,  it  may  be  mortgaged  or  hypothecated.  So 
a  lessee  or  owner  of  land  in  possession  of  the  same  may,  before 
he  has  planted  a  crop,  execute  a  valid  mortgage  on  the  crop  to 
be  raised  by  him  the  coming  cropping  season.® 

§  433.  Kansas. — In  this  State  where  a  mortgage  is  given  on 
an  unplanted  crop,  which  is  afterward  planted  and  grown,  but 
before  possession  is  taken  thereof  by  the  mortgagee,  a  creditor 

'Whittloshoffer  v.  Strauss,  83  Ala.  517;  Marks  v.  Robinson,  82  Ala.  69; 
Leslie  ik  Hinson,  83  Ala.  266. 
'  Paden  v.  Bellenger,  87  Ala.  575. 
^Tomilson  v.  Greenfield,  31  Ark.  557. 

*  Apperson  v.  Moore,  30  Ark.  56. 

*  Dig.  of  Stat.  1884,  sect.  4747. 
"^Arquea  v.  Wasson,  51  Cal.  620. 


464  NATURE    AND   REQUISITES   OF   THE   CONTRACT. 

of  the  mortgagor  causes  an  execution  to  be  levied  thereon,  the 
execution  will  take  precedence.  The  mortgage  being  void, 
and  the  property  subject  to  an  execution,  it  can  be  properly- 
levied  upon.  A  valid  mortgage  can  only  be  given  upon 
prox)erty  which  has  an  actual  or  potential  existence ;  a  crop 
not  planted  has  neither  an  actual  or  potential  life,  and  cannot 
therefore  be  legally  transferred.^ 

§  434.  Kentucky. — A  mortgage  of  a  crop  to  be  raised  on  a 
farm  during  a  certain  term  passes  no  title  in  the  crop  not  sown 
when  the  mortgage  was  executed,  and  the  mortgagee  has  no 
claim  against  a  purchaser  of  the  crop  for  it  or  its  value.^ 

§  435.  Illinois. — Crops  to  be  raised  in  the  future  by  the  in- 
dustry of  the  mortgagor,  the  seed  not  being  in  the  ground  at 
the  time  of  the  execution  of  the  mortgage,  have  no  potential 
existence  and  do  not  pass  under  the  mortgage ;  and  the  mort- 
gagee without  taking  possession,  cannot  hold  them  as  against 
an  execution  creditor.^  But  a  mortgage  of  "  all  the  wheat 
and  other  crops  now  growing  "  on  certain  land,  the  wheat  hav- 
ing been  sown  the  fall  before,  is  valid,  because  the  wheat  at 
the  time  of  giving  the  mortgage,  had  a  potential  existence.* 

§  436.  Iowa. — A  mortgage  of  crops  to  be  grown  in  the 
future,  is  valid.^  Such  mortgage  attaches  to  the  crop  when  it 
comes  into  existence,  and  imports  notice  of  the  lien  of  the 
mortgage." 

The  rule  is,  however,  that  a  mortgage  will  not  be  deemed  to 
cover  after-acquired  property,  unless  the  intention  that  it 
should  is  clearly  expressed.^ 

§  437.  Minnesota. — A  mortgage  on  crops  to  be  grown  by 
the  mortgagor  on  land  owned  or  possessed  by  him  is  valid. 

1  Long  V.  Hines,  40  Kan.  220. 

2  Hutchinson  v.  Ford,  9  Bush,  318. 
5  Stowell  r.  Bair,  5  111.  App.  104. 
♦Hansen  v.  Dennison,  7  111.  App.  73. 
^Norris  v.  Hix,  74  Iowa,  524. 

«  Wheeler  v.  Becker,  68  Iowa,  723. 

^Lormer  r.  Allyn,  64  Iowa,  725;  Mc.\rthur  ?'.  Garman,  71  Iowa,  34. 


AFTER-ACQUIRED  PROPERTY.  465 

The  common-law  rule  that  no  interest  could  pass  by  the  as- 
signment of  a  chattel  not  in  esse  does  not  apply  to  crops  to  be 
raised  by  the  assignor,  on  land  then  owned  by  him  or  in  his 
possession/ 

So  where  parties  by  their  contract  in  clear  terms  express  an 
intention  to  create  a  mortgage  lien  upon  chattels  not  then 
owned  but  to  be  subsequently  acquired  by  the  mortgagor, 
whether  in  being  or  not,  the  mortgage  attaches  as  a  lien  on  the 
property  as  soon  as  the  mortgagor  acquires  it,  as  against  him 
and  all  claiming  under  him  with  notice  of  all  voluntary  con- 
veyances, the  same  as  if  the  property  had  belonged  to  him 
when  the  mortgage  was  created,  and  precisely  as  if  the  property 
had  been  in  being  and  belonged  to  the  mortgagor  when  the 
mortgage  was  executed.^ 

§  438.  Mississippi. — A  lessee  or  owner  of  land  may  execute 
a  mortgage  conveying  crops  to  be  grown  by  him  in  future 
years,  though  the  subject  of  the  mortgage  be  a  chattel  not  in 
esse,  but  a  future  acquisition.  He  has  acquired  such  an  in- 
terest in  the  soil  as  will  enable  him  to  mortgage  fruits  of  it  to- 
be  afterward  produced.^  This  is  on  the  doctrine  that  one  may 
make  a  present  sale  or  mortgage  of  all  things  having  a  poten- 
tial existence ;  an  unplanted  crop  has  such  potential  existence.* 

§  439.  Nebraska. — As  a  question  of  law,  the  lien  of  a  mort- 
gage on  an  unplanted  crop,  at  the  time  of  the  execution  of  the 
instrument,  will  not  attach  to  the  crop  when  it  comes  into  ex- 
istence, unless  taken  possession  of  by  the  mortgagee. 

Until  the  mortgagee  has  taken  possession  of  the  crop  after 
coming  into  existence,  it  gives  a  mere  license  only  to  go  upon 
the  land,  and  conveys  neither  a  lien  nor  a  right  of  property 
which  the  mortgagee  can  assert  against  a  purchaser  or  execu- 
tion creditor  of  the  mortgagor.' 

'  Minnesota  Linseed  Oil  Co.  r.  Maginnis,  32  Minn.  193 ;  Miller  v.  McCor- 
mick  Harvest  Mach.  Co.,  35  Minn.  399. 
'Ludlum  ?'.  Rothschild,  41  Minn.  218. 
'  Evemian  v.  Robb,  52  INIiss.  653. 

*  ]McCo\vn  ;;.  IMayer,  65  Mi.«s.  537  ;  Stadeker  v.  Loeb,  67  Miss.  200. 
^  Cole  V.  Kerr,  19  Nebr.  553. 
VOL.  I.— 30 


466  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

:§  440.  Nevada. — In  this  State  it  is  provided  that  growint^ 
OFops  may  be  mortgaged,  and  the  mortgage  may  be  executed 
aipon  sx  growing  crop  as  well  before  as  after  the  crop  has  been 
planted.^ 

•§441.  New  Hampshire. — In  this  State,  crops  to  be  sown 
cannot  be  mortgaged.  But  crops  already  sown,  as  fall  rye, 
may  be  mortgaged  the  following  January,  and  hay  to  be  grown 
during  the  year,^ 

§  442.  New  Mexico. — In  this  Territory,  growing  crops  can- 
not be  mortgaged  separate  from  the  land.  This  is  regulated 
by  statutory  provisions.  After  being  severed  from  the  soil,  the 
crop  can  be  mortgaged.^ 

§  443.  New  York. — A  mortgage  of  crops  to  be  grown  will 
not  pass  title  at  law,  yet  the  mortgagee  has  a  license,  under 
such  a  mortgage,  to  seize  such  property,  and  after  such  seizure 
the  title  passes ;  in  equity,, such  mortgage  transfers  the  bene- 
ficial interest  without  the  intervention  of  any  new  act,  which 
attached  immediately  upon  coming  into  existence,  or  the  ac- 
quisition of  the  property  ;  and  crops  subsequently  raised  upon 
the  farm  are  covered  by  such  mortgage.* 

§  444.  North  Carolina. — Frudus  industriales  are  chattels  ; 
and  a  conveyance  of  one's  entire  crop,  whether  growing  or  un- 
planted,  is  valid,  and  a  mortgage  can  be  made  on  the  same, 
even  if  the  crop  is  to  be  planted  in  the  future.*  And  under 
the  rule  that  one  may  grant  a  thing  not  in  esse,  of  which  he 
has  a  potential  interest,  a  valid  mortgage,  at  common  law, 
may  be  made  by  the  owner  of  land  of  crops  sown  but  not  yet 
growing.^ 

'Laws  of  1885,  ch.  54. 

« Cudworth  v.  Scott,  41  N.  H.  456.    See  Gen.  Stat.  1878,  ch.  137,  sect.  1,  p. 
328. 
^  Gen.  Laws,  sect.  1586. 
♦McCaffrey  v.  Woodin,  65  N.  Y.  459. 
*  Robinson  v.  Ezzell,  72  N.  Car.  231. 
«  Gotten  V.  Willoughby,  83  N.  Car.  75. 


AFTER- ACQUIRED    PROPERTY.  467 

§  445.  North  Dakota. — A  mortgage  of  unplanted  crops  is 
valid.  Such  a  mortgage  is  valid  against  a  bona  fide  purchasoi' 
for  value,  if  recorded  when  given,  and  need  not  be  again  filod 
for  record  after  the  crops  come  into  existence.  Under  the  law 
the  original  contract,  ipso  facto,  immediately  upon  the  acqui- 
sition or  creation  of  such  property,  awakens  and  brings  into 
life  the  lien  agreed  upon.^ 

§  446.  South  Dakota. — By  statutory  provisions  an  agree- 
ment may  be  made  to  create  a  lien  on  property  not  yet  In 
existence,  in  which  case  the  lien  attaches  when  the  party 
agreeing  to  give  it,  acquires  an  interest  in  the  property. 
Hence,  a  mortgage  of  unplanted  crops  is  valid,  made  by  the 
owner  or  lessee  of  the  land.^ 

§  447.  Tennessee. — In  this  State  a  mortgage  of  an  ui;i- 
planted  crop  is  valid,  even  as  against  creditors  of  the  mort- 
gagor or  other  third  persons.^ 

§  448.  Texas. — A  growing  crop  planted  before  the  date  of 
the  contract  can  be  mortgaged.  Such  crop  is  subject  to  mort- 
gage regardless  of  itg  growth  toward  maturity.  The  time  of 
its  planting  may  be  recited  in  the  instrument* 

§  449,  Wisconsin. — A  mortgage  can  have  no  valid  opera- 
tion upon  a  crop  of  grain  given  at  or  about  the  time  of  plant- 
ing the  same,  and  before  it  is  up  or  has  any  appearance  of  a 
growing  crop  ;  because  the  property  attempted  to  be  mortgaged 
in  such  case  cannot  be, said  to  be  in  existence.  The  subject- 
matter  not  being  in  existence,  there  is  nothing  for  it  to  operate 
upon.^ 

§  450.  Growing  Crops. — In  some  of  the  States  statutory 
provisions  are  made  as  regards  the  stage  of  growth  when  crops 

'Grand  Forks  Nat.  Bank  v.  Minneapolis  &  N.  Elev.  Co.,  6  Dak.  357. 
This  regulated  by  the  Code,  sect.  4330,  4331. 

*  Com.  Laws,  sects.  4330, 4331 ;  Grand  Forks  Nat.  Bank  v.  Minneapolis  &  N. 
Elev.  Co.,  6  Dak.  357. 

^Watkins  v.  Wyatt,  9  Baxt.  250. 
*Cookv.  Steel,  42  Tex.  53. 

*  Comstock  V.  Scalep,  ,7  Wis.  159 ;  Lamson  v.  Moffat,  61  Wis.  153. 


468  NATURE    AND    REQUISITES    OF    THE   CONTRACT. 

ma}^  be  mortgaged.'  And  generally  a  crop  is  "  a  growing 
crop,"  so  that  it  can  be  mortgaged,  giving  a  lien  or  title  to  the 
mortgagee  from  the  time  the  seed  is  deposited  in  the  ground.^ 
It  is  the  rule  of  the  common  law  that  growing  crops  are  per- 
sonal property,  but  pass  by  a  conveyance  as  appurtenant  to 
the  land,  unless  severed  by  reservation  or  exception.  And  a 
party  may  show  by  parol  evidence  that  the  growing  crops  were 
reserved  on  sale  of  the  land,  although  there  be  no  exception  in 
the  deed.  A  different  rule  controls,  undoubtedly,  in  regard  to 
the  natural  products  of  the  earth,  which  grow  spontaneously, 
without  the  culture  of  man's  hands,  such  as  trees,  grass,  and 
the  like,  and  a  continuous  right  to  enter  and  cut,  would 
require  to  be  reserved  by  an  instrument,  in  writing.^ 

§  451.  Growing  Timber. — When  growing  trees  are  mort- 
gaged to  be  removed,  they  are  constructively  severed  from  the 
realty,  and  become  personalty.  Thus,  a  mortgage  of  pine  logs 
is  valid  where  part  had  already  been  cut  and  rafted,  and  the  re- 
mainder was  to  be  cut  and  placed  in  rafts  within  a  certain  time, 
from  lands  which  were  designated  ;  and  this  is  a  sufficient 
severance,  and  all  the  logs  become  personalty.^ 

So  a  party  may  buy  growing  timber  and  give  a  valid  mort- 
gage of  the  same  before  actually  severed  from  the  realty ;  such 
mortgage  will  be  effectual  as  soon  as  the  trees  are  cut  down.^ 

§  452.  Growing  Grass. — Growing  grass,  trees,  and  other 
natural  products  of  the  earth  are  parcels  of  the  land.  They 
are  within  the  statute  of  frauds,  and  can  only  be  sold,  as  a 
general  rule,  by  an  agreement  in  writing.^ 

^  Washington  Code,  sect.  1986  ;  Arkansas,  Acts  of  1875,  p.  149 ;  New  Hamp- 
shire, Gen.  Laws  of  1878,  ch.  137,  sect.  1 ;  Nevada,  Acts  of  1885,  ch.  54. 

nVilkinson  V.  Ketler,  69  Ala.  4.35;  Cook  v.  Steel,  42  Tex.  53;  Hansen  v. 
Dennison,  7  111.  App.  73  ;  Cotten  v.  Willoughby,  83  N.  Car.  75. 

^Backenstoss  v.  Stahler,  33  Pa.  St.  251. 

*Boykin  v.  Rosenfield,  69  Tex.  115. 

*Claflin  V.  Carpenter,  4  Met.  (Mass.)  580;  Sheldon  v.  Conner,  48  Me.  584; 
Wood  V.  Lester,  29  Barb.  (N.  Y.)  145  ;  Cook  v.  Stearns,  11  Mass.  533  ;  Doug- 
las V.  Shumway,  13  Gray  (Mass.),  498;  Nelson  v.  Nelson,  6  Gray  (Mass.),  385; 
Cndworth  v.  Scott,  41  N.  H.  456 ;  Erskine  v.  Plummer,  7  Me.  447. 

*  Green  f.  Armstrong,  1  Denio  (N.  Y.),  550;  Wintermute  v.  Light,  46  Barb. 


AFTER-ACQUIRED  PROPERTY.  469 

A  writing  would  be  necessary  to  give  the  vendee  the  right 
to  enter  and  cut  tliem.'  But  grain  and  vegetables  are  annual 
products  of  the  earth,  and  may  be  mortgaged  by  parol.^ 

Where  the  mortgagor  of  grass  owns  both  the  land  and  the 
grass  or  trees,  and  he  fails  to  fulfill  the  conditions  of  the  mort- 
gage, then  there  is  a  severance  in  contemplation  of  law,  and 
the  grass  becomes  a  chattel  belonging  to  the  mortgagee.^  When 
the  grass  is  owned  by  one  not  the  owner  of  the  realty,  then  it 
is  not  considered  a  parcel  of  the  land/ 

Article  3. 
In  Equity. 

§453.  In  Equity.  H55.  Priority. 

2  454.  The  Prevailing  Doctrine  in 
Equity. 

§  453.  In  Equity. — At  common  law  no  title  passed  to  the 
mortgagee  of  after-acquired  property.  In  equity,  a  mortgage  of 
property  in  essS  and  after-acquired,  creates  an  equitable 
interest  in  that  after-acquired.  Whenever  the  parties  by  their 
contract  intend  to  create  a  positive  lien  or  charge,  either  upon 
real  or  personal  property,  whether  then  owned  by  the  mort- 
gagor or  not,  or,  if  personal  property,  whether  it  be  in  esse  or 
not,  it  attaches  in  equity  as  a  lien  or  charge  upon  the  particu- 
lar property,  as  soon  as  the  mortgagor  or  contractor  acquires  a 
title  thereto  against  the  latter,  and  all  persons  asserting  a 
claim  thereto  under  him,  either  voluntarily  or  with  notice,  or 
in  bankruptcy.*  In  equity,  such  a  mortgage  is  effectual  to 
charge  the  property,  when  acquired,  with  an  equitable  lien,  or 

(N.  Y.)  278 ;  Rodwell  v.  Phillips,  9  Mees.  &  Wes.  501 ;  Carrington  v.  Roots, 
2  Mees.  &  Wes.  248 ;  Crosby  v.  Wadsworth,  6  East,  602. 
'  Backenstoss  v.  Stahler,  33  Pa.  St.  251. 

*  Robinson  v.  Ezzell,  72  N.  Car.  231 ;  Jones  v.  Flint,  10  Ad.  &  E.  753;  Par- 
ker V.  Staniland,  11  East,  362. 

"Bank  v.  Crary,  1  Barb.  (N.  Y.)  542. 

*  Smith  V.  Jenks,  1  Denio  (N.  Y.),  580;  1  N.  Y.  90 ;  Green  v.  Armstrong,  1 
Dgnio  (N.  Y.),  550. 

^MitcheU  v.  Winslow,  2  Story,  C.  C.  630. 


470  NATURE    AND    REQUISITES    OF    TlHE    CONTRACT. 

i/y  create  an  equitable  title  to  it  in  favor  of  the  mortgagee 
against  the  mortgagor.' 

Many  decisions  hold  that  though  the  mortgage  per  se  is  in- 
operative to  transfer  the  legal  title,  possession  so  given  or  taken 
ttnder  it  transfers  the  legal  title  to  the  mortgagee,  being  the 
ihiovus  actus  interveniens,  as  stated  by  Lord  Bacon,  to  give  effect 
to  the  mortgage  as  a  declaratio  prsecedens.^ 

The  rule  in  equity  was  settled  in  a  leading  case.'  This 
case  was  twice  argued.  One  Taylor  was  the  owner  of  certain 
machinery  in  a  mill.  It  was  purchased  by  Holroyd,  but  not 
removed  by  him,  Taylor  continuing  in  possession.  He,  how- 
ever, executed  a  deed  by  which  it  was  declared  that  the  ma- 
chinery was  the  property  of  Holroyd ;  that  Taylor  desired  to 
repurchase  it  for  £5,000,  but  had  not  the  money  to  pay  for  it, 
wherefore  it  was  conveyed  to  B.  in  trust  when  Taylor  should 
pay  the  money  to  transfer  to  him,  and,  if  he  did  not  pay,  to 
hold  the  property  for  Holroyd.  There  was  a  covenant  that  all 
the  machinery  which  should  be  placed  in  the  mill,  in  addition 
to  or  in  substitution  for  the  original  machinery,  should  be  sub- 
ject to  the  same  trusts,  but  nothing  was  done  by  or  on  behalf  of 
Holroyd  to  take  possession  of  the  newly-purchased  machinery. 
On  April  2,  1860,  Holroyd  served  Taylor  with  notice  of  de- 
mand for  payment  of  £5,000.  An  execution  was  afterward 
fevied  by  a  creditor.  This  state  of  facts  distinctly  raised  the 
point  whether  the  rule  that  there  must  be  "  some  new  act  in- 
tervening "  in  order  to  create  the  lien,  prevails  in  equity.  Lord 
Westbury  said  that  though  the  contract  as  to  the  future  ac- 
quired property  passed  no  title,  yet  that  if  a  vendor  or  mort- 
gagor agreed  to  sell  or  mortgage  property  of  which  he  is  not 
possessed  at  the  time,  and  receives  a  consideration,  and  after- 
ward becomes  possessed  of  property  answering  the  description 

'  Borden  r-.  Croak,  131  111.  68 ;  McCaffrey  v.  Woodin,  65  N.  Y.  459 ;  Wood  v. 
U\adbitter,  13  Mees.  &  Wes.  838 ;  Sillera  v.  Lester,  48  Miss.  513  ;  Pennock  v, 
Coe,  23  How.  (U.  S.)  117 ;  Phelps  v.  Murray,  2  Tenn.  Ch.  740 ;  EUett  v.  Butt, 
1  Woods,  C.  C.  214. 

-  Hope  r.  Hayley,  5  El.  &  B.  830  ;  Congreve  v.  Evetts,  10  Exch.  298 ;  Baker 
V.  Gray,  17  C.  B.  462  ;  Lanjrton  v.  Morton,  1  Hare,  549. 

*  Holroyd  v.  Marshall,  10  H.  L.  Cas.  191. 


AFTER-ACQUIRED  PROPERTY.  471 

in  the  contract,  that  will  in  equity  transfer  the  beneficial  in- 
terest to  the  mortgagee  or  purchaser  immediately  out  of  the 
property  being  acquired.  Because  there  was  a  trust  imposed 
on  the  fund  by  the  force  of  the  contract,  and  that  the  inca- 
pacity to  perform  it  at  the  time  of  its  execution  is  no  answer 
when  the  means  of  doing  so  are  afterward  obtained.  Accord- 
ingly it  followed  that  as  soon  as  the  new  machinery  and  effects 
were  placed  in  the  mill  they  became  subject  in  equity  to  the 
operation  of  the  contract,  and  passed  to  the  mortgagee,  to 
whom  Taylor  was  bound  to  make  a  legal  conveyance,  and  for 
whom  he  was  in  the  meantime  a  trustee  of  the  property  in 
question. 

Lord  Chelmsford  said,  in  speaking  of  the  distinction  between 
the  rule  in  law  and  in  equity,  that  in  the  former  there  must  be 
a  new  intervening  act ;  a  mere  license  is  not  sufficient  unless 
acted  upon.  In  equity  the  estate  attaches  as  soon  as  the  prop- 
erty is  acquired  by  the  debtor.  At  law,  property  not  existing, 
but  to  be  acquired  at  a  future  time,  is  not  assignable;  in 
equity,  it  is  transferable.  At  law,  though  a  power  is  given  in 
a  deed  of  assignment  to  take  possession  of  after-acquired  prop- 
erty, no  interest  is  transferred,  even  as  between  the  parties 
themselves,  unless  possession  is  actually  taken.  In  equity,  it 
is  not  disputed  that  the  moment  the  property  comes  into  pos- 
session the  deed  operates  upon  it. 

The  court  also  distinguished  some  cases  that  have  been  sup- 
posed to  be  opposed  to  this  view  of  the  doctrine.  It  declares 
that  Langton  v.  Horton  ^  does  not  impugn  the  general  principle. 
It  admits  the  transaction  to  pass  the  title  between  the  parties, 
while  it  departs  from  the  rule  in  failing  to  apply  it  to  third 
parties  as  creditors. 

The  dicta  in  Mogg  v.  Baker,^  to  the  effect  that  no  equitable 
title  passes  without  "  the  new  intervening  act,"  are  disapproved, 
and  Lord  Wensleydale,  who,  as  Baron  Parke,  wrote  the  opinion 
in  that  case,  admits,  when  participating  in  the  decision  of  this 

'  1  Hare,  549. 
'3Mees.  &.  W.  198. 


472  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

case/  that  he  was  mistaken  so  far  as  he  stated  in  Mogg  v. 
Baker  a  rule  to  be  appUed  in  equity. 

So  a  mortgage  of  future-acquired  property  will  bind  both 
real  and  personal  estate,  when  acquired,  as  to  the  parties  them- 
selves and  all  persons  claiming  under  them  with  notice.  ^ 

§  454.  The  Prevailing  Doctrine  in  Equity. — Lord  West- 
bury  says  that  a  contract  as  to  future-acquired  property 
passes  no  title,  yet  that  if  the  vendor  or  mortgagor  agrees  to 
sell  or  mortgage  property  of  which  he  is  not  possessed  at  the 
time,  and  receives  a  consideration,  and  afterward  becomes  pos- 
sessed of  the  property  answering  the  description  of  the  con- 
tract, that  will,  in  equity,  transfer  the  beneficial  interest  to  the 
mortgagee  or  purchaser  immediately  out  of  the  j)roperty  being 
acquired  ;  thr.t  a  trust  is  imposed  on  the  property  by  force  of 
the  contract,  and  that  the  incapacity  to  perform  it  at  the  time 
of  the  contract  is  no  answer  when  the  means  of  doing  so  after- 
ward are  obtained.^ 

In  this  case  Lord  Chelmsford  distinguishes  the  rule  of  law 
and  equity.  He  says  that  in  equity  the  estate  attaches  as  soon 
as  the  property  is  acquired  by  the  debtor.  At  law,  property 
not  existing  but  to  be  acquired  at  a  future  time,  is  not  assign- 
able ;  in  equity  it  is  transferable.  At  law,  though  a  power  is 
given  in  a  deed  of  assignment  to  take  possession  of  after-ac- 
quired property,  no  interest  is  transferred,  even  as  between  the 
parties  themselves,  unless  possession  is  actually  taken.  In 
equity  it  is  not  disputed  that  the  moment  the  property  comes 
into  possession  the  deed  operates  upon  it.  This  doctrine  is  in 
accord  with  the  weight  of  American  decisions.* 

'  Holroyd  v.  Marshall,  10  H.  L.  Cas.  191. 

« Sniithurst  v.  Edmunds,  14  N.  J.  Eq.  408 ;  Mitchell  v.  Winslow,  2  Story, 
C.  C.  630. 

» Holroyd  v.  Marshall,  10  H.  L.  Cas.  191. 

*Smithurst  V.Edmunds,  14  N.  J.  Eq.  408;  Borden  v.  Croak,  131  111.  68; 
McCaffrey  v.  Woodin,  65  N.  Y.  459 ;  Rowan  v.  Sharp's  Rifle  Manuf.  Co.,  29 
Conn.  282 ;  Walker  v.  Vaughn,  33  Conn.  577  ;  Gevers  v.  Wright,  18  N.  J.  Eq. 
330 ;  Williamson  v.  New  Jersey  S.  R.  R.  Co.,  29  N.  J.  Eq.  311 ;  Mitchell  v. 
W^inslow,  2  Story,  C.  C.  630  ;  Beall  v.  White,  94  U.  S.  382  ;  Cook  v.  Corthell, 
11  R.  I.  482 ;  WiUiams  v.  Briggs,  11  R.  I.  476. 


fli 


AFTER- ACQUIRED  PROPERTY.  473 

§  455.  Priority. — A  mortgage  of  property  thereafter  ac- 
quired takes  effect  as  a  valid  lien  immediately  when  the  prop- 
erty is  acquired  by  the  mortgagor ;  and  as  between  successive 
mortgages  of  after-acquired  property,  priority  of  lien  is  gen- 
erally determined  by  priority  of  time,  the  mortgage  first  in 
point  of  time  being  the  senior  lien.*  Courts  of  equity  will 
permit  the  conveyance  to  take  effect  upon  the  property  when 
it  is  acquired  in  fulfillment  of  an  express  agreement  if  founded 
upon  a  valid  consideration,  and  it  appears  no  rule  of  law  is  in- 
fringed, and  the  rights  of  third  persons  are  not  prejudiced. 
However,  to  reconcile  the  decisions  on  this  subject  would  be 
difficult  if  not  impossible.^ 

In  equity,  the  moment  the  property  comes  into  possession  of 
the  mortgagor  the  deed  operates  upon  it.  Such  mortgage  will 
bind  future-acquired  real  property  when  acquired  as  to  third 
persons,  and  all  parties  claiming  under  them,  with  notice.^ 

Article  4. 
Railroad  Property. 

?  456.  Extent  of  a  Eailroad  Mort-  Enjoyment  of  the  Franchise 

gage.  is  Included. 

§  457.  Property  Not  Within  the  §  460.  The  Subsequent  Property  Must 
Terms  of  the  Mortgage.  Be  Indispensable. 

I  458.  After- Acquired  Rolling  Stock  §  461.  Mortgage  of  Future  Net  Earn- 
Included.  ings. 

\  459.  Everything  Necessary  to  the  §  462.  Priorities. 

§  456.  Extent  of  a  Railroad  Mortgage. — A  railroad 
mortgage  covers  the  things  in  esse,  when  executed,  and  also 
such  as  shall  be  obtained  or  added  during  the  existence  of  the 
debt.  Thus,  a  mortgage  of  a  railroad,  its  lands,  property, 
franchises,  rights,  and  appurtenances,  with  the  buildings,  struc- 
tures, and  improvements,  comprehends  not  only  the  property 
in  esse  forming  part  of  the  organism  or  structural  arrangements, 

'Boston  Safe  Deposit  and  Trust  Co.  v.  Bankers',  etc.,  Co.,  36  Fed.  Rep.  288. 
» Beall  V.  White,  94  U.  S.  382. 

'  McCaffrey  v.  Woodin,  65  N.  Y.  459.  See,  also,  Holroyd  v.  Marshall,  10  H. 
L.  Cas.  191. 


474  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

or  the  machinery  and  apparatus  for  the  construction,  main- 
tenance, or  operation  of  the  railroad,  whether  movable  or  im- 
movable, but  also  such  as  shall  be  obtained  or  added  during 
the  existence  of  the  debt.^ 

Such  mortgage  covers  property  afterward  acquired,  which 
is  contemplated  by  the  parties  as  set  forth  in  the  instrument.^ 

So  a  mortgage  of  a  railroad,  its  tolls  and  revenues,  covers  all 
the  rolling  stock  and  fixtures,  whether  movable  or  immovable, 
essential  to  the  production  of  tolls  and  revenues.^  So  a  mort- 
gage on  a  railroad  with  its  engines,  depots,  and  shops  then 
owned  by  the  company,  or  which  it  might  thereafter  acquire, 
"  with  the  superstructure,  rails,  and  other  materials  used  there- 
on," covers  wood  provided  for  the  use  of  the  road.^ 

So  a  mortgage  of  "  all  the  present  and  future  to  be  acquired 
property  of  the  company,  including  the  right  of  way  and  land 
occupied,  and  all  rails  and  other  materials  used  therein  or 
procured  therefor,"  covers  the  rolling  stock  of  the  railroad.^ 

In  general  such  articles  are  included  in  a  railroad  mortgage 
as  are  essential  to  the  use  of  the  realty,  and  which  have  been 
applied  to  the  use  in  connection  with  it  and  are  necessary  for 
that  purpose,  and  without  which,  or  similar  articles,  the  realty 
would  cease  to  be  of  value.®  So  a  mortgage  executed  by  a 
railroad  company  upon  its  road,  with  the  lands,  tracks,  build- 
ings, privileges,  and  franchises  "  together  with  all  the  locomo- 
tives, tenders,  cars,  carriages,  tools,  and  machinery,  owned  or 
thereafter  to  be  owned  by  the  company,  or  in  any  way  belong- 
ing or  appertaining  to  said  road,  and  to  be  used  thereon," 

1  Bell  V.  Railroad  Co.,  34  La.  Ann.  785  ;  Calhoun  v.  Memphis,  etc.,  R.  R.  Co., 
2  Flip.  C.  C.  442,  447. 

"^  Thompson  v.  White  Water  Valley  R.  R.  Co.,  132  U.  S.  68  ;  Wellink  v.  Morris 
Canal  &  Banking  Co.,  3  Green.  Ch.  (N.  J.)  377,  402 ;  Fidelity  Ins.,  Trust  and 
Safe  Deposit  Co.  v.  Railroad  Co.,  33  W.  Va.  7G1. 
^     »  State  V.  Northern  Cent.  R.  R.  Co.,  18  Md.  193. 

*  Coe  V.  McBrown,  22  Ind.  252. 

spuUan  ('.  Cincinnati  &  Chi.  Air  Line  R.  R.  Co.,  4  Biss.  C.  C.  35.  See, 
also,  Emerson  v.  European,  etc..  Railroad  Co.,  67  Me.  387  ;  Christy  v.  Dana, 
34  Cal.  548. 

«  Hoyle  V.  Plattsburg,  etc.,  R.  R.  Co.,  51  Barb.  (N.  Y.)  45 ;  Bond  v.  Coke,  71 
N.  C.  97. 


AFTER-ACQUIRED  PROPERTY.  475 

is  valid  in  equity,  in  respect  to  subsequently  acquired  prop- 
erty.^ So  a  mortgage  of  "  all  the  present  and  future  to  be 
acquired  property  of  the  company,  including  the  right  of  way 
and  land  occupied,  and  all  rails  and  other  materials  used 
therein  or  procured  therefor,"  includes  the  rolling  stock  of 
the  road.^ 

Accordingly,  a  mortgage  upon  an  existing  railroad  may  be 
extended  to  rolling  stock  to  be  subsequently  acquired,  if  an 
intent  to  acquire  such  stock  and  to  hold  it  subject  to  the  mort- 
gage is  sufficiently  expressed.^ 

In  many  cases,  mortgages  by  such  companies  upon  their 
roads  and  appurtenances  have  been  executed  for  the  purpose 
of  raising  the  necessary  means  to  construct  the  roads ;  and, 
often,  when  the  lines  of  such  roads  had  only  been  surveyed. 
In  one  case  there  were  several  deeds  of  trust,  which  in  terms 
covered  after-acquired  property,  and  it  was  decided  that  they 
estopped  the  company  and  all  persons  claiming  under  them, 
and  in  privity  with  them,  from  asserting  that  the  deeds  did  not 
cover  all  the  property  and  rights  which  they  professed  to 
cover.  "  Had  there  been  but  one  deed  of  trust,  and  had  that 
been  given  before  a  shovel  had  been  put  into  the  ground  to- 
ward cbnstructing  the  railroad,  yet  if  it  assumed  to  convey 
and  mortgage  the  railroad  which  the  company  was  authorized 
by  law  to  build,  together  with  its  superstructure,  appurte- 
nances, fixtures,  and  rolling  stock,  these  several  items  of  property, 
as  they  came  into  existence,  would  become  instantly  attached 
to  and  covered  by  the  deed,  and  would  have  fed  the  estoppel 
created  thereby.  No  other  rational  or  equitable  rule  can  be 
adopted  for  such  cases."  * 

In  speaking  of  Galveston  Railroad  v.  Cowdry,'  Justice  Field 

*  Benjamin  v.  Elmira,  etc.,  R.  R.  Co.,  49  Barb.  (N.  Y.)  441 ;  Philadelphia,  etc., 
R.  R.  Co.  V.  Woelpper,  64  Pa.  St.  .366 ;  3  Am.  Rep.  596. 

'PuUan  V.  Cincinnati,  etc.,  R.  R.  Co.,  4  Biss.  C.  C.  35  ;  Hoyle  v.  Plattsburg, 
etc.,  R.  R.  Co.,  51  Barb.  (N.  Y.)  45. 

^Morrill  v.  Noyes,  56  Me.  4-58;  Weetjen  v.  St.  Paul,  etc.,  R.  R.  Co.,  4  Hun 
(N.  Y.),  529  ;  Pierce  v.  Milwaukee,  etc.,  R.  R.  Co.,  24  Wis.  551 ;  1  Am.  Rep.  203. 

♦Galveston  Railroad  v.  Cowdry,  11  Wall.  (U.  S.)  459,  481.  See,  also,  Por- 
ter V.  Pittsburgh  Bessemer  Steel  Co.,  122  U.  S.  267,  283. 

»llWall.  (U.S.)  459,481. 


476  NATURE    AND    REQUISITES    OP    THE    CONTRACT. 

says :  "  In  the  case  cited  it  was  contended  that  priority  should 
be  given  to  the  last  creditor  for  aiding  to  conserve  the  road. 
But  the  court  answered  that  this  rule  had  never  been  intro- 
duced into  our  laws,  except  in  maritime  cases,  which  stand  on 
a  particular  reason ;  that  by  the  common  law  whatever  is 
affixed  to  the  freehold  becomes  part  of  the  realty,  except  cer- 
tain fixtures  erected  by  tenants,  which  do  not  affect  the  ques- 
tion ;  and  that  the  rails  put  down  upon  the  company's  road 
become  a  part  of  the  road."  '  So  the  rails  and  all  permanent 
fixtures  which  are  essential  to  the  successful  operation  of  the 
road  become  a  part  of  the  property  of  the  company,  though  sub- 
sequently annexed  and  are  covered  by  the  existing  mortgage. 

The  doctrine  that  a  vendor  not  taking  security  for  the  price 
of  realty  sold  by  him  holds  in  equity  a  lien  upon  the  property 
for  such  price  is  not  controverted  by  this  rule,  because  it  has 
no  application  to  such  cases.^ 

Rails  and  other  articles  which  become  affixed  to  and  a  part 
of  a  railroad  covered  by  a  prior  mortgage  will  be  held  by  the 
lien  of  such  mortgage  in  favor  of  bona  fide  creditors,  as  against 
any  contract  between  the  furnisher  of  the  property  and  the 
railroad  company,  and  notice  of  such  a  contract  to  a  purchaser 
of  bonds  covered  by  such  mortgage  will  not  affect  his  rights 
if  he  purchased  the  bonds  from  those  who  were  bona  fide  hold- 
ers of  them,  free  from  any  such  notice.^ 

§  457.  Property  not  within  the  Terms  of  the  Mort- 
gage.— Property  not  within  the  terms  of  the  mortgage  as  con- 
trolled by  the  charter  is  not  covered  by  it,  nor  can  it  cover 
property  contrary  to  the  statute.  Thus,  a  railroad  company 
mortgaged  the  whole  of  its  line  in  the  State  of  Louisiana ; 
"also  all  real  and  personal  estate  within  the  State  owned 
by  the  company  at  the  date  of  this  mortgage,  or  which  may 
be  acquired  by  it  thereafter,  appurtenant  or  necessary  for  the 
operation  of  said  line." 

^Thompson  v.  White  Water  Valley  Railroad  Co.,  132  U.  S.  68,  74. 
*  Thompson  v.  AVhite  Water  Valley  Railroad  Co.,  132  U.  S.  68,  74. 
'Porter  v.  Pittsburgh  Besseraer  Steel  Co.,  122  U.  S.  267. 


AFTER-ACQUIRED    PROPERTY.  477 

The  special  authority  to  mortgage  given  to  the  company  by 
its  charter  did  not  authorize  it  to  mortgage  an  after-acquired 
land  grant.  The  statute  provided  that  "  future  property  can 
never  be  the  subject  of  a  conventional  mortgage."  It  was 
held  that  said  mortgage  did  not  cover  land  thereafter  granted 
to  the  company  to  aid  in  the  construction  of  the  road. 

Judge  Pardee  says  that  the  land  grant  could  not  be  con- 
sidered an  appurtenant  of  said  railroad,  and  the  language  of 
the  mortgage  was  not  intended  to  cover  the  after-acquired 
land  grant.  As  the  general  law  of  the  State  did  not  author- 
ize a  mortgage  of  an  after-acquired  land  grant,  as  the  special 
authority  to  mortgage  granted  to  the  railroad  company  did 
not  contemplate  or  authorize  the  mortgage  of  such  after- 
acquired  grant,  and  as  the  language  of  the  mortgage  itself  did 
not  describe  nor  include  any  such  after-acquired  grant,  the 
mortgage  could  not  be  made  to  affect,  by  any  lien  or  otherwise, 
the  after-acquired  land.^ 

It  can  only  mortgage  such  property  as  it  has  power  by  law 
to  acquire.  So  a  mortgage  of  a  land  grant,  which  the  company 
had  no  power  to  accept  by  its  charter  or  by  the  general  law,  is 
invalid.^ 

A  mortgage  of  a  railroad  company  of  its  road  and  appur- 
tenances, and  of  lands  afterward  acquired  for  stations,  shops, 
and  the  like  uses,  does  not  cover  a  tract  of  woodland  afterward 
acquired,  situate  seven  miles  from  the  road,  because  no  apt 
words  in  the  mortgage  describe  this  tract,  and  cannot  be  used 
for  any  specific  purpose  mentioned  in  the  mortgage.^  But  a 
mortgage  of  a  railroad  company  embracing  all  property  which 
it  may  subsequently  acquire  when  not  contrary  to  statute,  in- 
cludes a  lease  it  takes  afterward  of  another  railroad.* 

But  if  the  after-acquired  property  is  not  embraced  within 
the  terms  of  the  mortgage,  it  is  not  included.     Thus,  a  mort- 

'  New  Orleans,  etc.,  R.  R.  Co.  v.  Union  Trust  Co.,  41  Fed.  Rep.  717. 

'Meyer  v.  Johnston,  53  Ala.  237,  331. 

^Dinsmore  v.  Racine,  etc.,  R.  R.  Co.,  12  Wis.  649. 

*  Barnard  v.  Norwich  &  Worcester  R.  R.  Co.,  14  N.  Bank  Reg.  560.  See, 
also,  Walsh  v.  Barton,  24  Ohio  St.  28 ;  Campbell  v.  Texas  &  New  Orleans  R. 
tl.  Co.,  2  Woods.  C.  C.  263. 


478  NATURE    AND    REQUISITES    OF    THE    CX)NTRACT. 

gage  conveying  the  railroad  with  its  superstructure,  track,  and 
all  other  appurtenances,  made  or  to  be  made ;  also  railroad 
furniture,  including  engines,  tenders,  cars  of  every  description, 
tools,  materials,  machinery,  and  every  kind  of  personal  property 
which  shall  be  used  for  operating  said  railroad,  does  not  include 
certain  railroad  chairs,  afterward  acquired  by  the  company, 
never  used  in  the  construction  of  the  road.^  So  a  mortgage 
covering  "  all  other  personal  property  belonging  to  said  com- 
pany, as  the  same  now  in  use  by  said  company,  or  as  the  same 
may  be  hereafter  changed  or  renewed  by  said  company," 
does  not  include  certain  machinery  for  "  burnetizing  "  ties  and 
timber  so  as  to  render  them  more  desirable,  which  machinery 
was  not  in  existence  at  the  time  of  the  mortgage,  and  took  the 
place  of  nothing  that  was  therein  specified,  but  was  constructed 
by  the  railroad  company.^ 

§  458.  After-acquired  Rolling  Stock  Included. — A 
mortgage  of  a  railroad  includes  the  rolling  stock.  Thus,  a 
mortgage  of  "  all  their  road,  property,  rights,  liberties,  privi- 
leges, corporate  franchises,  income,  tolls,  and  receipts  then 
held  or  thereafter  acquired,"  "  in  trust  for  the  use,  benefit,  and 
security  of  the  holders  "  of  certains  bonds  therein  described, 
covers  engines,  rolling  stock  in  actual  use  by  the  company  and 
required  for  the  transaction  of  its  business,  whether  owned  at 
the  date  of  the  mortgage  or  afterward  acquired.^ 

Thus,  where  second  mortgagees  and  holders  of  bonds  of  a 
second  issue  brought  suit  upon  these  bonds,  recovered  judg- 
ment, issued  execution,  and  levied  it  upon  a  part  of  the  rolling 
stock,  which  was  not  in  existence  when  the  first  mortgage  was 
given,  their  judgment  liens  must  be  postponed  to  the  claims 
of  the  first  mortgagees.* 

'  Farmers'  Loan  and  Trust  Co.  v.  Bank,  11  Wis.  207  ;  Dinsmore  v.  Racine, 
etc.,  Railroad  Co.,  12  Wis.  649. 

^  Brainerd  v.  Peck,  .34  Vt.  496. 

'  Philadelphia,  etc.,  R.  R.  Co.  v.  Woelpper,  64  Pa.  St.  366  ;  Covey  r.  Pittsburgh, 
etc.,  R.  R.  Co.,  3  Phila.  (Pa.)  173. 

^Pennock  v.  Coe,  23  How.  (U.  S.)  117.  See,  also,  Galveston,  etc.,  R.  R.  Co. 
IK  Cowdry,  11  Wall.  (U.  S.)  459,  481 ;  Dunham  v.  Cincinnati,  etc.,  R.  R.  Co., 
1  Wall.  (U.  S.)  254 ;  IMorrill  v.  Noyes,  56  Me.  458 ;  Pierce  v.  Milwaukee,  etc., 


AFTER- ACQUIRED    PROPERTY.  479 

So,  whenever  a  mortgage  is  made  by  a  railroad  company, 
and  it  includes  all  present  and  after-required  property,  as  soon 
as  the  property  is  acquired,  the  mortgage  operates  upon  it,  and 
the  mortgagees,  under  such  circumstances,  have  a  prior  equity 
to  the  claims  of  creditors  obtaining  judgments  and  execu- 
tions after  the  property  is  thus  acquired  and  placed  in  posses- 
sion of  the  mortgagor/ 

It  is  the  settled  law  generally  that  all  property  that  is 
acquired  under  such  mortgages  which  expressly  declare  that 
they  are  given  for  all  the  property  then  in  possession  of  the 
railroads,  or  thereafter  to  be  acquired,  is  covered  by  the  mort- 
gages, and  the  mortgagees  have  a  superior  equity  as  against 
all  parties  who,  at  the  time  that  any  after-acquired  property 
came  into  possession  of  the  railroad  company,  had  not  an 
inchoate  or  perfect  lien  upon  the  same.^ 

§  459.  Everything  Necessary  to  the  Enjoyment  of  the 

Franchise  is  Included. — The  power  to  mortgage  a  railroad 

implies  as  incident  thereto  the  power  to  mortgage  everything 

that    may  be  necessary  to  the  enjoyment  of   the  franchise. 

Thus  a  mortgage  of  a  railroad  includes   cars,  wheels,  firewood 

obtained  for  the  use  of  the  engine,  and  coal  for  the  use  of  the 

machine-shop  as  things  incident  and  indispensable  to  the  use 

and  enjoyment  of  the  thing  conveyed.'^  So  lands  subsequently 

purchased  for  depot  grounds  will  come  under  the  lien  of  the 

mortgage.*     And  one  court  holds  that  the  trustees  under  such 

a  mortgage  hold  subsequently-acquired  property  as  incident  to 

the  franchise  mortgaged,  and   as  an  accession  to  the  subject 

mortgaged.^ 

R.  R.  Co.,  24  Wis.  551 ;  Howe  v.  Wolf,  15  Ohio  St.  523 ;  Phillips  v.  Winslow, 
18  B.  Men.  (Ky.)  431 ;  Noel  v.  Bewley,  3  Sim.  103  ;  Foreman  v.  Proctor,  9  B. 
Mon.  (Ky.)  124;  Jenckea  v.  Goffe,  1  R.  I.  511. 
'  Scott  V.  Clinton,  etc.,  R.  R.  Co.,  6  Bis?.  C.  C.  529. 

*  Dunham  v.  Cincinnati,  etc.,  R.  R.  Co.,  1  Wall.  (U.  S.)  254  ;  Galveston  R.  R. 
Co.r.  Cowdry,  11  Wall.  (U.  S.)  459. 

'Phillips  V.  Winslow,  18  B.  Mon.  (Ky.)  431. 

*  Farmers'  Loan  and  Trust  Co.  v.  Fisher,  17  Wis.  114.  See,  also.  Chew  v. 
Bamet,  11  S.  &  R.  (Pa.)  389. 

,  ^Pierce  v.  Emery,  32  N.  H.  484.    See,  also,  Dinsmore  v.  Racine,  etc..  Rail- 
road Co.,  12  Wis.  649 ;  Farmers'  Loan  and  Trust  Co.  v.  Bank,  11  Wis.  207. 


480  nature  and  requisites  of  the  contract. 

§  460.  The  Subsequent  Property  Must  Be  Indispensable. 
— The  property  purchased  must  be  incident  and  indispens- 
abl}^  necessary  to  the  enjoyment  of  its  franchise  in  order  to 
come  under  the  mortgage  lien.  Thus,  town  lots  do  not  pass 
at  a  foreclosure  sale  "  with  its  corporate  privileges  and  ap- 
purtenance," unless  directly  appurtenant  to  the  railroad  and 
indispensably  necessary  to  the  enjoyment  of  its  franchises.^  So 
a  canal-boat  run  in  connection  with  the  railroad  does  not  come 
under  a  mortgage  of  all  the  property  of  the  road.^ 

But  such  a  mortgage  does  not  ojjerate  to  exempt  such  prop- 
ert}^  in  its  nature  personal  and  while  it  remains  in  possession 
of  the  corporation,  from  being  levied  upon  by  a  judgment 
creditor  of  the  company.^  The  mortgagee  can  take  only  the 
property  mortgaged.  He  is  not  authorized  to  detach  portions 
not  covered  by  the  lien.^  The  office  furniture  used  in  the 
office  is  covered  by  the  mortgage  of  the  entire  property  of 
the  corporation;''  and  chairs  can  be  held  under  materials  and 
pass  with  the  mortgage  ;  ®  but  if  it  appears  that  the  chairs  are 
not  appurtenant  to  the  corpus  they  cannot  be  included  in  the 
mortgage.'' 

It  may  be  regarded  as  settled  that  in  equity  a  mortgage  of  a 
railroad  will  be  held  to  apply  to  after-acquired  rolling  stock 
and  other  personal  property,  if  the  terms  of  the  mortgage  cover 
such  future  acquisitions,  with  the  qualification,  however,  that 
the  mortgage  will  attach  to  such  property  subject  to  the  liens  ex- 
isting upon  it  when  it  comes  into  the  hands  of  the  mortgagor.* 

§  461.  Mortgage  of  Future  Net  Earnings. — A  railroad 
corporation  may  mortgage  its  property  including  the  tolls,  in- 

^  Shaniokin  Valley  R.  R.  Co.  v.  Livermore,  47  Pa.  St.  465. 

^  Parish  v.  Wheeler,  22  N.  Y.  494. 

3  Coe  V.  Columbus,  etc.,  R.  R.  Co.,  10  Ohio  St.  372. 

*Coe  V.  Peacock,  14  Ohio  St.  187. 

s  Raymond  r.  Clark,  46  Conn.  129. 

^  Farmers'  Loan  and  Trust  Co.  v.  Commercial  Bank,  15  Wis.  424. 

"^  Farmers'  Loan  and  Trust  Co.  v.  Commercial  Bank,  11  Wis.  207.  See,  also, 
Benjamin  v.  Elmira,  etc.,  R.  R.  Co.,  49  Barb.  (N.  Y.)  441 ;  54  N.  Y.  675. 

*  Hamlin  v.  Jerrard,  72  Me.  62 ;  Morrill  v.  Noyes,  56  Me.  458 ;  Meyr  v. 
Johnston,  64  Ala.  603. 


AFTER-ACQUIRED    PROPERTY.  481 

come,  rents,  issues,  and  profits.  This  conveys  only  the  net  in- 
come of  the  road  after  the  payment  of  the  expenses ;  ^  this 
may  be  done  to  secure  prompt  payment  of  interest  accru- 
ing on  its  construction  bonds.^ 

A  railway  mortgage,  from  the  very  nature  of  the  property 
mortgaged,  differs  from  other  mortgages  in  this,  that  a  railway 
mortgagor,  before  default,  in  possession  of  mortgaged  premises, 
has  less  power  over  the  usufruct  of  the  mortgaged  premises 
than  other  mortgagors  in  possession.  And  a  correlative  propo- 
sition is  that  a  mortgagee  of  a  railway  corporation  can  secure 
the  tolls,  and  even  the  railway  corpus,  only  upon  certain  con- 
ditions, none  of  which  are  usually  expressed  iii  this  class  of 
mortgages,  and  some  of  which  are  at  variance  with  the  terms 
of  the  writings  between  the  railway  mortgagor  and  its  mort- 
gagee.' 

Some  classes  of  indebtedness,  created  by  the  mortgagor 
subsequent  to  the  lien  of  a  railway,  will,  without  consent  of 
the  mortgage  creditors,  be  paid  out  of  the  corpus,  as  well  as 
out  of  the  tolls  of  the  mortgaged  railway,  before  the  creditors 
are  paid.*  This  doctrine  has  no  reference  to  receiverships  of 
any  class  of  corporations  other  than  railway  corporations.^ 

Debts  incurred  in  the  course  of  the  original  construction  of 
a  railway  are  not  entitled  to  any  preference  over  the  lien  of 
the  mortgage.® 

It  has  been  said  "  that  the  railway  mortgage  is  a  prior  lien 
only  upon  the  net  earnings  of  the  road,  after  the  payment  of 
all  the  operating  expenses,  while  the  road  is  in  the  possession 
of  the  company." '  Undoubtedly  the  court  intended  to  say 
that  the  railway  mortgage  is  a  prior  lien  upon  the  net  earn- 
ings of  the  road  only  after  the  payment  of  all  the  operating 
expenses  while  the  road  is  in  the  possession  of  the  company. 

^  Parkhurst  v.  Northern,  etc.,  E.  R.  Co.,  19  Md.  472. 

*  Jessup  V.  Bridge,  11  Iowa.  572;  Dunham  v.  Isett,  15  Iowa,  284. 
"  See  Fosdick  v.  Schall,  99  U.  S.  235. 

*  Barton  v.  Barbour,  104  U.  S.  126. 

» Wood  V.  Guarantee  Trust  Co.,  128  U.  S.  416. 
"Wood  V.  Guarantee  Trust  Co.,  128  U.  S.  416. 
'  ^  Hale  V.  Frost,  99  U.  S.  389. 
VOL.  I. — 31 


482  NATURE    AND    REQUISITES    OF    THE   CONTRACT. 

Mortgages  of  tolls,  real  estate,  and  fixtures  of  trade  made 
by  a  railroad,  stand  on  a  different  ground  from  the  mortgage 
made  by  some  other  private  corporations. 

The  rules  appertaining  to  mere  mortgages  of  real  estate, 
by  private  individuals,  have  a  limited  application  to  a  corpo- 
rate railway  mortgage  of  its  realty  and  appurtenances  there- 
to, though  the  Suj)reme  Court  at  first  refused  to  make  the 
distinction.^ 

Net  earnings  while  the  railroad  is  in  the  hands  of  a  re- 
ceiver appointed  by  the  court,  may  be  applied  to  the  payment 
of  claims  having  superior  equities  to  that  of  the  bond-holdera 
These  claims  are  confined  to  outstanding  debts  for  labor,  sup- 
plies, equipments,  or  permanent  improvements  of  the  mort- 
gaged property  as  may,  under  the  circumstances  of  the  par- 
ticular case,  appear  to  be  reasonable." 

And  under  certain  circumstances,  and  for  proper  purposes, 
receiver's  certificates  may  be  accorded  priority  over  debts 
secured  by  mortgage.^ 

§  462.  Priorities. — A  mortgage  intended  to  cover  after- 
acquired  property  can  only  attach  itself  to  such  property  in  the 
condition  in  which  it  comes  into  the  mortgagor's  hands.  If 
that  property  is  already  subject  to  mortgages  or  other  liens, 
the  general  mortgage  does  not  displace  them,  though  they  may 
be  junior  to  it  in  point  of  time.  It  only  attaches  to  such 
interests  as  the  mortgagor  acquires.  If  a  company  purchase 
property  and  give  a  mortgage  for  the  purchase-money, 
the  deed  which  is  given  and  the  mortgage  back  are  re- 
garded as  one  transaction,  and  such  lien  is  not  displaced  by 
the  general  mortgage.  This  rule  fiiils,  how;ever,  when  the 
property  purchased  is  annexed  to  a  subject  already  covered 

1  See  Dunham  v.  Eailway  Co.,  1  Wall.  (U.  S.)  268. 

'  Fosdick  ?;.  Schall,  99  U.  S.  235;  Addison  v.  Lewis,' 75  Ya.  701;  Fidelity 
Ins.  and  Safe  Deposit  Co.  v.  Railroad  Co.,  33  W.  Va.  761,  788 ;  Finance  Co.  v. 
Railway  Co.,  48  Fed.  Rep.  188. 

^  Beach  Rec,  sect.  379  d  seq. ;  Wallace  v.  Loomis,  97  U.  S.  146;  Union 
Trust  Co.  V.  Illinois,  etc.,  R.  R.  Co.,  117  U.  S.  434  ;  Miltenberojer  v.  Railroad 
Co.,  106  U.  S.  286  ;  Fidelity  Ins.  and  Safe  Deposit  Co.  v.  Railroad  Co.,  33  W. 
Ya.  761,  788. 


AFTER-ACQUIRED    PROPERTY.  483 

by  the  general  mortgage,  and  becomes  a  part  of  the  rail- 
road.^ 

When  loose  property  is  susceptible  of  separate  ownership  and 
separate  liens,  such  liens,  if  binding  on  the  railroad  company 
itself,  are  unaflfected  by  a  prior  general  mortgage  given  by  the 
corporation,  and  paramount  thereto.^ 

A  mortgage  of  its  road  and  franchises  does  not  convey  its 
corporate  existence,  or  its  general  corporate  powers,  but  only 
its  franchise  necessary  to  make  the  conveyance  beneficial  to 
the  grantees.^ 

And  a  power  to  mortgage  a  railroad  and  its  franchises,  con- 
ferred by  the  legislature,  does  not  give  the  mortgagee  any 
greater  rights  than  the  mortgagor  had.* 

A  mortgage  of  the  entire  property  and  also  all  property  ap- 
pertaining to  the  road  which  the  railroad  company  might 
afterward  acquire  is  valid  as  to  such  after-acquired  property, 
and  the  bonds  issued  under  it  are  a  prior  incumbrance  on  a 
part  of  the  chartered  line  constructed,  after  the  funds  realized 
from  the  mortgaged  bonds  have  been  exhausted,  out  of  moneys 
subsequently  furnished  by  jDarties  who  took  from  the  company  a 
special  lien  upon  the  rents  and  profits  of  the  section  so  con- 
structed with  their  mone3^^  Justice  Blatchford  says :  "  What- 
ever is  the  rule  applicable  to  locomotives  and  cars,  and  loose 
property  susceptible  of  separate  ownership  and  of  separate 
liens,  and  to  real  estate  not  used  for  railroad  purposes,  as  to 
their  being  unaffected  by  a  prior  mortgage  given  by  the  rail- 
road company,  covering  after-acquired  property,  it  is  well  set- 
tled, in  the  decisions  of  this  court,  that  rails  and  other  articles 
which  become  affixed  to  and  a  part  of  a  railroad  covered 
by  a  prior  mortgage  will  be  held  by  the  lien  of  such  mortgage 
in  favor  of  bona  fide  creditors,  as  against  any  contract  between 

'  Galveston,  etc.,  R.  R.  Co.  r.  Cowdry,  11  Wall.  (U.  S.)  459. 

=  United  States  v.  New  Orleans  Railroad,  12  Wall.  (U.  S.)  362 ;  Williamson 
V.  N.  J.  South  R.  R.  Co.,  28  N.  J.  Eq.  277. 

3  Meyer  v.  Johnston,  53  Ala.  237,  325  ;  Eldridge  v.  Smith,  34  Vt.  484 ;  Miller 
V.  Rutland,  etc.,  R.  R.  Co.,  36  Vt.  452,  498. 

/  Attorney-Gen.  v.  Chicago,  etc.,  R.  R.  Co.,  35  Wis.  425. 

5  Thompson  v.  White  Water  Valley  Railroad  Co.,  132  U.  S.  68. 


484  NATURE    AND    REQUISITES   OF    THE    CONTRACT. 

ihe  furnisher  of  the  property  and  the  railroad  company  con- 
taining stipulations  "  that  the  title  to  the  property  shall  not 
pass  till  the  property  is  paid  for,  and  reserving  to  the  vendor 
the  right  to  remove  the  property/  This  is  the  well-settled 
doctrine  of  the  United  States  Supreme  Court.^ 

'  Porter  v.  Pittsburgh  Bessemer  Steel  Co.,  122  U.  S.  267,  283. 

'  Durham  v.  Kailroad  Co.,  1  Wall.  (U.  S.)  254 ;  Galveston  Eailroad  Co.  v. 
Cowdry,  11  Wall.  (U.  S.)  459,  480,  482 ;  United  States  v.  New  Orleans  Railroad, 
12  Wall.  (U.  S.)  362,  365 ;  Dillon  v,  Barnard,  21  Wall.  (U.  S.)  430,  440  ;  Fos- 
dick  V.  Schall,  99  U.  S.  235,  251. 


I 
I 


I 


CHAPTER  XIII. 

the  debt  secured. 

Article  1. 

Identification  and  Description  of  the  Debt. 

1 463.  Description  of  the  Debt.  §  473.  The  Two  Instruments  Must  be 
§  464.  The  Amount  of  the  Indebted-  Construed  Together. 

ness.  2474.  Several  Mortgages  Upon  Sep- 
§  465.  TVTiat  Indebtedness  Secured.  arate  Pieces  of  Realty. 

?  466.  Unliquidated  Indebtedness.  §  475.  The  Mortgage  Is  Security  Only 
1 467.  The    Description  of   the  Note  for  the  Debt  Specified. 

Given  with  the  Mortgage.  §  476.  The  Doctrine  of  Tacking. 

§  468.  What  the  Condition  Should  Set  1 477.  The  Doctrine   of   Tacking   in 

Forth.  England. 

1 469.  It  Is   Not  Necessary  to  Have  §  478.  Re\nval  of  Mortgage. 

Collateral    or    Personal    Se-  §  479.  Increasing  the  Eate  of  Interest 

curity.  by  Subsequent  Agreement. 

2  470.  Clerical  Mistakes  and  Inaccura-  1 480.  Expenses  for  Collecting. 

cies.  §481.  Solicitor's  Fees. 

H71.  Admissibility  of  Parol  Evidence.  H82.  Taxes. 
2  472.  Substitution  of  New  Notes. 

§  463.  Description  of  the  Debt. — No  formal  and  exact 
description  of  the  debt  is  essential,  provided  there  is  a  debt  be- 
tween the  parties  capable  of  being  enforced  against  the  mort- 
gagor or  the  property  mortgaged.*  Literal  exactness  is  not  re- 
quired. If  enough  be  said  to  direct  the  attention  of  parties 
subsequently  dealing  with  the  property  to  a  source  where  they 
can  obtain  full  and  correct  information,  it  is  sufficient,  pro- 
vided that  they  be  not  deceived  or  misled  by  the  language 
used.^ 

Thus,  where  the  condition  of  the  mortgage  recites  that  the 
grantor  was  indebted  to  the  mortgagee  for  moneys  loaned,  and 

^RusseU  v.  Southard,  12  How.  (U.  S.)  139;  Smith  v.  Bank,  24  Me.  185; 
Brown  v.  Dewey,  1  Sand.  Ch.  (N.  Y.)  56 ;  Rice  v.  Rice,  4  Pick.  (Mass.)  349. 

"Shirras  v.  Caig,  7  Cranch  (U.S.),  34;  Conard  v.  Ins.  Co.,  1  Pet.  (U.S.) 
448 ;  Ricketson  v.  Richardson,  19  Cal.  330 ;  Paine  v.  Benton,  32  Wis.  491 ; 
Oilman  v.  Moody,  43  N.  H.  239. 

485 


486  NATURE    AND    REQUISITES    OP    THE    CONTRACT. 

his  liability  on  divers  bills  of  exchange  and  promissory  notes, 
and  it  provides  that  if  the  mortgagor  discharge  them  within 
six  months  the  mortgage  shall  be  void,  it  will  be  a  sufficient 
description  of  the  debt,  since  it  is  capable  of  being  made  cer- 
tain by  parol  evidence/ 

So  a  mortgage  which  provides  for  the  payment  of  future- 
accruing  accounts  which  may  become  due  from  the  mortgagor 
to  the  mortgagee  is  not  void  as  between  the  parties,  nor  as  to 
purchasers  or  mortgagees.^  In  general,  all  that  is  required  is 
that  the  debt  shall  be  described  with  such  convenient  certainty 
as  the  case  demands.^  In  some  jurisdictions,  however,  it  has 
been  held  that  the  debt  must  either  be  described  in  the  con- 
dition so  that  its  identity  can  be  traced,  or  some  intimation 
given  where  such  information  may  be  obtained  upon  inquiry/ 

But  it  is  obvious  that  this  doctrine  is  now  regarded  as  the 
sound  rule  upon  the  subject.  All  that  is  now  required  is  that 
the  mortgage  shall  describe,  in  general  terms,  all  that  the 
mortgagor  owes  or  may  thereafter  owe  the  mortgagee.^ 

§  464.  The  Amount  op  the  Indebtedness. — If  the  mortgage 
contains  a  general  description  sufficient  to i embrace  the  liability 
intended  to  be  secured,  so  as  to  direct  a  person  examining  the 
record  to  the  proper  source  for  more  minute  and  particular 
information  of  the  amount  of  the  incumbrance,  it  is  all  that  is 
necessary.^ 

Though  usually  it  is  not  necessary  that  the  mortgage  states 
the  amount  of  the  debt  secured,  or  that  it  is  evidenced  by  a 

» Hurd  V.  Robinson,  11  Ohio  St.  232 ;  Utley  v.  Smith,  24  Conn.  290,  314. 

^  McDaniels  v.  Colvin,  16  Vt.  300. 

^  Stoughton  V.  Pasco,  5  Conn.  442 ;  Lewis  v.  De  Forest,  20  Conn.  427 ;  Sey- 
mour V.  Darrow,  31  Vt.  122. 

*Garber  v.  Henry,  6  Watts  (Pa.),  57;  Gardner  v.  Webber,  17  Pick.  (Mass.) 
414 ;  Commercial  Bank  v.  Cunningham,  24  Pick.  (Mass.)  274 ;  James  v.  John- 
son, 6  Johns.  Ch.  (N.  Y.)  429. 

5  McDaniels  v.  Colvin,  16Vt.  300;  Shirras  ?-.  Caig,  7  Cranch  (U.  S.),  34; 
Truscott  V.  King,  6  Barb.  346 ;  Stuy  vesant  v.  Hall,  2  Barb.  Ch.  (N.  Y.)  151. 

« Carnall  r.  Duval,  22  Ark.  136 ;  Jarratt  v.  McDaniel,  32  Ark.  598  ;  Fetes  v. 
O'Laughlin,  62  Iowa,  532 ;  Lashbrooks  v.  Hatheway,  52  Mich.  124 ;  Michigan 
Ins.  Co.  V.  Brown,  11  Mich.  265  ;  Page  v.  Ordway,  40  N.  H.  253 ;  Machette  v. 
Wanless,  1  Colo.  225. 


THE    DEBT    SECURED.  487 

note  or  any  instrument/  The  amount  of  the  debt  need  not  be 
shown  upon  the  face  of  the  mortgage,  if  reference  be  made  to 
other  evidence  from  which  the  amount  of  the  debt  may  be  de- 
termined. The  true  amount  of  the  debt  secured  cannot  always 
be  discovered  by  the  mortgage,  however  correctly  the  note 
may  be  described  therein.  It  is  a  rule  of  law  that  if  a  written 
instrument  refers  to  any  deeds  and  contracts  with  sufficient 
explicitness  to  identify  them,  they  are  to  be  regarded  so  far 
constituting  a  part  of  such  deeds  and  contracts  as  to  be  read 
with  them  in  order  to  determine  their  terms  and  conditions. 
And  a  record  of  a  mortgage  will  impart  notice  to  parties  that 
the  amount  of  the  note  is  to  be  determined  by  that  instrument 
itself,  to  which  reference  is  made.^ 

But  if  the  debt  is  certain,  it  has  been  held  that  then  the 
amount  must  be  stated ;  and  a  description  of  a  debt  in  the 
mortgage  as  a  note  due  from  the  mortgagor  to  the  mortgagee, 
of  a  certain  date,  payable  on  demand  wdth  interest,  without 
stating  the  amount,  is  not  a  valid  security  against  subsequent 
incumbrances.^  The  Kentucky  court  seems  to  indorse  this 
rule,  and  holds  so  far  as  reasonably  practicable,  the  mortgage 
must  set  out  the  amount  of  the  debt  for  the  payment  of  which 
the  parties  intended  it  as  a  security.  "  We  do  not  mean  to  in- 
timate that  an  omission  to  state  the  date  of  the  note,  or  the 
time  at  which  it  will  fall  due,  or  the  precise  amount  of  the 
debt,  even  when  the  amount  is  ascertained,  is  essential  to 
make  the  mortgage  invalid."  * 

And  in  Maryland  no  mortgage  is  valid  except  as  between 
the  parties  thereto,  unless  there  be  indorsed  thereon  an  oath 
or  affirmation  that  the  consideration  in  said  mortfras-e  is  true 

'  Curtis  V.  Flinn,  46  Ark.  70. 

'  Kellogg  V.  Frazier,  40  Iowa,  502  ;  Clark  v.  Hyman,  55  Iowa,  14 ;  Bourne  v. 
Littlefield,  29  Me.  302 ;  Gill  v.  Pinney,  12  Ohio  St.  38 ;  Babcock  v.  Lisk,  57  111. 
327  ;  Booth  w.  Barnum,  9  Conn.  286;  Stoughton  v.  Pasco,  5  Conn.  442  ;  13  Am. 
Dec.  72. 

^Hart  r.  Chalker,  14  Conn.  77;  Metropolitan  Bank  v.  Godfrey,  23  111. 
604 ;  Battenhausen  v.  Bullock,  11  111.  App.  665 ;  Pettibone  v.  Griswold,  4 
Conn.  158,  162 ;  Crane  v.  Deming,  7  Conn.  387,  395.  Compare  Utley  v.  Smith, 
24  Conn.  290. 

*Pearce  v.  HaU,  12  Bush  (Ky.),  209. 


488  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

and  bona  fide  as  therein  set  forth.'  That  the  oath  was  taken 
can  only  be  estabhshed  by  a  formal  indoreement  upon  the 
mortgage.  Parol  proof  cannot  be  admitted  to  prove  that  such 
an  affidavit  was  made.^ 

The  affidavit  must  contain  words  sufficient  to  be  equivalent 
to  those  used  in  the  statute,  when  the  exact  words  are  not 
used.^ 

The  strictness  required  in  Connecticut  and  Illinois  is  against 
the  weight  of  authority,  and  is  not  to  control  in  other  jurisdic- 
tions. The  general  rule  is  as  has  been  stated,  and  a  reference 
in  a  mortgage  to  a  note  secured  by  it,  without  specifying  its 
contents,  is  sufficient  to  put  subsequent  purchasers  upon  in- 
quiry and  to  charge  them  with  notice.* 

And  a  mortgage  for  a  certain  sum,  divided  in  specific  items 
to  each  of  several  creditors,  containing  no  personal  covenants, 
cannot  be  held  to  secure  creditors  a  sum  larger  than  that 
mentioned.^ 

Pending  an  appeal  from  a  judgment  against  joint  obligors, 
one  of  them  gave  a  mortgage  or  trust  deed  to  secure  the  pay- 
ment of  such  judgment  or  any  judgment  rendered  in  any 
other  suit  of  the  same  cause  of  action.  The  judgment  was  re- 
versed. The  mortgagor  died  and  one  of  the  plaintiffs.  It  was 
lield  that  the  trust  deed  secured  the  payment  of  a  second 
judgment,  notwithstanding  the  change  of  parties." 

Where  a  mortgage  describes  the  indebtedness  secured  by  it 
as  a  note  for  $1,500,  the  time  and  manner  of  payment  to  be 
as  therein  appear,  it  is  sufficient.'' 

§  4G5.  What  Indebtedness  Secured. — A  mortgage  is  se- 
curity only  for  the  debt  thereby  secured,  and  cannot  be 
held    for   other   debts    from   the   mortgagor;    upon  payment 

>  M(L  Rev.  Code,  1878,  p.  380,  secta.  35,  36. 

2  ReifFv.  Eshleman,  52  Md.  582. 

3  Stanhope  v.  Dodge,  52  Md.  483. 

*  Somersworth  Savings  Bank  v.  Eoberta,  38  N.  H.  22  ;  Fetes  v.  O'Laughlin, 
62  Iowa,  532. 

*  Sheldon  v.  Erskine,  78  Mich.  G27. 
« Walker  r.  Doane,  131  111.  27. 
'King  V.  Kilbride,  58  Conn.  109. 


THE    DEBT    SECURED.  489 

of  the  identical  debt,  the  mortgagee  must  release  the  m.ort- 
gage/ 

A  reference  to  a  larger  amount  in  an  unexecuted  agreement 
between  the  parties  cannot  control  the  debt  secured  by  the 
mortgage.^  And  a  mortgage  for  a  certain  sum  cannot  be  held 
to  secure  a  larger  amount.^ 

Nor  is  a  mortgage  given  by  one  person  to  secure  the  pay- 
ment, at  maturity,  of  notes  executed  by  another,  security  for 
renewal  notes  substituted  therefor.* 

A  mortgage  given  to  secure  all  the  indebtedness  of  the 
mortgagor  to  the  mortgagee  is  valid  without  specifying  the 
separate  debts  or  their  amounts.^  But  a  mortgage  given  to 
secure  a  gross  sum  which  might  be  furnished  in  goods  and 
materials  toward  the  erection  of  a  house  for  the  mortgagor,  a 
collateral  liability,  or  one  assumed  as  surety  or  guarantor,  will 
not  be  within  its  terms  and  will  not  thereby  be  secured.^  But 
a  mortgage  made  as  security  for  a  debt,  evidenced  by  a  note, 
will  operate  as  security  for  the  same  continuing  debt,  though 
the  evidence  of  it  be  by  renewal  or  otherwise.  But,  if  one  deed 
of  trust  is  executed  as  a  substitute  for  a  preceding  one,  the 
former  will  at  once  cease  to  have  any  validity.^ 

A  description  of  "  a  note  or  notes  for  about  $350  "  does  not 
include  six  notes  amounting  to  over  |1,500.^ 

Neither  does  a  mortgage  to  secure  a  note  of  $5,000,  payable 
in  six  months,  include  a  note  for  $3,000,  payable  in  thirty 
days,  if  the  latter  note  was  given  in  a  new  and  independent 
transaction  upon  the  failure  of  negotiations  for  a  loan  of  the 
first-mentioned  amount.^ 

» Beardsley  c.  Tuttle,  11  Wis.  74;  Vanmeter  t;.  Vanmeters,  3  Gratt.  (Va.) 
148;  Michigan  Ins.  Co.  v.  Brown,  11  IMich.  265. 
""  Turnbull  v.  Thomas,  1  Hughes,  C.  C.  172. 
^Sheldon  v.  Erskine,  78  Mich.  G27. 

*  Ayres  v.  Wattson,  57  Pa.  St.  360. 

*  Michigan  Ins.  Co.  v.  Brown,  11  Mich.  265. 

*  Doyle  V.  White,  26  Me.  341. 

'  Ames  V.  Railway,  2  Woods,  C.  C.  206 ;  Appeal  of  Bank  of  Commerce,  44 
Pa.  St.  423. 

V     *  storms  V.  Storms,  3  Bush  (Ky.),  77. 
'  Walker  v.  Carleton,  97  111.  582. 


490  NATURE    AND   REQUISITES   OF   THE    CONTRACT. 

And  a  mortgage  to  secure  the  payment  of  dues  to  a  build- 
ing association  does  not  secure  the  payment  of  a  sum  in  addi- 
tion thereto,  there  being  no  express  agreement  to  pay  such 
additional  sum/ 

A  mortgage  securing  certain  payments,  and  the  performance 
of  an  agreement,  also  provided  that  it  should  become  security 
for  the  performance  of  a  certain  other  agreement,  should  the 
mortgagor  elect  to  perform  the  second  agreement.  After  the 
election  and  notice  by  the  mortgagor,  such  mortgage  will 
become  security  for  the  performance  of  the  second  agreement.^ 

§  466.  Unliquidated  Indebtedness. — A  mortgage  to  secure 
unliquidated  indebtedness  is  good.  Thus,  a  mortgage  may  be 
given  to  secure  whatever  amount  of  indebtedness  may  at  any 
time  thereafter  exist  from  the  mortgagor  to  the  mortgagee,  a 
bank ;  and  the  mortgage  is  not  restricted  by  the  proviso  to  the 
indebtedness  of  the  mortgagor  to  the  bank,  arising  from  direct 
dealings  between  them,  but  is  security  also  for  the  amount  of 
notes  made  by  the  mortgagor  to  the  order  of  a  third  person, 
and  by  him  indorsed  to  the  bank  and  discounted  for  him.^ 
So  also  it  may  be  given  to  secure  a  sum  stated  by  arbitrators,  in 
settling  debts  from  the  mortgagor  to  the  mortgagee.*  So  a 
debtor  may  mortgage  his  property  to  secure  a  contingent  lia- 
bility.^ But  where  a  statute  requires  that  the  debt  shall  be 
stated  in  the  mortgage,  it  cannot  be  made  to  cover  unliquidated 
damages.^ 

A  mortgage  may  be  given  to  secure  the  fidelity  of  an  agent 
or  factor,  or  to  secure  the  payment  of  moneys  in  the  hands  of 
a  trustee,  the  amount  being  uncertain.^  So  a  mortgage  may 
be  given  to  secure  an  open  account  that  is  continually  vary- 
ing ;  ^  or  to  secure  any  balance  that  may  remain  after  collecting 

1  Whipperman  v.  Smith,  96  Ind.  275. 

« Furbish  v.  Sears,  2  Cliff.  C.  C.  454. 

3  Nat.  Bank  v.  Byard,  26  N.  J.  Eq.  255. 

*  Emery  v.  Owings,  7  Gill  (Md.),  488. 

s  Moore  v..  Ragland,  74  N.  Car.  343. 

«  Bethlehem  v.  Annis,  40  N.  H.  34. 

'  Stoughton  V.  Pasco,  5  Conn.  442. 

"Esterly  v.  Purdy,  50  How.  (N.  Y.)  Pr.  350  ;  Moses  v.  Hatfield,  27  S.  Car.  324. 


THE    DEBT    SECURED.  491 

collaterals  given  to  the  mortgagee  by  the  mortgagor  ;  ^  or  for 
a  certain  sum  or  "  thereabouts,"  when  no  material  difference 
to  the  sum  described,  is  shown ;  ^  or  to  secure  payment  to  be 
made  in  lumber  under  a  prior  agreement  between  the  parties.^ 
In  such  mortgages,  the  mortgagee  or  holder  of  the  mortgage 
must  prove  what  is  due/ 

§467.  The  Description  of  the  Note  Given  with  the 
Mortgage. — The  description  of  the  note  must  be  reasonably 
certain,  so  that  it  can  be  identified.  The  utmost  particularity  is 
unnecessary.  Thus,  where  a  note  is  described  as  a  note  for 
$1,500,  the  time  and  manner  of  payment  to  be  as  therein  ap- 
pear, it  is  sufficient.^  So  when  a  mortgage  recites  that  it  was 
given  to  secure  payment  of  $300  on  the  9th  day  of  May,  1883, 
$400  on  the  9th  day  of  May,  1884,  and  $100  on  the  9th  day 
of  May,  1885,  with  interest,  but  the  consideration  was  stated 
to  be  $300,  and  but  one  note  was  named,  this  description  is 
sufficient,  because  this  omission  could  mislead  no  one,  and  the 
mortgage  was  a  valid  security  for  all  three  notes.^ 

It  is  not  necessary  that  all  the  particulars  of  the  note 
secured  should  be  set  forth  in  the  condition  of  the  mortgage. 
It  is  enough  if  it  appears  with  reasonable  certainty  to  be  the 
note  intended.'' 

Judge  Carpenter  says  that  the  particularity  required  in 
making  a  contract  is  not  required  in  describing  it,  and  that  it 
may  be  safely  assumed  that  some  particulars  may  be  omitted 
in  the  description.  Certainty  of  description  in  every  particular 
is  dispensed  with,  provided  the  record  gives  reasonable  notice  of 
the  nature  and  extent  of  the  incumbrance.^  It  is  sufficient  if  the 
amount,  date,  and  time  of  payment  of  the  note  are  given,  though 

'  Clarke  v.  Bancroft,  13  Iowa,  320. 
"Booth  V.  Barnum,  9  Conn.  286. 
'Rees  V.  Logsdon,  68  Md.  93. 

*  Dc  M(At  V.  Benson,  4  Edwards  (N.  Y.),  297. 
*King  V.  Kilbride,  58  Conn.  109. 

*  Shoemaker  v.  Smith,  80  Iowa,  655. 
^  Webb  V.  Stone,  24  N.  H.  282. 

^   MVinchell  v.  Coney,  54  Conn.  24.    See,  also,  Stoughton  v.  Pasco;  5  Conn. 
442 ;  Merrills  v.  Swift,  18  Conn.  257. 


492  NATURE   AND   REQUISITES   OF   THE   CONTRACT. 

the  description  fails  to  give  what  rate  of  interest  was  to  be  al- 
lowed, as  the  record,  in  effect,  gives  notice  to  subsequent  pur- 
chasers, that  its  purpose  was  to  secure  the  payment  of  such 
interest  as  had  been  reserved  in  the  note.^ 

So  when  a  note  was  described  in  a  deed  of  release,  as  pay- 
able May  21,  1834,  when  in  fact  it  was  payable  April  21, 
the  description  is  sufficient,  because  evidence  is  admissible  to 
show  the  agreement  or  identity  of  the  note  with  the  one  de- 
scribed.^ So  where  a  note  did  not  correspond  with  the 
description  in  the  mortgage,  the  note  was  held  to  cure  the  de- 
fective description  in  the  mortgage.^ 

And  where  the  condition  was  that  the  mortgagor  should 
pay  $500  at  a  future  time  specified,  when  the  deed  and  note 
bearing  even  date  with  the  mortgage  should  be  void,  it  was 
held  that  a  note  of  $500,  payable  on  demand  with  interest, 
was  the  one  secured  by  the  mortgage,* 

The  omission  of  "  or  order  "  in  the  note,  payable  to  order  of 
the  mortgage,  is  not  fatal.^  And  when  a  mortgage  describes  a 
note  which  had  not  been  executed  by  mistake,  the  description 
is  sufficient,  and  the  mortgage  valid.^  The  recitals  in  a  mort- 
gage is  competent  evidence  against  the  mortgagor  to  prove 
the  consideration  of  the  note  described/ 

And  a  mortgage  conditioned  to  pay  whatever  sum  the  mort- 
gagor miglit  owe  the  mortgagee,  either  as  maker  or  indorser  of 
any  notes  or  bills,  bonds,  checks,  overdrafts,  or  securities  of  any 
kind  given  by  him,  secures  only  debts  evidenced  by  writing.* 

A  mortgage  given  at  the  same  time  as  a  note  is,  and  de- 

'  Richards  v.  Holmes,  18  How.  (U.  S.)  143. 
'  Worthington  v.  Hylyer,  4  Mass.  196. 
^Cleavenger  v.  Beath,  53  Ind.  172. 

*  Bourne  v.  Littlefield,  29  Me.  302.  See,  also,  Johns  v.  Church,  12  Pick.  (Mass.) 
557  ;  Hall  v.  Tufts,  18  Pick.  (Mass.)  455 ;  Jackson  v.  Bowen,  7  Cow.  (N.  Y.)  13. 

*  Hough  V.  Bailey,  32  Conn.  288. 

*  Volrner  v.  Stagerman,  25  Minn.  234. 
^Warner  v.  Brooks,  14  Gray  (Mass.),  107. 
8  Walker  v.  Paine,  31  Barb.  (N.  Y.)  213. 

It  Avill  be  presumed  that  a  note  referred  to  in  a  mortgage  or  deed  of  trust 
is  not  under  seal :  Jackson  v.  Sackett,  7  Wend.  (N.  Y.)  94 ;  Walker  v.  McCon- 
nico,  10  Yerg.  (Tenn.)  228. 


THE   DEBT   SECURED.  493 

scribing  it,  except  that  it  omitted  the  words  "  as  collateral 
security,  with  mortgage,"  sufficiently  describes  the  debt,  that 
debt  not  being  conditional.^ 

§468.  What  the  Condition  Should  Set  Forth. — It  is 
not  required  that  the  mortgage  should  set  forth  a  literal  copy 
of  the  instrument  secured  thereby.  It  is  sufficient  to  describe 
it  according  to  its  legal  effect.^  Thus,  if  it  is  stated  in  the  con- 
dition of  the  mortgage  that  the  mortgagor  is  indebted  to  the 
mortgagee  for  moneys  loaned  and  his  liability  on  divers  bills 
of  exchange  and  promissory  notes,  and  it  provides  that  if  he 
discharges  them  within  six  months  the  deed  should  be  void, 
it  is  a  sufficient  description  of  the  debt,  since  it  is  capable  of 
being  made  certain  by  parol  evidence.^  Parol  evidence  is 
admissible  to  show  the  real  consideration,  and  what  notes  were 
actually  intended  to  be  designated.*  And  a  description  is  not 
void  when  extrinsic  evidence  can  be  applied  to  its  proper  sub- 
ject-matter.^ And,  in  general,  when  a  note  is  offered  in  evi- 
dence, in  connection  with  a  mortgage,  it  is  not  necessary  that 
all  the  particulars  of  it  should  be  specified  in  the  condition  of 
the  mortgage  in  order  to  identify  it  as  the  note  intended  to  be 
secured  thereby.  If  a  general  description  of  the  note  is  con- 
tained in  the  mortgage  it  will  be  prima  facie  evidence  that  it 
is  the  note  intended  to  be  secured,  although  the  note  may  con- 
tain additional  particulars,  or  be  signed  by  other  persons  than 
the  mortgagor. 

Thus,  where  a  mortgage  described  the  note  secured  as  one 
of  $625,  signed  by  the  mortgagor,  payable  to  the  mortgagee,  or 
order,  on  demand,  with  interest  annually,  and  of  even  date 
with  the  mortgage,  and  the  note  offered  in  evidence  was  of  the 
same  date,  amount,  and  payable  to  the  mortgagee,  or  order, 

^  Hill  V.  Banks,  61  Conn.  25. 

'Muldrowt;.  Caldwell,  7  Mo.  563;  Hey  wood  v.  Wingate,  14  N.  H.  73; 
Pitcher  v.  Barrows,  17  Pick.  (Mass.)  361. 

*Aull  V.  Beverly,  61  Mo.  160. 

*  Nazro  v.  Ware,  38  Minn.  443. 
,  *Hurd  V.  Eobinson,  11  Ohio  St.  232.    See,  also,  Williams  v.  Hilton,  35  Me. 
547;  Partridge  v.  Swazey,  46  Me.  414;  Boody  v.  Davis,  20  N.  H.  140;  McKin- 
Bter  V.  Babcock,  26  N.  Y.  378. 


494  NATURE   AND   REQUISITES   OF   THE   CONTRACT. 

"  in  teaming,  on  demand,  with  interest  annually,  from  Warner 
to  Boston,  at  the  following  prices,"  to  which  was  added  a  fur- 
ther stipulation  as  to  forwarding  in  part  by  railroad,  and  the 
note  was  signed  by  the  mortgagor  and  two  others,  it  was  held 
that  the  note  or  contract  so  produced  was  prima  facie  the  note 
intended  by  the  description  in  the  mortgage.^ 

A  promissory  note  was  made  and  delivered  on  or  about  the  8th 
day  of  August,  1867,  payable  on  or  about  one  j^ear  after  date 
to  the  mortgagee,  signed  by' three  persons.  The  note  offered 
in  evidence  was  dated  August  6,  1867,  payable  on  or  before 
September  1,  1868,  and  it  contained  a  condition  that  it  might 
be  paid  by  the  delivery  of  a  barge  in  lieu  of  money.  It  was 
held  sufficiently  identified  as  the  note  described  in  the  mort- 
gage.^ But,  of  course,  the  note  must  agree  in  some  respects 
with  that  described  in  the  mortgage,^  for  if  the  note  be  totally 
variant  from  the  one  described  in  the  mortgage  parol  evidence 
is  inadmissible  in  an  action  at  law  to  identify  it.*  When  notes 
are  otherwise  identified  it  is  no  objection  to  the  validity  of  the 
mortgage  that  it  does  not  state  the  names  of  the  holders  of  the 
notes  secured.^ 

A  mortgage  with  the  year  left  blank,  securing  a  note  never 
made,  is  invalid.'^ 

§  469.  It  is  not  Necessary  to  Have  Collateral  or  Per- 
sonal Security. — To  constitute  a  mortgage  it  is  not  necessary 
that  there  should  be  any  collateral  or  personal  security  for  the 
debt  secured  by  the  mortgage ; ''  because  the  validity  of  the 
mortgage  stands  upon  the  genuineness  of  the  debt  described  in 
the  condition  thereto.  It  need  not  exist  in  the  form  of  a 
promissory  note.^     The  mortgage  depends  upon  the  existence 

1  Robertson  v.  Stark,  15  N.  H.  109. 

2  Paine  v.  Benton,  32  Wis.  491. 

'Stanford  v.  Andrews,  12  Heisk.  (Tenn.)  664. 
*Follctt  V.  Heath,  15  Wis.  601. 
*Boyd  r.  Parker,  43  Md.  182. 
«  Parker  v.  Parker,  17  Mass.  370. 

'  Smith  V.  People's  Bank,  24  Me.  185  ;  Rice  r.  Rice,  4  Pick.  (Mass.)  349. 
»Hod^don  v.  Shannon,  44  N.  H.  572  ;  Lund  v.  Lund,  1  N.  H.  39 ;  Weeks  v. 
Eaton,  15  N.  H.  145. 


THE    DEBT    SECURED.  495 

of  the  debt  it  is  given  to  secure/  And  if  the  mortgage  or 
deed  of  trust  describes  a  note  or  bond  which  was  not  given, 
its  vaHdity  is  not  affected.^ 

The  question  to  be  answered  is,  does  the  debt  exist  ?  If  it 
does,  the  recital  of  that  fact  in  the  deed  is  sufficient,  without 
any  other  evidence ;  ^  and  though  the  written  evidence  be 
destroyed,  it  does  not  affect  the  mortgage.* 

A  mortgage  given  to  secure  a  debt  actually  existing  is  good, 
though  there  be  no  note  and  no  time  of  payment,  and  can  be 
immediately  enforced.^  And  it  has  been  decided  that  a  mort- 
gage to  secure  a  note  attached  thereto  is  valid  though  the  note 
was  not  signed  by  the  maker,  as  the  note  might  be  read  in 
evidence  as  part  of  the  mortgage.® 

§  470.  Clerical  Mistakes  and  Inaccuracies. — Clerical 
inaccuracies  in  the  description  of  a  debt  will  not  affect  the 
lien  of  a  mortgage  as  against  the  mortgagor  or  subsequent 
judgment  creditors  of  his,  provided  the  debt  is  clearly  identi- 
fied as  the  one  intended  to  be  secured.''  Thus,  a  mortgage 
was  given  in  blank,  the  sum  which  it  was  designed  to  secure 
not  appearing  either  upon  the  mortgage  or  the  registry ;  but 
the  provision  thereto  provided  that  it  was  to  be  void  on  the 
payment  of  (blank)  agreeable  to  the  condition  of  the  bond 

'  Griffin  t;.  Cranston,  1  Bosw.  (N.  Y.)  281;  Coutanf  r.  Servoss,  3  Barb.  (N. 
Y.)  128 ;  Jackson  v.  Bowen,  7  Cow.  (N.  Y.)  13  ;  Farmers'  Loan  and  Trust  Co.  v. 
Curtis,  7  N.  Y.  466 ;  Moses  v.  Hatfield,  27  S.  Car.  324. 

2  Mitcliell  V.  Burnham,  44  Me.  286  ;  Goodhue  v.  Berrien,  2  Sandf.  Cii.  (N.Y.) 
630 ;  Baldwin  v.  Raplee,  4  Ben.  D.  C.  433. 

■''Eacho  V.  Cosby,  26  Gratt.  (Va.)  112.  See,  also,  Burger  v.  Hughes,  5  Hun 
(N.  Y.),  180. 

*Clough  V.  Seay,  49  Iowa,  111. 

^Brookings  v.  White,  49  Me.  479;  IMcCaughrin  v.  Williams,  15  S.  Car.  515, 
516  ;  Carnall  v.  Duval,  22  Ark.  136. 

« McFadden  v.  State,  82  Ind.  558. 

Where  a  note  represents  a  part  of  the  amount  described  in  a  mortgage,  it 
is  entitled  to  a  proportionate  part  of  the  mortgage  security  :  Adger  v.  Pringle, 
lis.  Car.  527.  And  a  mortgage  for  a  greater  sum  than  the  amount  due,  in 
the  absence  of  a  fraudulent  intent,  is  valid  to  the  extent  of  the  actual  debt : 
Gordon  v.  Preston,  1  Watts  (Pa.),  385.  See,  also,  Chester  v.  Wheelwright,  15 
Conn.  562. 

'  Tousley  v.  Tousley,  5  Ohio  St.  78. 


496  NATURE    AND   REQUISITES    OF   THE   CONTRACT. 

given  by  the  mortgagor  to  the  mortgagee  of  even  date  with 
the  mortgage  and  payable  at  a  date.  The  bond  contained  the 
sum.  It  was  held  to  be  good  against  subsequent  mortgagees.^ 
And  a  writing  giving  the  amount  of  a  blank  left  in  a  mort- 
gage, attached  to  the  page  on  which  the  registry  is  made,  is  a 
sufficient  notice  to  subsequent  mortgagees.^ 

So  where  a  mortgage  is  executed  to  secure  the  payment  of 
promissory  notes,  and  the  notes  are  misdescribed  in  the  mort- 
gage, the  mortgagee  is  entitled  to  relief  in  equity  against  a 
subsequent  mortgagee.^ 

If  the  note  is  described  as  being  signed  by  the  mortgagor 
and  indorsed  by  another,  it  may  be  corrected  in  equity  to 
cover  a  bond  signed  by  the  principal,  and  also  signed  by  a 
surety  as  such.*  A  misdescription  of  the  date  and  time  of 
payment  in  a  note  secured  by  the  mortgage  may  be  corrected.^ 

Parol  evidence  may  be  introduced  to  show  the  real  considera- 
tion, as  a  general  rule,  before  the  correction  of  the  mistake  of 
the  clerk  ; "  and  parol  evidence  is  admissible  to  prove  that  the 
note  produced  is  the  note  described  in  the  mortgage.^ 

§  471.  Admissibility  of  Parol  Evidence. — Parol  evidence 
is  admissible  to  show  that  the  note  described  in  the  mortgage 
is  the  one  produced  in  evidence. 

Thus,  where  a  note  secured  by  a  mortgage  is,  in  some  par- 
ticulars, misdescribed,  it  may  be  shown  by  parol  evidence  that 
it  is  the  one  intended  to  be  described.* 

So  a  note  payable  •'*  in  one after  date,"  may  be  iden- 
tified as  one  payable  in  one  "  year  "  after  date,  to  correspond 

'Hall  V.  Lambert,  3  Halst.  Ch.  (N.  J.)  651. 

*  Lambert  v.  Hall,  3  Halst.  Ch.  (N.  J.)  410. 
3  Porter  v.  Smith,  13  Vt.  492. 

*  In  re  Clarke,  2  Hughes,  C.  C.  405. 
^Tousley  v.  Tousley,  5  Ohio  St.  78. 

^  Nazro  v.  Ware,  38  Minn.  443. 

'Nazro  v.  Ware,  38  Minn.  443;  Williams  v.  Hilton,  35  Me.  547  ;  Bourne  v. 
Littlefield,  29  Me.  302. 

8  Bourne  v.  Littlefield,  29  Me.  302  ;  Williams  v.  Hilton,  35  Me.  547  ;  58  Am. 
Dec.  729 ;  Johns  v.  Church,  12  Pick.  (Mass.)  557 ;  23  Am.  Dec.  651 ;  Stanford  v. 
Andrews,  12  Heisk.  (Tenn )  664 ;  McKinster  v.  Babcock,  26  N.  Y.  378 ;  Nazro 
V.  Ware,  38  Minn.  443. 


THE    DEBT   SECURED.  497 

with  one  described  in  the  mortgage  given  to  secure  it.^  So  a 
promissory  note  agreeing  in  many  respects  with  the  one  de- 
scribed in  the  mortgage  deed,  though  variant  therefrom  in 
some  of  its  particulars,  may  be  proved  by  parol  evidence  to  be 
the  note  intended  to  be  described  in  the  mortgage.^  This  is 
founded  upon  the  principle  that  a  thing  is  to  be  regarded  as 
certain  which  can  be  made  certain,  and  parol  evidence  can  be 
adduced  to  apply  the  contract  to  its  subject ;  that  where  there 
is  enough  to  put  those  concerned  upon  inquiry,  the  means  of 
knowledge  and  knowledge  itself  are  in  legal  effect  the 
same.^ 

Parol  evidence  may  be  admitted  to  show  that  Ebenezer 
Hall,  3d,  means  Ebenezer  Hall,  and  that  a  note  was  dated  sev- 
eral months  before.* 

If  the  ordinary  principle  of  allowing  extrinsic  evidence  to 
apply  to  a  written  contract  to  its  proper  subject-matter,  can 
control  in  such  cases,  then  the  mortgage  is  valid  as  to  third 
persons,  and  the  inaccuracy  in  the  description  can  be  cor- 
rected.^ And  it  has  been  held  that  a  description  entirely 
variant  with  the  note  may  be  shown  to  be  the  one  intended  to 
be  described.®  The  amount  and  nature  of  the  debt  described 
and  when  contracted  may  be  shown  by  parol.^ 

§472.  Substitution  of  New  Notes — Renewal. — Notes 
may  be  given  in  renewal  of  one  secured  by  a  mortgage,  and 
the  new  note  carries  with  it  the  original  security.* 

So  a  bond  given  in  renewal  of  one  secured  in  a  mortgage, 
even  to  an  assignee,  retains  its  place  in  the  mortgage  as  a  se- 

^  Stowe  V.  Merrill,  77  Me.  550. 

nVilliams  v.  Hilton,  35  Me.  547 ;  Aull  v.  Lee,  61  ]Mo.  160  ;  Hall  v.  Tay,  131 
Mass.  192 ;  Goddard  v.  Sawyer,  9  Allen  (Mass.),  78  ;  Bell  v.  Fleming,  12  N.  J. 
Eq.  13  ;  Duval  v.  McLoskey,  1  Ala.  708. 

^  Jones  V.  Guaranty  and  Indemnity  Co.,  101  U.  S.  022. 

*  Hall  V.  Tufts,  18  Pick.  (Mass.)  455. 

5  Gill  V.  Pinney,  12  Ohio  St.  38  ;  Clark  r.  Hyman,  55  Iowa,  14,  26  ;  Hurd  v. 
Robinson,  11  Ohio  St.  232. 

'Baxter  v.  Mclntire,  13  Gray  (Mass.),  168  ;  Gunn  v.  Jones,  67  Ga.  398. 

^  Babcock  v.  Lisk,  57  111.  327 ;  Bank  v.  Willard,  10  N.  H.  210. 
,  « Kidder  v.  Mcllhenny,  81  N.  Car.  123;  Bank  v.  Rose,  1  Strobh.  (S.  Car.) 
Eq.  257 ;  Lover  v.  Bessenger,  9  Baxt.  (Tenn.)  393,  395. 
VOL.  I.— 32 


498  NATURE   AND    REQUISITES   OF   THE.  CONTRACT. 

curity  debt,^  But  a  note  not  secured  by  the  mortgage,  and  no 
part  of  the  original  consideration  agreed  upon,  cannot  be  in- 
chided  in  such  mortgage  by  subsequent  agreement  between 
the  parties,  to  the  prejudice  of  junior  incumbrancers.^ 

A  subsequent  debt,  as  a  due-bill  of  the  mortgagor  to  the 
mortgagee,  will  not  be  substituted  by  parol  agreement,  some 
time  after  the  mortgage,  unless  there  is  a  clear  showing  that 
there  was  such  an  agreement  when  the  exchange  was  effected.^ 

In  California  the  code*  provides  that  a  mortgage  can  be 
created,  renewed,  or  extended  only  by  writing,  executed  with 
the  formalities  required  in  the  case  of  a  grant  of  real  property. 
Hence,  the  renewal  of  a  note  for  the  payment  of  the  mortgage 
debt  does  not  create  a  new  mortgage  after  the  original  mort- 
gage has  been  barred  by  the  statute  of  limitations.^ 

A  mortgage  given  to  secure  the  payment  at  maturity  of  the 
notes  of  another  does  not  secure  renewal  notes  sul^stituted  in 
place  of  them,  because  the  mortgagor  stands  in  the  relation  of 
surety  for  the  debtor,  and  his  obligation  cannot  be  continued 
without  his  consent." 

It  was  agreed  that  a  promissory  note  should  be  substituted 
for  notes  of  a  larger  amount  already  secured  by  a  mortgage ; 
that  if  paid  at  maturity  it  should  be  considered  a  payment 
and  discharge  pro  tanto  of  those  notes  and  of  the  mortgage,  and 
that  the  mortgage  should  be  held  as  collateral  security  for  the 
new  note,  and  not  be  discharged  or  cancelled  until  that  was  paid. 
It  was  held  that  this  agreement  did  not  create  a  lien  upon  the 
mortgaged  property  to  secure  its  payment.  The  court  says  it 
amounts  to  this :  "  Give  me  your  note  for  $600  ;  if  j)aid,  I 
will  indorse  it  on  the  mortgage ;  if  not,  the  mortgages  are  to 
stand  as  they  are."  Hence,  no  new  right  in  the  mortgaged 
property  accrues,  and  no  new  lien  is  created.  The  relation  of 
the  parties  is  not  changed.^ 

^Hyman  r.  Devereux,  63  N.  Car.  624. 

^  McCaughrin  v.  Williams,  15  S.  Car.  505. 

3  Tucker  v.  Alger,  30  Mich.  67. 

^  Civil  Code,  sect.  2922. 

^  Wells  V.  Harter,  56  Cal.  342. 

«  Ayres  v.  Wattson,  57  Pa.  St.  360. 

mowe  V.  Wilder,  11  Gray  (Mass.),  267. 


I 


THE    DEBT    SECURED.  499 

The  surrender  of  unpaid  notes  and  taking  a  new  note  for 
the  balance  due,  do  not  of  themselves  discharge  the  lien  of  the 
mortgage.^ 

The  taking  of  a  new  note  and  mortgage  by  the  mortgagee 
from  the  mortgagor  for  the  same  debt  upon  the  same  property, 
will  not  discharge  the  lien  of  the  first  mortgage,  but  that  lien 
will  be  continued  in  the  new  mortgage.  This  would  be  other- 
wise if  the  second  debt  was  created  by  the  parties  getting  to- 
gether and  having  a  settlement  of  mutual  running  accounts 
and  other  debts,  among  which  was  the  first  mortgage  debt, 
and  a  balance  is  found  due  the  mortgagee ;  this  balance, 
being  put  in  a  new  note  and  mortgage,  will  form  a  new  con- 
sideration, and  the  lien  of  the  first  mortgage  will  be  divested ; 
or  if  at  the  time  the  second  mortgage  is  taken  it  is  agreed  and 
understood  that  it  is  to  be  in  full  payment  and  satisfaction  of 
the  first  mortgage,  that  will  operate  as  a  cancellation  of  the 
first  mortgage.^ 

So,  where  a  husband  gave  a  mortgage  for  the  purchase- 
money  of  real  estate,  and  this  mortgage  was  afterward  dis- 
charged, and  at  the  same  time  and  as  part  of  the  same  trans- 
action a  new  note  and  mortgage  were  given  for  the  same  pur- 
chase-money debt,  the  instantaneous  seisin  of  the  husband  did 
not  operate  to  give  the  wife  a  homestead  right  in  the  premises 
or  dower.^ 

The  taking  of  a  new  note  and  mortgage  to  secure  an  in- 
debtedness already  evidenced  by  a  note,  and  secured  by  a 
mortgage  on  the  same  property,  does  not,  even  where  the  first 
note  and  mortgage  are  cancelled,  operate  to  discharge  the  lien 
of  the  first  mortgage.*  So  the  renewal  of  a  mortgage  reciting 
that  it  is  to  secure  precisely  the  same  indebtedness  as  the 
former  one,  will  take  priority  over  all  mortgages  and  other 

^  Dumell  r.  Terstegge,  23  Ind.  397 ;  Flower  r.  Elwood,  66  HI.  4.38 ;  M'Cor- 
mick  V.  Digby,  8  Blackf.  (Ind.)  99 ;  Bristol  Milling,  etc.,  Co.  v.  Probasco,  64 
Ind.  406. 

*  Walters  r.  Walters,  73  Ind.  425. 

*  Burns  v.  Thayer,  101  Mass.  426.  And  see  Gregory  v.  Thomas,  20  Wend. 
^N.  Y.)  17  ;  Dillon  v.  Byrne,  5  Cal.  455 ;  Swift  v.  Kraemer,  13  Cal.  526. 

*  Packard  v.  Kingman,  11  Iowa,  219. 


500  NATURE    AND    REQUISITES    OP   THE   CONTRACT. 

subsequent  liens  made  after  the  recording  of  the  first  mort- 
gage/ 

The  substituting  of  other  notes  for  the  same  amount  does 
not  discharge  the  debt.  The  new  notes  take  the  place  of  the 
old  ones,  leaving  the  indebtedness  unaffected  by  the  transac- 
tion. It  is  only  substituting  one  instrument  of  evidence  for 
another,  without  at  all  affecting  the  security.^  And  as  be- 
tween the  immediate  parties,  it  is  competent  for  them  to 
change  the  time  and  mode  of  payment,  and  still  retain  the 
mortgage  security.^ 

§  473.  The  Two  Instruments  Must  Be  Construed  To- 
gether.— The  construction  of  the  note  and  mortgage  must  be 
such  as  to  give  effect  to  each.* 

Thus,  a  provision  in  a  note,  secured  by  a  mortgage,  that 
"  upon  a  failure  to  pay  any  of  said  interest  within  thirty  days 
after  due,  the  holder  may  elect  to  consider  the  whole  note  due, 
and  it  may  be  collected  at  once,"  controls  a  general  provision 
in  the  mortgage,  and  restricts  the  right,  in  case  of  default  of 
payment  of  interest,  to  declare  the  debt  due,  to  the  holder  of 
the  note.  The  court  says,  "  the  note  and  mortgage  were  made 
at  the  same  time,  in  relation  to  the  same  subject-matter,  and 
must,  therefore,  be  construed  together.  By  construing  them 
together  as  parts  of  one  contract,  it  is  very  evident  that  the 
provisions  of  the  note  control  those  of  the  mortgage.^ 

A  mortgage  for  $5,000  and  a  written  agreement  were  made 
on  the  same  day.     The  agreement  recited  the  execution  of 

1  Shaver  v.  Williams,  87  El.  469.  See,  also,  Christie  v.  Hale,  46  111.  117; 
Houston  V.  Houston,  67  Ind.  276;  Story's  Eq.  Jur.,  sects.  1035  c,  1035  e; 
Gregory  v.  Thomas,  20  Wend.  (N.  Y.)  17. 

2  Morse  v.  Clayton,  13  Sm.  &  M.  (Miss.)  373 ;  Davis  v.  Maynard,  9  Mass. 
242 ;  Burdett  v.  Clay,  8  B.  Mon.  (Ky.)  287 ;  Williams  v.  Starr,  5  Wis.  534. 

^Hugunin  v.  Starkweather,  5  Gil.  (111.)  422;  M'Cormick  v.  Dighy,  8 
Blackf.  (Ind.)  99. 

*  Nat.  Bank  v.  Peck,  8  Kan.  662 ;  Schoonmacker  r.  Taylor,  14  Wis.  313  ;  Ti(M- 
man  v.  Hinman,  16  111.  400 ;  Attawa,  etc.,  Co.  v.  Murray,  15  111.  336 ;  Round 
V.  Donnel,  5  Kan.  56 ;  Muzzy  v.  Knight,  8  Kan.  456 ;  Crafts  v.  Crafts,  13 
Gray  (Mass.),  360. 

^  Fletcher  v.  Daugherty,  13  Nebr.  224.  See,  also,  Gillman  v.  Henry,  53  Wis. 
468 ;  Blakeslee  v.  Rossman,  43  Wis.  116. 


THE    DEBT    SECURED.  501 

the  mortgage,  and  that  the  mortgagee  held  a  note  of  the  mort- 
gagor for  $1,500,  and  provided  that  that  sum,  in  addition  to 
the  said  $1,500,  should  be  advanced,  not  exceeding  in  all 
$5,000,  said  sum,  when  advanced,  to  be  secured  by  the 
mortgage.  It  was  held  that  construing  the  mortgage  and 
agreement  together,  the  note  for  $1,500  was  to  be  secured  by 
the  mortgage.^ 

A  note  with  a  blank  for  the  insertion  of  "  bearer  or  order  " 
may  be  supplemented  by  the  mortgage  which  describes  the 
note  as  payable  to  the  payee  or  "  bearer."  ^ 

And  where  a  note  provided  for  interest  at  ten  per  cent,  per 
annum  and  the  mortgage  stipulated  for  "  interest  at  the  rate 
of  ten  per  cent,  per  annum,  payable  annually,  according  to 
the  terms  of  the  promissory  note,"  it  was  held  that  the  mort- 
gage provided  for  something  respecting  which  the  note  was 
silent,  and  must  therefore  govern.^ 

Parol  evidence  may  be  admitted  to  show  that  the  note  is 
the  only  debt  secured  by  the  mortgage.* 

A  note  and  mortgage  may  supplement  each  other.  If  the 
mortgage  contains  a  provision  not  in  the  note,  it  will  control. 
Thus  a  mortgage  provided  that  upon  default  in  the  payment 
of  the  interest,  the  whole  debt  should  become  due  and  pay- 
able. The  note  contained  no  such  provision,  but  it  became 
due  upon  default,  and  a  personal  judgment  was  taken  against 
the  mortgagor  for  a  deficiency  after  foreclosure.^ 

§  474.  Several  Mortgages  Upon  Separate  Pieces  of 
Realty. — Where  several  mortgages  are  given  to  secure  the 

^  Evenson  v.  Bates,  58  Wis.  24.  See,  also,  Leedy  v.  Nash,  67  Ind.  311 ;  Stowe 
V.  Merrill,  77  Me.  550  ;  Wheeler  &  Wilson  Manf.  Co.  v.  Howard,  28  Fed.  Rep.  741. 

2  Elliott  V.  Deason,  64  Ga.  63. 

^  Dobbins  v.  Parker,  46  Iowa,  357.  And  see  Moses  v.  Hatfield,  27  S.  Car. 
324 ;  Mowry  v.  Sanborn,  68  N.  Y.  153  ;  Winchell  v.  Coney,  54  Conn.  24  ;  Rich- 
ards V.  Holmes,  18  How.  (U.  S.)  143. 

*  Hampden  Cotton  Mills  v.  Payson,  130  Mass.  88.  In  this  case  the  mortgage 
provided  for  interest,  but  the  note  did  not  make  such  provision.  See,  also, 
Wheeler  &  Wilson  Manf.  Co.  v.  Howard,  28  Fed.  Rep.  741 ;  Shores  v.  Doh- 
erty,  65  Wis.  153 ;  Commercial  Exch.  Bank  v.  McLeod,  67  Iowa,  718  ;  Gregory 
'V.  Marks,  8  Biss.  C.  C.  44  ;  Fletcher  r.  Daugherty,  13  Nebr.  224. 

*  Gregory  v.  Marks,  8  Biss.  C.  C.  44. 


502  NATURE    AND   REQUISITES    OF   THE   CONTRACT. 

same  debt,  though  upon  several  pieces  of  land,  they  constitute 
but  one  mortgage,  and  the  mortgagee  can  have  the  benefit  of 
them  all  for  the  security  of  this  debt.^ 

So  where  there  are  several  mortgages,  though  bearing  upon 
their  face  evidence  of  distinct  debts,  yet  they  will  be  consid- 
ered as  additional  evidence  of  security  for  an  original  debt, 
which  may  be  shown  by  parol  evidence.^  But  a  mortgage 
given  to  two  or  more  persons  to  secure  their  several  demands, 
is  several  and  not  joint ;  each  mortgagee  has  a  right  to  enforce 
his  claim  under  the  mortgage,  in  any  form  adapted  to  his 
case  ;  and,  of  course,  the  surviving  mortgagee  cannot  maintain 
a  case  on  the  mortgage  to  enforce  payment  of  the  debt  due  the 
deceased  mortgagee.^ 

§  475.  The  Mortgage  Is  Security  Only  for  the  Debt 
Specified. — A  mortgage  only  secures  the  debt  specified.  Thus, 
the  mortgagee,  seeking  the  foreclosure  of  a  mortgage,  can  have 
only  such  debts  established  as  are  within  the  terms  of  the 
mortgage.'*  The  mortgage  cannot  be  extended  to  include 
other  debts.^  But  so  long  as  the  debt  can  be  traced,  the  mort- 
gage remains  security  for  its  payment.® 

Neither  can  the  mortgagor  as  against  the  rights  of  third 
parties,  increase  the  charge  upon  the  land,  as  by  increasing 
the  rate  of  interest,^  or  by  making  the  payment  in  gold  instead 
of  currency,^  or  by  confessing  judgment  and  thus  compound- 
ing the  interest.^ 

1  Franklin  v.  Gorham,  2  Day  (Conn.),  142. 

2  Anderson  v.  Da\aes,  6  Munf.  ( Va.)  484. 

3  Burnett  v.  Pratt,  22  Pick.  (Mass.)  556  ;  Donnels  v.  Edwards,  2  Pick.  (Mass.) 
617  ;  Gardner  v.  Diedrichs,  41  111.  158  ;  Eccleston  v.  Clipsham,  1  Saund.  153 ; 
Thayer  v.  Campbell,  9  Mo.  280. 

*  funno  V.  Robert,  1(5  Fla.  738  ;  Perrin  v.  Kellogg,  38  Mich.  720  ;  Beekman  v. 
First  M.  E.  Church,  18  How.  Pr.  (N.  Y.)  431. 

5  Large  v.  Van  Doren,  14  N.  J.  Eq.  208 ;  Stoddard  v.  Hart,  23  N.  Y.  556  ; 
Patterson  v.  Johnson,  7  Ohio,  225. 

6  Van  Wagner  v.  Van  Wagner,  3  Halst.  Eq.  (N.  J.)  27  ;  Wilkerson  v.  Till- 
man, 66  Ala.  532  ;  Chapman  v.  Jenkins,  31  Barb.  (N.  Y.)  164. 

^  Burchard  v.  Frazer,  23  Mich.  224. 

8  Belloc  )).  Davis,  38  Cal.  242  ;  Taylor  v.  Atlantic,  etc.,  R.  R.  Co.,  55  How.  Pr. 
(N.  Y.)  275.    Compare  Poett  v.  Stearns,  22  Cal.  78. 

9  McGready  v.  McGready,  17  Mo.  597. 


THE    DEBT   SECURED.  503 

While  an  indebtedness  other  than  that  for  which  the  mortgage 
was  given  cannot  legally  be  attached  to  such  mortgage,  it  is 
competent,  in  answer  to  a  bill  in  equity  to  redeem  a  mortgage, 
for  the  defendant  to  show  that  it  would  be  inequitable  to  allow 
the  plaintiff  to  do  so  upon  payment  of  the  amount  apparently 
due  thereon,  inasmuch  as  the  defendant  had  for  valuable 
consideration  orally  agreed  that  it  should  not  thus  be  dis- 
charged, but  should  remain  as  security  for  other  debts/  As 
against  the  mortgagor  an  oral  agreement  to  extend  the  mort- 
gage to  cover  advances  will  be  upheld.^  This  rule  applies  to 
those  claiming  under  him.*  But  such  oral  agreement  cannot 
be  set  up  against  a  subsequent  mortgagee  or  attaching  cred- 
itor ;  *  nor  can  it  be  extended  for  additional  sums,  and  parol 
evidence  is  inadmissible  in  such  cases  to  prove  the  agree- 
ment.^ 

The  civil  law  authorizes  a  mortgagee  to  unite,  as  against  his 
own  debtor,  a  second  loan  without  security,  to  the  first,  when 
the  debtor  seeks  to  redeem.^ 

The  French  code  contains  a  similar  doctrine.  A  novation 
of  a  debt,  as  a  general  rule,  extinguishes  the  hypothecation.  But 
when  it  operates  solely  between  the  creditor  and  debtor,  to 
whom  the  mortgaged  property  belongs,  they  can  by  contract 
transfer  the  thing  mortgaged  for  the  old  debt  to  the  new  one. 
This  works  no  prejudice  to  the  other  creditors,  because  it  does 
not  prevent  them  from  seizing  the  property  and  selling  it  pre- 
cisely as  they  might  have  done  before  the  translation.  The 
new  obligation  cannot  exceed  the  old  in  amount,  and  it  must 
be  made  at  the  time  of  the  novation,  not  subsequently.^ 

So  it  is  generally  held  that  an  oral  agreement  to  extend  the 

security  of  a  mortgage  so  as  to  cover  other  or  further  debts  and 

1  Joslyn  V.  Wyman,  5  Allen  (Mass.),  62 ;  Stone  v.  Lane,  10  Allen  (Mass.),  74 ; 
Upton  V.  Bank,  120  Mass.  153. 
^  Walker  v.  Walker,  17  S.  Car.  329,  337. 
'  Stone  V.  Lane,  10  Allen  (Mass.),  74. 
*  Upton  V.  Bank,  120  Mass.  153. 

^Townsend  v.  Empire  Stone  Co.,  6  Duer  (N.  Y.),  208. 

« Story's  Eq.  Jnr.,  sect.  415,  n.  2,  and  sect.  1010 ;  1  Domat,  p.  348,  art.  4, 
'  and  note  ;  Jarvis  v.  Eogers,  15  Mass.  389,  415. 

'Touillier  Droit  Civil  Francaise,  tome  7,  arts.  308,  310,  312,  and  note. 


504  NATURE   AND   REQUISITES   OF    THE    CONTRACT. 

liabilities  is  void  as  to  third  parties ;  ^  but  such  agreement 
may  be  set  up  against  a  mortgagor  or  his  assigns  in  equity.^ 
In  Penns3dvania  a  mortgage  is  so  entirely  a  security  for 
money  that  payment  or  performance  of  the  condition  as  fully 
satisfies  it  as  it  does  a  judgment.^  Thus,  a  mortgage  given  by 
two  tenants  in  common,  as  security  for  a  partnership  debt,  is 
discharged  by  payment  of  the  debt,  and  cannot  be  kept  alive 
as  a  security  for  an  individual  debt  of  one  of  the  mortgagors  to 
the  mortgagee,  even  as  against  the  interest  of  the  debtor/  In 
Pennsylvania  a  mortgage  of  real  estate  cannot  be  created  by  oral 
agreement.^  And  in  Missouri,  a  verbal  agreement  that  subse- 
quent advances  shall  constitute  a  lien  on  land  already  conveyed 
as  a  security  for  former  loans,  is  within  the  statute  of  frauds 
and  void.'' 

§  476.  The  Doctrine  of  Tacking. — The  doctrine  of  tacking 
is  not  known  to  our  laws  as  regards  the  right  of  a  mortgagee 
to  tack  to  his  mortgage  any  debt  not  secured  thereby,  and 
require  its  payment  by  the  mortgagor  as  a  condition  to  his 
right  to  redeem.''  This  doctrine  is  wholly  suspended  by  the 
principle  of  registration,  whereby  the  record  of  a  prior  mort- 
gage is  constructive  notice  to  all  parties  of  its  existence.^ 

A  prior  mortgagee  cannot  tack  his  debts  against  the  mort- 
gagor, not  included  in  the  mortgage,  to  his  prior  mortgage,  to 
the  prejudice  of  a  subsequent  mortgagee.^ 

1  Curie  V.  Eddy,  24  Mo.  117  ;  Lawrence  v.  Tucker,  23  How.  (U.  S.)  14 ; 
Bank  v.  Finch,  3  Barb.  Ch.  (N.  Y.)  293  ;  Shirras  v.  Caig,  7  Cranch  (U.  S.),  34 ; 
Stoddard  v.  Hart,  23  N.  Y.  556 ;  Williams  v.  HilL  19  How.  (U.  S.)  250 ;  Ex 
parte  Hooper,  19  Ves.  477  ;  Craig  v.  Tappin,  2  Sandf.  Ch.  (N.  Y.)  78. 

2  Upton  V.  Bank,  120  Mass.  153. 

*  Asay  V.  Hoover,  5  Barr  (Pa.),  21. 

*  Thomas'  Appeal,  30  Pa.  St.  378. 

*  Bowers  v.  Oyster,  3  Pa.  239. 

6  O'Neill  V.  Capelle,  62  Mo.  202. 

^  Bacon  v.  Cottrell,  13  Minn.  194  ;  Edwards  v.  Dwight,  68  Ala.  389 ;  Barthell 
V.  Syverson,  54  Iowa,  160.     ShifFer  v.  Feagin,  51  Ala.  335. 

8  Grant  v.  Bank,  1  Caines'  Cas.  (N.  Y.)  112 ;  Wing  v.  McDowell,  Walk. 
(Mich.)  175  ;  Chandler  v.  Dyer,  37  Vt.  345. 

9Siter  V.  M'Clanachan,  2  Gratt.  (Va.)  280;  Hughes  v.  Worley,l  Bibb  (Ky.), 
200 ;  Chase  v.  M'Donald,  7  Harr.  &  J.  (Md.)  160. 


THE    DEBT    SECUHED.  505 

So  a  mortgage,  after  payment  of  the  amount  named  therein, 
cannot  be  made  available  to  secure  further  amounts,  unless  the 
parties  so  agree  by  valid  contract.^ 

And  when  a  creditor,  whose  debt  is  secured  by  the  assign- 
ment of  a  mortgage,  purchases  a  judgment  which  constitutes 
a  prior  lien  on  the  premises,  at  the  request  of  the  debtor,  and 
with  the  express  understanding  that  it  shall  be  tacked  to  the 
mortgage,  and  paid  out  of  the  fund,  he  is  entitled,  in  equity, 
to  have  it  tacked  to  his  mortgage,  and  paid  out  of  the  fund.^ 
And  a  mortgagee  may  take  another  mortgage  which  will  be 
valid  against  an  incumbrance  implied  by  equity,  of  which  he 
had  no  actual  or  constructive  notice.^ 

If  a  vendor  has  a  lien  on  the  land  for  the  purchase-money, 
and  the  vendee  mortgages  the  premises  to  a  third  person,  who 
pays  the  purchase-money,  he  may  tack  the  money  paid  to  the 
sum  due  on  the  mortgage.*  Even  by  agreement  with  the 
mortgagor,  the  mortgagee  cannot  tack  other  debts  to  his  mort- 
gage as  against  intervening  mortgagees  and  judgment  creditors.^ 

§  477.  The  Doctrine  of  Tacking  in  England. — In  Eng- 
land there  was  a  doctrine  in  relation  to  mortgages,  by  which  if 
there  were,  for  instance,  three  successive  mortgages  without 
notice,  upon  the  same  estate  to  three  different  persons,  and  the 
third  acquires  the  first  mortgage  by  assignment,  he  might 
hold  the  estate  against  the  second  until  he  paid  both  the  first 
and  the  third.  This  was  called  "  tacking  "  of  mortgages,  and 
rested  upon  the  idea  that  the  equities  of  the  parties  are  all 
equal,  and  the  first  being  in  possession  should  not  be  obliged 
to  give  up  his  legal  right  of  possession  till  his  whole  charge 
upon  the  estate  was  satisfied.^ 

§  478.  Revival  of  Mortgage. — A  mortgage  that  has  been 

satisfied  and  delivered  up  to  the  mortgagor  without  cancella- 

^  Johnson  v.  Anderson,  30  Ark.  745. 
^Cullum  V.  Bank,  23  Ala.  798. 
'Orvis  V.  Newell,  17  Conn.  97. 

*  Henderson  v.  Stewart,  4  Hawks  (N.  Car.),  256. 

'  *  Towner  v.  Wells,  8  Ohio,  136 ;  Averill  v.  Guthrie,  8  Dana  (Ky.),  82. 

*  3  Washb.  Real  Prop.  540  ;  Williams  Real  Prop.  361.  Tacking  was  abol- 
ished in  England  in  1847  by  the  Vendor  and  Purchaser  Act 


506  NATURE    AND    REQUISITES   OF   THE   CONTRACT. 

tion  may  be  again  delivered  as  a  valid  security  for  a  debt,  by 
the  mortgagor,  and  such  new  delivery  gives  it  a  new  vitality 
against  the  mortgagor,  but  not  as  against  intervening  incum- 
brancers. The  court  says  there  can  be  no  doubt  that  a 
mortgagor  may  again  use  or  negotiate  the  mortgage  which 
has  been  satisfied  and  paid  off  and  delivered  to  him,  except  as 
against  intervening  securities.^  And  a  mortgage  already  re- 
corded may  be  made  to  secure  a  further  sum,  by  an  indorse- 
ment upon  the  mortgage  executed  and  acknowledged  with  the 
formalities  necessary  in  the  first  place  to  make  it  valid,  and 
recorded  with  a  proper  reference  to  the  mortgage.^ 

§  479.  Increasing  the  Rate  of  Interest  by  Subsequent 
Agreement. — The  rate  of  interest  cannot  be  increased  where 
rights  of  third  persons  intervene.  Thus  an  agreement  in 
writing  between  a  subsequent  purchaser  of  mortgaged  lands 
and  the  mortgagee,  for  the  payment  of  an  increased  rate  of 
interest  after  due,  in  consideration  of  an  extension  of  time,  is 
valid  as  between  the  parties,  but  not  as  to  third  persons  who 
have  intervening  rights.^  No  incorporation  of  another  in- 
debtedness will  be  allowed  as  to  the  rights  of  third  parties. 
When  gold  is  at  a  premium,  the  interest  cannot  be  paid  in 
gold.'' 

So  when  parties  to  a  prior  mortgage  stipulated  for  the  pay- 
ment of  a  higher  rate  of  interest  on  the  mortgage  debt  than 
was  provided  in  the  mortgage  as  recorded,  such  excess  of  in- 
terest has  no  priority  and  cannot  be  allowed  as  against  junior 
incumbrancers.^ 

So  a  penalty  imposed  by  statute  for  omitting  prompt  pay- 
ment of  school  money  loaned  upon  a  mortgage,  does  not  come 
under  the  mortgage,  but  is  personal  to  the  mortgagor.^  When 
a  mortgage  to  a  building  association,  secures  only  monthly 

1  Underbill  v.  Atwater,  22  N.  J.  Eq.  16. 

^  Choteau  v.  Thompson,  2  Ohio  St.  114. 

3  Smith  V.  Graham,  34  Mich.  302. 

*  Taylor  v.  Atlantic,  etc.,  E.  R.  Co.,  55  How.  Pr.  (N.  Y.)  275. 

5  Gardner  v.  Emerson,  40  111.  296. 

« Bradley  v.  Snyder,  14  111.  263. 


THE    DEBT    SECURED.  607 

payments,  the  payments  of  fines,  and  other  dues  to  the  asso- 
ciation do  not  come  under  the  mortgage  lien.^ 

The  owner  of  tlie  equity  of  redemption  may  contract  in 
writing  to  increase  the  interest,  uj^on  a  valuable  consideration 
as  between  him  and  the  mortgagee.^ 

§  480.  Expenses  for  Collecting. — The  expenses  for  col- 
lecting the  debt  are  not  considered  as  augmenting  the  indebted- 
ness, and  thereby  infringing  on  the  rights  of  intervening  in- 
cumbrancers. Thus,  the  court  of  equity  may  allow  the  mort- 
gagee a  per  cent,  for  the  expenses  of  collecting  his  mortgage 
debt,  when  the  instrument  provides  for  such  allowance.  The 
mortgagor  may  stipulate  that  a  certain  sum  or  percentage  shall 
be  allowed  the  mortgagee  for  the  expenses,  if  he  be  compelled 
to  bring  suit  to  recover  the  debt.^  Such  a  compensation  to  the 
mortgagee  for  the  expenses  for  compelling  the  mortgagor  to 
perform  his  contract  is  valid,  and,  of  course,  cannot  injure  the 
rights  of  other  incumbrancers.* 

A  debtor  refusing  or  neglecting  to  pay  his  creditor  imposes 
upon  the  creditor  the  expense  of  resorting  to  the  law  to  enforce 
his  rights.  It  is  equitable  and  just  that  the  debtor  in  such  case 
should  pay  the  expenses  which  have  been  imposed  upon  his 
creditor.  While  the  law  makes  no  provision  for  enforcing  such 
a  conscionable  obligation  it  will  certainly  be  assumed  a  suffi- 
cient consideration.^ 

If  the  stipulation  in  the  mortgage  is  for  the  payment  of 
something  which  the  court  can  see  is  legal  and  a  valid  and 
legitimate  charge  or  expense,  then  the  court  will  uphold  the 
same  ;  but  if  the  stipulation  is  so  indefinite  that  the  court  can- 
not tell  whether  the  payment  was  intended  to  be  for  something 
legal  or  illegal,  then  the  court  will  not  uphold  the  stipulation. 
Thus,  where  the  mortgage  contains  a  stipulation  that  the  mort- 
gagor shall  pay  not  only  the  debt  secured  and  interest  thereon, 

^  Hamilton  Building  Association  v.  Reynolds,  5  Duer  (N.  Y.),  671. 

*  Smith  V.  Graham,  34  Mich.  302;  Taylor  v.  Thomas,  61  Ga.  472. 
'  McLane  v.  Abrams,  2  Nev.  199. 

^    *Tholen  v.  Duffy,  7  Kan.  405. 

*  Williams  v.  Meeker,  29  Iowa,  292;  Nelson  v.  Everett,  29  Iowa,  184. 


508  NATURE   AND    REQUISITES    OF   THE    CONTRACT. 

but  also,  in  case  of  foreclosure,  the  costs  "  and  fifty  dollars  as 
liquidated  damages  for  the  foreclosure  of  the  mortgage,"  such 
stipulation  is  void  and  cannot  be  enforced.^ 

Liquidated  damages  are  not  applicable  to  such  a  case.  If 
they  were  they  might  afford  a  secure  protection  for  usury  and 
countenance  oppression  under  form  of  law,^  In  all  the  cases 
whers  a  jjarty  relies  on  the  payment  of  liquidated  damages  as 
a  discharge,  it  must  clearly  appear  from  the  contract  that  they 
were  j^aid  and  received  absolutely  in  lieu  of  performance.^ 

§  481.  Solicitor's  Fees. — A  mortgagor  may  stipulate  to  pay 
attorney's  fees  in  case  of  foreclosure,  and  such  agreement  will 
be  upheld.  The  attorney's  fee  must  be  reasonable,  although 
such  amount  does  not  rest  in  computation,  but  may  be  ascer- 
tained by  evidence  aliunde^  And  a  covenant  in  a  mortgage 
that  the  mortgagor  will  pay,  in  addition  to  the  mortgage  debt, 
all  counsel  fees  and  costs  which  the  mortgagee  may  incur  in 
collecting  the  same,  is  not  •  within  the  prohibition  of  a  statute 
limiting  the  lien  of  a  mortgage  to  the  principal  sum  expressed 
on  the  face  thereof. '^  And  courts  of  equity  in  absence  of  any 
express  contract,  will  allow  the  mortgagee  costs  and  expenses 
necessarily  incurred  in  defending  his  title  against  the  mortgagor 
and  parties  claiming  under  him.^  But  the  fee  must  be  reason- 
able.^ 

But  if  the  suit  for  collection  is  unnecessary,  the  attorney's 
fee  will  not  be  allowed.^  If  the  fee  is  not  excessive,  a  court  of 
equity  will  not  refuse  to  enforce  the  stipulation,®  which  may  be 

*  Foote  V.  Sprague,  13  Kan.  155 ;  Kurtz  v.  Sponable,  6  Kan.  395. 

2  Gray  v.  Crosby,  18  Johns.  (N.  Y.)  219. 

'  Graham  v.  Bickham,  4  Dal.  (Pa.)  150.  See,  also,  Slosson  v.  Beadle,  7 
Johns.  (N.  Y.)  72 ;  Hasbrouck  v.  Tappen,  15  Johns.  (N.  Y.)  200 ;  Daly  v. 
Maitland,  88  Pa.  St.  384. 

*Hoyt  V.  Smith  (Wash.  St.),  30  Pac.  Rep.  664;  Clawson  v.  Munson,  55  111. 
394 ;  Tholen  v.  Duff>',  7  Kan.  405 ;  AVilliams  v.  Meecker,  29  Iowa,  292. 

^Maus  r.  McKelhp,  38  Md.  231. 

^Loniax  v.  Hide,  2  A^ernon,  185  ;  Hunt  r.  Fownes,  9  Yes.  70. 

'  Tallman  v.  Truesdell,  3  Wis.  443 ;  Hitchcock  r.  Merrick,  15  Wis.  522. 

^Alexandrie  v.  Saloy,  14  La.  Ann.  327. 

3  Sharp  V.  Barker,  11  Kan.  381. 


THE    DEBT   SECURED.  509 

enforced,  as  well  against  subsequent  purchasers  and  incum- 
brancers, as  against  the  mortgagor  himself.^ 

If  an  unreasonable  and  oppressive  exaction  be  made  of  the 
mortgagor,  so  that  the  stipulation  amounts,  in  fact,  to  a  penalty 
which  he  incurs  by  default,  a  court  of  equity  will  give  the 
debtor  relief.^ 

But  a  reasonable  fee  may  be  recovered  as  part  of  the  costs 
without  any  averment  in  the  petition  as  to  what  amount  is  a 
reasonable  fee.^ 

It  has  been  held  that  where  a  mortgage  empowers  the  mort- 
gagee in  the  usual  manner  to  sell,  rendering  the  surplus  moneys 
to  the  mortgagor,  after  deducting  the  costs  of  the  sale,  and  also 
$100  as  an  attorney's  fee,  should  any  proceedings  be  taken  to 
foreclose,  such  fee  cannot  be  recovered  upon  a  foreclosure  in 
equity.* 

Where  two  persons  buy  property  together,  and  one  furnishes 
all  the  money,  and  the  other,  to  secure  him  for  one-half  the 
money,  mortgages  other  property,  and  the  two  then  agree  in 
writing  that  the  mortgage  is  given  for  money  advanced  in  the 
purchase,  and  that  in  the  settlement  of  accounts  the  mortgagor 
shall  be  allowed  a  reasonable  compensation  for  the  services 
which  he  may  render  as  attorney  in  perfecting  the  title  of  the 
property  purchased,  the  value  of  such  service  rendered  may  be 
proved  for  the  purpose  of  reducing  the  amount  due  on  the 
mortgage.^ 

But  a  provision  in  a  mortgage  for  the  "  expenses  of  the  sale  " 
does  not  include  attorney's  fees.®  The  amount  should  not  ex- 
ceed the  contract  price  by  the  parties,  or  that  actually  received.^ 
Such  stipulations  in  either  note  or  mortgage  are  as  a  general  rule 
valid.*     But  this  doctrine  is  not  accepted  by  all  the  States. 

^  Pierce  v.  Kneeland,  16  Wis.  672. 
''Daly  V.  Maitland,  88  Pa.  St.  384. 

'  Nelson  v.  Everett,  29  Iowa,  184 ;  Hurd  v.  Coleman,  42  Me.  182 ;  Bronson  v. 
Lacrosse  R.  R.  Co.,  2  Wall.  (U.  S.)  283 ;  Pierce  v.  Kneeland,  16  Wis.  672. 
*Sage  V.  Riggs,  12  Mich.  313. 
^Whitmore  v.  Reynolds,  46  Cal.  380. 
^Thomas  v.  Jones,  84  Ala.  302. 
V  'Broadbent  v.  Brumback  (Idaho),  16  Pac.  Rep.  555. 
®Cox  V.  Smith.  1  Nev.  161;  Sperry  v.  Horr,  32  Iowa,  184;  Wood  r.  North, 


510  NATURE    AND    REQUISITES   OF  THE   CONTRACT. 

Kentucky/  Ohio,^  and  Michigan,^  reject  this  stipulation  in  a 
mortgage,  and  hold  that  it  is  void  as  against  public  policy. 

This  attorney's  fee  cannot  be  considered  as  usury,  and  there- 
fore an  enlargement  of  the  debt.* 

It  must  be  considered  that  the  true  intent  and  purpose  of  the 
provision  for  such  fee  is  the  holding  the  mortgagee  harmless 
from  costs  and  expenses  of  a  suit  to  foreclose.* 

But  when  the  fee  is  so  large  as  to  suggest  that  it  is  a  mere 
device  to  secure  illegal  interest,  or  some  unconscionable  advan- 
tage, the  court  will  be  slow  to  enforce  the  payment  of  it,  and 
ought,  probably,  on  slight  additional  evidence  to  that  effect, 
refuse  to  allow  it,  or  reduce  it  to  a  reasonable  sum.® 

Whenever  this  stipulation  is  resorted  to  as  a  cover  for  a 
greater  rate  of  interest  than  is  allowed  by  law,  it  then  is  in- 
valid ;  but  where  it  is  made  in  good  faith,  as  an  indemnity  for 
the  necessary  expenses  of  foreclosure,  and  is  reasonable  in 
amount,  it  can  be  incorporated  in  the  contract.^ 

In  those  cases  where  the  stipulation  is  made  in  both  note  and 
mortgage,  that  in  the  note  only  may  be  recovered  if  reasonable.^ 
And  though  the  mortgagee  signs  the  bill  of  complaint  for  fore- 

84  Pa.  St.  407 ;  Johnston  v.  Speer,  92  Pa.  St.  227  ;  Bank  v.  Gay,  63  Mo.  33 ;  71 
Mo.  627  ;  Jones  v.  Padatz,  27  Minn.  240 ;  Morgan  v.  Edwards,  53  Wis.  599  ; 
Dietrich  v.  Bayhi,  23  La.  Ann.  767 ;  Seaton  v.  Scovill,  18  Kan.  435 ;  Bank  v. 
Easmussen,  1  Dak.  60 ;  Clawson  v.  Munson,  55  111.  394  •  Machine  Co.  v.  Moreno 
(Oreg.),  29  Am.  Rep.  406 ;  6  Sawyer,  C.  C.  35. 
^Thomasson  v.  Townsend,  10  Bush  (Ky.),  114. 

2  State  r.  Taylor,  10  Ohio,  378;  Shelton  t).  Gill,  11  Ohio,  417;  Spalding  t-. 
Bank,  12  Ohio,  544 ;  Martin  v.  Bank,  13  Ohio,  250. 

3  Van  Marter  v.  McMillan,  39  Mich.  304,  305;  Sage  v.  Riggs,  12  Mich.  313; 
Myer  v.  Hart,  40  Mich.  517 ;  Vosburgh  v.  Lay,  45  Mich.  455.  See  Session 
Laws  of  1885,  art,.  133. 

*  Lloyd  r.  Scott,  4  Pet.  (U.  S.)  224;  Cutler  v.  How,  8  Mass.  257;  Tuttle  r. 
Clark,  4  Conn.  153 ;  Pollard  v.  Baylors,  6  Munf.  (Va.)  433 ;  Jones  v.  Hubbard, 
6  Call  (Va.),  211 ;  Gower  v.  Carter,  3  Iowa,  244;  Fisher  v.  Anderson,  25  Iowa, 
28;  Rogers  v.  Sample,  33  Miss.  316;  G^mbril  v.  Doe,  8  Blackf.  (Ind.)  140; 
Bilhngsley  v.  Dean,  11  Ind.  331 ;  Lawrence  v.  Cowles,  13  111.  577 ;  Sumner  v. 
People,  29  N.  Y.  337  ;  Bank  v.  Curtiss,  19  Johns.  (N.  Y.)  326. 

^  Burns  v.  Scoggin,  16  Fed.  Rep.  734,  opinion  by  Deady,  J. 

®  Machine  Co.  v.  Moreno,  6  Sawyer,  C.  C.  35. 

">  Griswold  v.  Taylor,  8  INIinn.  342 ;  Tallman  v.  Truesdell,  3  Wis.  443. 
Hamil  v.  Rogers,  79  Ga.  581. 


THE    DEBT   SECURED.  511 

closure  per  se,  the  fee  may  be  allowed  where  he  is  represented 
in  the  litigation  by  other  solicitors.^ 

Under  the  California  statute/  entitled  "  An  Act  to  abolish 
attorney's  fees  and  other  charges  in  foreclosure,"  when  a 
mortgage  provides  a  certain  amount  as  attorney's  fees,  it  is 
error  for  the  court  to  allow  more  than  is  specified  ;  ^  and  in  the 
absence  of  such  provision,  the  mortgagee,  under  the  statute,  is 
not  entitled  to  counsel  fees.* 

Nearly  all  the  decisions  allow  a  reasonable  attorney's  fee, 
especially  when  so  stipulated  in  the  mortgage,^  and  the  holder 
of  the  note  may  collect  tlie  fees  specified.^ 

The  Louisiana  court  holds  that  a  per  cent,  for  attorney's  fees 
is  in  the  nature  of  damages,  and  is  covered  by  the  mortgage.^ 

A  suit  was  begun  to  foreclose  a  mortgage  of  $5,000,  provid- 
ing for  a  reasonable  attorney's  fee ;  a  change  of  venue  was 
taken  to  another  county,  eight  days  being  occupied  in  taking 
depositions,  and  the  case  was  stubbornly  contested  ;  held,  that 
an  allowance  of  $500  solicitor's  fees  upon  the  testimony  of  two 
practicing  lawyers  that  such  fee  was  reasonable,  is  not  reversi- 
ble for  error.^ 

If  the  court  adds  an  additional  fee,  the  mortgagee  can  remit 
it,  and  then  it  is  not  error.^ 

It  is  held  in  some  of  the  States  that  the  court  will  not  enforce 
an  unconscionable  allowance  for  attorney's  fees  in  a  mortgage, 
and  having  no  authority  to  make  a  new  contract  for  the  parties, 
will  not  make  any  allowance  therefor  ;  ^^  that  where  no  fees  are 
specified,  none  will  be  allowed."     Many  of  the  courts,  and  it 

1  Barry  r.  Guild,  126  111.  439. 

"  Act  of  March  27,  1874. 

^Monroe  v.  Fohl,  72  Cal.  570. 

*Sichel  V.  Carrillo,  42  Cal.  493;  Schallard  v.  Eel  Riv.  Steam  Co.,  70  Cal. 
144  ;  Mascarel  v.  Raftbur,  51  Cal.  242  ;  Moran  v.  Gardemeyer,  82  Cal.  96. 

*Levy  V.  Beasley,  41  La.  Ann.  832. 

«  Cheltenham  Imp.  Co.  v.  Whitehead,  128  111.  279. 

'Succes.sion  of  Duh^,  41  La.  Ann.  209. 

« easier  v.  Byers,  129  111.  657.    See,  also,  Telford  v.  Garrels,  132  111.  550. 

» Killops  V.  Stephens,  73  Wis.  111. 

'"Balfour  v.  Davis,  14  Ore.  47. 
V  "Jefferson  v.  Edrington,  53  Ark.  545.     See,  also,  Am.  Freehold  Land  & 
Mortg.  Co.  V.  McCall  (Ala.),  11  S.  Rep.  288. 


612  NATURE   AND   REQUISITES    OF   THE   CONTRACT. 

is  the  general    rule,  will    allow   a   reasonable   attorney's  fee, 
though  no  stipulation  is  included  in  the  mortgage. 

§  482.  Taxes. — It  is  well  settled  that  a  mortgagee  may  pay 
taxes  in  order  to  preserve  his  lien,  and  tack  the  amount  to  the 
mortgage  debt.^  And  a  stipulation  for  insurance  for  the  mort- 
gagee's benefit,  being  intended  to  afford  security  supplementary 
to  and  connected  with  the  mortgage,  and  to  keep  the  mortgaged 
property  itself  so  far  intact  as  a  means  of  security  as  to  per- 
petuate the  safety  of  the  mortgagee's  interest  in  case  the  build- 
ing should  be  burned,  is  in  equity  a  sort  of  adjunct  to  the 
mortgage,  and  is  binding  on  the  mortgagor  and  all  others 
claiming  under  him,  with  notice.^  Taxes  when  included  in  a 
judgment,  draw  the  same  rate  of  interest  as  the  judgement.^ 

It  is  the  general  rule  that  money  paid  by  the  mortgagee,  to 
redeem  the  premises  from  a  tax  sale,  or  from  any  charge  which 
is  a  paramount  lien  upon  the  property,  becomes  part  of  the 
mortgage  debt,  and  may  be  enforced  by  foreclosure.* 

In  one  case  in  Iowa  it  was  decided  that  the  mortgage  security 
cannot  be  extended  to  embrace  debts  of  the  mortgagor,  such  as 
taxes  on  the  land,  not  provided  for  in  the  instrument.^  But 
this  seems  to  be  repudiated  in  a  later  case,  which  holds  that 
the  doctrine  thus  announced  must  be  confined  strictly  to  the 
facts  in  that  particular  case,^  thus,  in  effect,  overruling  it  as  a 
general  rule. 

It  seems  that  equity  may  enforce,  over  a  judgment  uj)on  the 
lessee's  interest,  a  priority  for  the  payment  of  moneys  to  pre- 
serve the  lease  from  forfeiture,  where  the  lessee  was  not  bound 

1  Hill  V.  Townley,  45  Minn.  167  ;  Gormley  v.  Bunyan,  138  U.  S.  62.3  ;  Hall 
V.  Gould,  79  111.  16 ;  Parsons  v.  Gaslight  &  Coke  Co.,  108  111.  380 ;  Silver  Lake 
Bank  v.  North,  4  Johns.  Ch.  (N.  Y.)  370 ;  Faure  v.  Winans,  Hopk.  Ch.  (N. 
Y.),  283 ;  Burr  v.  Veeder,  3  Wend.  (N.  Y.)  412  ;  Rapelye  v.  Prince,  4  Hill  (N. 
Y.),  119  ;  Hamilton  v.  Denny,  1  Ball  &  B.  202 ;  Trimleston  v.  Hamill,  1  Ball 
&  B.  377  ;  Mix  v.  Hotchkiss,  14  Conn.  32. 

2  Miller  v.  Aldrich,  31  Mich.  408. 

3  Sharp  V.  Barker,  11  Kan.  381. 

*  Hill  V.  Eldred,  49  Cal.  398  ;  Robinson  v.  Ryan,  25  N.  Y.  320 ;  Wright  v. 
Langley,  36  111.  381. 
^  Savage  v.  Scott,  45  Iowa,  130. 
®  Barthell  v.  Syverson,  54  Iowa,  160. 


THE    DEBT    SECURED.  513 

to  make  the  payment,  and  it  preserved  the  security  for  the 
judgment  creditor.  It  must  be  something  which  the  lessee  was 
not  bound  by  the  lease  to  pay,  and  which  had  had  the  effect  to 
preserve  the  security  for  the  benefit  of  a  judgment  creditor. 
Such  a  claim  would  be  the  payment  of  an  assessment  which 
the  lessee  was  bound  to  pay  and  did  not,  the  payment  of  which 
prevented  the  termination  of  the  lease  by  a  sale  of  the  land  ;  ^ 
that  is,  the  subsequent  leinor  has  a  preference  by  way  of  sub- 
rogation over  even  a  prior  incumbrancer,  who  has  been  pro- 
tected by  such  payment.  But  such  claim  must  be  for  some 
other  cause  than  the  ordinary  rent  and  taxes  of  the  premises,^ 
and  when  he  claims  reimbursement,  he  must  seek  it  at  the 
foreclosure  suit ;  he  is  entitled  to  subrogation,  in  the  foreclosure 
suit  on  the  payment  of  the  charge,  but  as  against  a  purchaser  at  a 
sheriff's  sale  of  the  premises,  he  is  not  entitled  to  subrogation.^ 

If  the  mortgage  contains  no  covenants  to  pay  taxes  and  assess- 
ments, the  mortgagor  is  not  liable  for  them  after  he  has  sold 
his  equity  of  redemption,  and  the  mortgagee  cannot  collect 
them  from  him.*  Taxes  and  assessments  on  mortgaged  land 
assessed  before  bankruptcy  of  the  owner,  must  be  paid  out  of 
the  estate,^  and  after  assignment,  by  the  assignee  as  expenses.^ 

The  lien  of  a  mortgage  attaches  ec|ually  for  the  debt  and  for 
the  costs  necessarily  incurred  in  the  enforcement  of  it.^ 

A  covenant  in  a  mortgage  for  the  payment  by  the  mortgagor  of 
all  taxes  that  may  be  assessed  upon  the  premises  therein  described 
cannot  be  enforced  after  the  mortgage  debt  is  discharged.^ 

Where  a  mortgage  stipulates  that  upon  the  non-payment  of 
taxes  due  upon  the  premises,  the  debt  secured  by  the  mort- 
gage should  become  due,  it  is  valid.^ 

1  Cook  V.  Kraft,  .3  Lans.  (N.  Y.)  512. 
"^  Cook  V.  Kraft,  3  Lans.  (N.  Y.)  512. 
'Manning  v.  Tuthill,  30  N.  J.  Eq.  29. 

*  Marshall  v.  Davies,  16  Hun  (N.  Y.),  606. 

*  In  re  Moller,  8  Ben.  D.  C.  526. 

*  In  re  Moller,  8  Ben.  D.  C.  526. 
^  Hurd  V.  Coleman,  42  Me.  182. 

*  Hitchcock  V.  Merrick,  18  Wis.  357.  See,  also,  Manning  v.  Tuthill,  30  N.  J. 
Eq.  29. 

^Stanclift  v.  Norton,  11  Kan.  218. 
VOL.  I.— 33 


514  nature  and  requisites  of  the  contract. 

Article  2. 
Future  Advances. 

§483.  Preliminary,  Its  Face  That  It  was  Given 

§  484.  Statutory  Provisions.  to  Secure  Future  Advances. 

§  485.  Requisites.  §  491.  Notice — Such  Mortgages   are  a 

§  486.  Limitation  of  the  Advances.  Valid  Lien  from  the  Date  of 

§  487.  A  Question  of  Good  Faith.  Execution. 

§  488.  Parol  Evidence.  §  492.  Mechanic's  Lien — Priority. 

§  489.  Subsequent  Parol  Agreement  §  493.  The  Future  Advances   Should 

to  Extend  the  Mortgage  to  be  Described  with  Reasonable 

Advances.  Certainty. 

§  490.  It  is  not  Necessary  that  the  ^  494.  Continuing  Security. 

Mortgage  Should  Show  on  ^  495.  Limitations  of  the  Security. 

§  483.  Preliminary. — This  question  is  not  free  from  diffi- 
culty, and  a  diversity  of  opinions  exist  among  the  courts  whether 
mortgages  for  future  advances  are  vaUd.  One  hne  of  decisions 
holds  that  a  mortgage  which  does  not  specify  that  for  which  it 
is  given  so  distinctly  as  to  give  definite  information  on  the  face 
of  the  mortgage  of  what  it  secures,  so  as  to  render  it  unneces- 
sary for  the  inquirer  to  look  beyond  the  mortgage  and  seek  in- 
formation aliunde,  is  void  as  against  creditors  and  purchasers. 
Another  line  holds  that  a  mortgage  for  future  advances  is  valid 
as  to  all  allowances  made  under  it  before  notice  by  the  mort- 
gagee of  the  supervening  rights  of  purchasers  or  incumbrancers. 
Still  others  hold  that  a  mortgage  for  future  advances  to  be 
made  or  liability  to  be  incurred,  when  duly  recorded,  is  valid 
as  a  security  for  indebtedness  incurred  under  it,  in  accordance 
with  its  terms.  And  again  a  distinction  has  been  made  be- 
tween mortgages  in  which  the  mortgagee  is  obligated  to  ad- 
vance a  given  sum  and  those  in  which  he  is  not  so  bound.^ 

§484.  Statutory  Provisions. — In  Georgia  the  code  pro- 
vides that  the  mortgage  shall  "  specify  the  debt  to  secure  which 
it  is  given."  ^ 

So  long  as  the  means  for  ascertaining  the  amount  of  the  debt 


^Witczinski  v.  Everman,  51  Miss.  841. 
'  Code,  sect.  1945. 


■ 


THE    DEBT   SECURED.  515 

are  pointed  out,  it  is  immaterial  that  the  amount  is  not  stated, 
or  is  from  its  nature  indefinite.^ 

In  New  Hampshire  the  statute  provides  that  no  conveyance 
in  writing  of  any  lands  shall  be  defeated,  or  any  estate  incum- 
bered by  any  agreement,  unless  it  be  inserted  in  the  condition 
of  the  conveyance  and  made  a  part  thereof,  stating  the  sum  of 
money  to  be  secured,  or  other  thing  to  be  performed.  And  no 
estate  conveyed  in  mortgage  shall  be  holden  by  the  mortgagee 
for  the  payment  of  any  sum,  or  the  performance  of  any  other 
thing,  the  obligation  or  liability  to  the  payment  or  performance 
of  which  arises,  is  made  or  contracted  after  the  execution  and 
delivery  of  such  mortgage.^  But  a  mortgage  made  in  part  to 
secure  a  fixed  sum  of  money  agreed  to  be  paid  by  the  mort- 
gagee on  the  happening  of  a  definite  contingency,  is  not  within 
the  statute  prohibiting  mortgages  to  secure  future  advances.^ 
So  a  mortgage  conditioned  to  secure  a  note,  the  consideration  of 
a  part  of  which  is  a  credit  of  an  agreed  sum  by  the  mortgagee, 
on  his  books,  to  the  mortgagor,  is  not  prohibited.* 

But  the  court  does  not  hold  that  a  mortgage  given  to  secure 
an  absolute  note,  intended  as  a  security  for  advances  hereafter 
to  be  made,  would  be  valid  if  at  the  time  of  the  execution  of 
the  mortgage  the  sum  of  the  advances  was  not  agreed  upon,  or 
the  mortgagee  was  under  no  obligation  to  make  them.  A 
mortgage  may  be  void,  under  this  statute,  as  to  part  of  the  con- 
sideration which  is  a  future  advance,  and  valid  for  the  part 
which  was  a  debt  at  the  time  the  mortgage  was  executed.^ 

The  Maryland  code  provides  that  no  mortgage,  or  deed  in 
the  nature  of  a  mortgage,  shall  be  a  lien  or  charge  on  any  es- 
tate or  property  for  any  other  or  different  principal  sum  or 
sums  of  money  than  appear  on  the  face  of  the  mortgage,  and 
are  specified  and  recited  in  it,  and  particularly  mentioned  and 

'  Allen  V.  Lathrop,  46  Ga.  133. 

*  Gen.  Laws,  1878,  ch.  136,  sects.  2,  3 ;  Gen.  Stat.,  ch.  122,  sects.  2,  3. 

^  Fessenden  v.  Taft  (N.  H.),  17  Atl.  Rep.  113  ;  Stearns  v.  Bennett,  48  N.  H. 
400,402. 

*Abbatt  V.  Thompson,  58  N.  H.  255. 
^  *  Leeds  v.  Cameron,  3  Sum.  C.  C.  488  ;  Bank  v.  Willard,  10  N.  H.  210 ;  John- 
son V.  Richardson,  38  N.  H.  353. 


516  NATURE    AND   REQUISITES    OP   THE    CONTRACT. 

expressed  to  be  secured  thereby  at  the  time  of  executing  it ;  and 
that  no  mortgage,  or  deed  in  the  nature  of  a  mortgage,  shall 
be  a  lien  or  charge  for  any  sum  or  sums  of  money  to  be  loaned 
or  advanced  after  the  same  is  executed,  except  from  the  time 
said  loan  or  advance  is  actually  made ;  that  no  mortgage  to 
secure  such  future  loans  or  advances  shall  be  valid  unless  the 
amount  or  amounts  of  the  same,  and  the  times  when  they  are 
to  be  made,  shall  be  specifically  stated  in  said  mortgage/ 

This  prohibition  does  not  apply  to  mortgages  to  indemnify 
the  mortgagee  against  loss  from  being  indorser  or  security,  nor 
to  any  mortgage  given  by  brewers  to  maltsters  to  secure  the 
payment  to  the  latter  of  debts  contracted  by  the  former  lor 
malt  and  other  materials  used  in  the  making  of  malt  liquors. 
A  mortgage  to  secure  future  advances  not  to  exceed  a  limited 
amount  may  be  enforced  to  the  amount  of  the  advances  made 
upon  it  within  that  limit,  although  such  advances  were  made 
after  the  mortgagee  had  received  notice  of  a  junior  incum- 
brance.^ 

§  485.  Requisites. — Mortgages  to  secure  future  advances 
are  valid  under  the  common  law,^  if  properly  made  for  that 
purpose.*  Mortgages  to  secure  future  advances,  made  in  good 
faith,  are  generally  upheld.^ 

And  the  purpose  to  secure  future  advances  need  not  appear 
on  the  face  of  the  mortgage,  as  it  may  be  shown  by  parol  evi- 
dence that  it  was  the  intention  of  the  parties  when  the  mort- 
gage was  executed  that  a  certain  sum  named  therein  as  an  ex- 
isting debt,  but  which  was  not  really  such,  should  be  the  limit 
of  advances  to  be  made  by  the  mortgagee. 

1  Eev.  Code,  1878,  art.  66,  sect.  43  ;  Laws  of  1872,  ch.  213.  This  amendment 
and  addition  to  the  code  does  not  apply  to  Anne,  Arundel,  Baltimore,  St. 
Mary's,  and  Prince  George's  counties. 

2  Wilson  V.  Ruspell,  13  Md.  494. 

3  Hopkinson  v.  Rolt,  9  H.  L.  Cas.  514. 

^  Burgess  v.  Eve,  L.  R.  13  Eqs  4-50 ;  Menzies  v.  Lightfoot,  L.  R.  11  Eq.  459 ; 
Daun  V.  London  Brewery  Co.,  L.  R.  8  Eq.  155. 

5  McCarty  v.  Chalfant,  14  W.  Va.  531 ;  Klein  v.  Glass,  53  Tex.  37  ;  United 
States  V.  Hooe,  3  Ci-anch  (U.S.),  73;  Shirras  r.  Caig,  7  Cranch  (U.  S.),  34 ; 
Lawrence  v.  Tucker,  23  How.  («U.  S.)  14  ;  Nat.  Bank  v.  Whitney,  103  U.  S.  99; 
Jones  V.  Guaranty  and  Indem.  Co.,  101  U.  S.  622. 


THE    DEBT    SECURED.  517 

Such  evidence,  however,  will  not  be  admitted  to  the  preju- 
dice of  intervening  creditors  and  incumbrancers  if  they,  by 
such  admission  would  be  injured  by  such  representations  in 
the  mortgage/ 

A  mortgage  to  secure  future  advances,  which  on  its  face 
gives  information  as  to  the  extent  and  purpose  of  the  contract, 
so  that  a  purchaser  or  junior  creditor  may,  by  inspection  of 
the  record,  and  by  ordinary  diligence  and  common  prudence, 
ascertain  the  extent  of  the  incumbrance,  will  prevail  over  the 
supervening  claim  of  such  purchaser  or  creditor  as  to  all  ad- 
vances made  by  the  mortgagee  within  the  terms  of  such  mort- 
gage, whether  made  before  or  after  the  claim  of  such  pur- 
chaser or  creditor  arose.^  And  though  it  appears  on  the  face 
of  the  mortgage  to  be  all  for  a  present  debt,  and  is,  therefore, 
open  to  suspicion  as  misrepresenting  the  real  transaction,  yet, 
if  upon  inspection,  the  real  transaction  shall  appear  to  be  fair, 
though  somewhat  variant  from  that  which  it  described,  it 
would  seem  to  be  unjust  and  unprecedented  to  deprive  the 
person  claiming  under  the  deed,  of  his  real  equitable  rights, 
unless  in  favor  of  a  person  who  has  in  fact  been  injured  or 
deceived  by  the  misrepresentation.^ 

The  New  York  cases  seem  to  require  that  the  purpose  should 

1  Wilson  V.  Russell,  13  Md.  495 ;  Pickersgill  v.  Brown,  7  La.  Ann.  297 ; 
D'Meza  v.  Generes,  22  La.  Ann.  285 ;  Bank  v.  Cunningham,  24  Pick.  (Mass.) 
270 ;  Evenson  v.  Bates,  58  Wis.  24  ;  Collins  v.  Carlisle,  13  111.  254 ;  James  v. 
Johnson,  6  Johns.  Ch.  (N.  Y.)  429  ;  Griffin  v.  Oil  Co.,  11  N.  J.  Eq.  49 ;  Sum- 
mers V.  Roos,  42  Miss.  749 ;  Speer  v.  Skinner,  35  111.  282  ;  Gunn  v.  Jones,  67 
Ga.  398  ;  Hendrix  v.  G^re,  8  Oreg.  406  ;  Sims  v.  Mead,  29  Kan.  124  ;  Mizner 
V.  Kussell,  29  Mich.  229  ;  Judge  v.  Vogel,  38  Mich.  568 ;  Irwin  v.  Tabb,  17  Serg. 
&  R.  423  ;  Walker  v.  Walker,  17  S.  Car.  329  ;  Bacon  v.  Brown,  19  Conn.  29  ; 
Mix  V.  Cowles,  20  Conn.  420  ;  Forsyth  v.  Freer,  62  Ala.  443  ;  Lovelace  v.  Webb, 
62  Ala.  272. 

^  Witczinski  v.  Everman,  51  Miss.  841. 

^  Shirras  v.  Caig,  7  Cranch  (U.  S.),  34  ;  Schuelenburg  v.  Martin,  1  McCrary 
C.  C.  348 ;  Schulze  v.  Bolting,  8  Biss.  C.  C.  174 ;  New  Orleans  Bank  v.  Le 
Breton,  120  U.  S.  765  ;  Seaman  v.  Fleming,  7  Rich.  Eq.  (S.  Car.)  283  ;  Garber 
V.  Henry,  6  Watts  (Pa.),  57  ;  Fassett  v.  Smith,  23  N.  Y.  252 ;  Doyle  v.  White, 
26  Me.  341 ;  Goddard  v.  Sawyer,  9  Allen  (Mass.),  78  ;  Hall  v.  Tay,  131  Mass. 
1,92  ;  James  i\  Morey,  2  Cow.  (N.  Y.)  246,  292 ;  Madigan  v.  Mead,  31  Minn.  94, 
98 ;  Truscott  v.  King,  6  N.  Y.  147. 


518  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

be  stated  in  the  mortgage/  though  there  are  some  that  hold 
that  such  mortgages  may  be  given  for  a  definite  sum  large 
enough  to  cover  all  such  floating  and  variable  indebtedness  as 
may  arise  from  a  course  of  dealings  between  the  parties.^ 

§  486.  Limitation  of  the  Advances. — It  is  held  that  the 
limitation  to  the  advances  should  be  named  in  the  mortgage. 
Thus,  when  the  mortgage  recites  that  it  is  to  secure  future 
advances  to  the  extent  of  $1,500  to  be  made  under  an  agree- 
ment set  out  therein,  the  lien  is  limited  as  against  subsequent 
mortgagees  to  that  amount,  but  against  the  mortgagor  it  is  good 
for  the  whole  of  the  advances.^  A  mortgage  to  cover  future 
advances  will  be  good  not  only  between  the  parties,  but  as  to 
purchasers  of  the  mortgagor  with  notice  of  the  mortgage.*  So 
a  few  cases  hold  that  the  utmost  limit  for  which  the  mortgage 
is  to  be  security  must  be  stated  therein.*  This  is  held  to  be 
requisite  to  the  validity  of  the  mortgage,  being  controlled  in 
some  States  by  statute.^ 

A  mortgage  to  secure  repayment  of  future  advances  will  be 
good  up  to  such  time  as  some  third  person  acquires  an  interest  by 
mortgage,  conveyance,  or  judgment  in  the  mortgaged  premises, 
and  notice  thereof  is  given  to  the  holder  of  the  prior  mortgage.^ 

§  487.  A  Question  of  Good  Faith. — It  is  the  general  doc- 
trine that  a  mortgage  given  for  a  specific  sum  in  good  faith  as 
security  for  future  advances  is  a  valid  security,  as  against  the 

1  Walker  v.  Snediker,  Hoff.  Ch.  (N.  Y.)  145 ;  Divver  v.  McLaughlin,  2 
Wend.  (N.  Y.)  599  ;  Wescott  v.  Gunn,  4  Duer  (N.  Y.),  108. 

2  Bank  v.  Finch,  3  Barb.  Ch.  (N.  Y.)  293  ;  Murray  v.  Barney,  34  Barb.  (N. 
Y.)  347 ;  Truscott  v.  King,  6  N.  Y.  147. 

3  Wagner  v.  Breed,  29  Nebr.  720 ;  Bell  v.  Fleming,  12  N.  J.  Eq.  13 ;  Beek- 
man  v.  Frost,  18  Johns.  (N.  Y.)  544. 

*  Freiberg  v.  Magale,  70  Tex.  116 ;  Lovelace  v.  Webb,  62  Ala.  271. 

sTully  V.  Harloe,  35  Cal.  302;  Babcock  v.  Bridge,  29  Barb.  (N.  Y.)427; 
Youngs  r.  Wilson,  24  Barb.  (N.  Y.)  510. 

8  Eev.  Code  of  Maryland,  1878,  art.  66,  sect.  43 ;  Wilson  v.  Eussell,  13  Md. 
494 ;  Laws  of  New  Hampshire,  1878,  ch.  136,  sects.  2,  3 ;  Code  of  Georgia,  sect. 
1945.     Tlie  Louisiana  Code  provides  that  a  mortgage  may  be  given  for  an 
obligation  which  has  not  yet  risen  into  existence  :  Civil  Code,  art.  3292. 
'Lanahan  v.  Lawton  (N.  J.),  23  Atl.  Rep.  476. 


THE    DEBT    SECURED.  519 

general  creditors  of  the  mortgagor,  for  advances  not  exceeding 
the  sum  specified  in  the  mortgage.^  The  only  question  in  such 
case  is  the  bona  fides  of  the  transaction.^  And  at  common  law 
a  mortgage,  bona  fide,  may  be  for  future  advances  and  liabili- 
ties for  the  mortgagor  by  the  mortgagee,  as  well  as  for  present 
debts  and  liabilities.^ 

There  can  be  no  more  fair  bona  fide  and  valuable  considera- 
tion than  the  drawing  or  indorsing  of  notes  at  a  future  period 
for  the  benefit  and  at  the  request  of  the  mortgagor.* 

Neither  is  the  validity  of  a  mortgage  to  secure  future  ad- 
vances affected  by  the  fact  that  the  advances  are  to  be  made 
in  materials  for  building  instead  of  money .^  A  mortgage  of 
land  executed  in  good  faith  to  secure  advances  to  be  thereafter 
made  to  pay  for  labor  performed,  and  material  furnished  in  and 
for  the  erection  of  a  building  on  the  premises,  and  advances  were 
so  made,  although  after  the  beginning  of  the  building,  becomes 
a  lien  upon  the  premises  from  the  time  of  the  execution  and 
recording  thereof ;  and  if  it  is  recorded  before  the  commence- 
ment of  the  building  it  will  take  precedence  of  liens  for  labor 
performed  and  materials  used  in  the  erection  of  the  building.® 
So  an  agreement  that  a  mortgage  shall  be  a  continuing  security 
for  any  future  advances,  whether  made  before  or  after  maturity, 
will  extend  the  lien  of  the  mortgage  in  favor  of  advances  made 
after  its  maturity.  And  a  mortgagor's  wife,  who  joined  in  the 
execution  of  the  mortgage,  which  covered  the  homestead,  can- 
not complain  that  it  was  given  for  future  advances,  when  these 
are  less  than  the  sum  to  secure  which  the  mortgage  purports 
to  be  given.'^ 

It  is  not  necessary  for  a  mortgage  to  secure  future  advances 

>  Banking  Co.  v.  Leonard  (Ky.),  13  S.  W.  Rep.  521. 

"Shirras  v.  Caig,  7  Cranch  (U.  S.),  34. 

'Leeds  v.  Cameron,  3  Sum.  C.  C.  492;  Conard  v.  Ins.  Co.,  1  Pet.  (U.  S.)  448. 

*Lyle  V.  Ducomb,  5  Bin.  (Pa.)  585.  See,  also,  ^loroney's  Appeal,  24  Pa.  St. 
372;  Crane  v.  Deming,  7  Conn.  387;  Boswell  r.  Goodwin,  31  Conn.  74;  Grif- 
fin V.  Burtnett,  4  Edw.  Ch.  (N.  Y.)  673 ,  Piatt  v.  Griffith,  27  N.  J.  Eq.  207. 

*  Brooks  V.  Lester,  36  3Id.  65;  Doyle  v.  AVhite,  26  Me.  341. 

*  Wisconsin  Planing  Mill  Co.  v.  Schuda,,  72  Wis.  277.  See,  also,  Moroney's 
Appeal,  24  Pa.  St.  372 ;  Piatt  v.  Griffith,  27  N.  J.  Eq.  207 

'  Banking  Co.  v.  Leonard  (Ky.),  13  S.  W.  Rep.  521. 


520  NATURE   AND    REQUISITES    OF    THE    CONTRACT. 

to  specify  any  particular  or  definite  sum  which  it  is  to  secure ; 
it  is  not  necessary  for  it  to  be  so  completely  certain  as  to  pre- 
clude the  necessity  of  all  extraneous  inquiry.  If  it  contains 
enough  to  show  a  contract  that  it  is  to  stand  as  security  to  the 
mortgagee  for  such  indebtedness  as  may  arise  from  future  deal- 
ings between  the  parties,  it  is  sufficient  to  put  a  purchaser  or 
incumbrancer  on  inquiry  ;  and  if  he  fails  to  make  it,  he  cannot 
claim  protection  as  a  bona  fide  purchaser.^ 

Even  if  the  intent  to  secure  future  advances  is  not  disclosed  by 
the  terms  of  the  instrument,  yet,  if  the  mortgage  is  recorded  and 
states  a  specific  sum  which  it  is  intended  to  secure,  so  as  to 
apprise  third  persons  of  the  extent  of  the  lien,  which  may  be 
claimed  under  it,  it  is  good  for  subsequent  advances,  except  as 
against  persons  acquiring  equities  prior  to  the  time  when  such 
advances  are  made.^ 

§  488.  Parol  Evidence. — Though  a  mortgage  purports  to 
be  given  for  a  fixed  sum,  parol  evidence  is  admissible  to  show 
that  it  was  given  to  secure  future  advances  and  other  amounts.^ 
And  though  the  mortgage  on  its  face  is  for  a  specific  sum,  parol 
evidence  is  admissible  to  show  that  it  was  really  intended  to 
secure  future  advances  to  be  made  from  time  to  time.* 

But  in  Arkansas  and  Ohio  it  is  held  that  the  intent  must 
appear  on  the  face  of  the  instrument,  and  cannot  be  shown  by 
parol  evidence.^  So  a  mortgage  which  purports  to  be  one  of 
indemnity  cannot  be  shown  by  [)arol  evidence  to  be  for  the 
purchase-money,  as  against  the  rights  of  third  parties.*' 

In  general,  the  consideration  cannot  be  inquired  into  for  the 

1  Witczinski  v.  Everman,  51  Miss.  841 ;  Robinson  v.  Williams,  22  N.  Y.  380 ; 
Stoughton  V.  Pasco,  5  Conn.  442 ;  Leeds  v.  Cameron,  3  Sum.  C.  C.  492 ; 
McDaniels  v.  Colvin,  16  Vt.  304 ;  Summers  v.  Roos,  42  Miss.  778. 

2  D'Meza  v.  Generes,  22  La.  Ann.  285 ;  Farnum  v.  Burnett,  21  N.  J.  Eq.  87 ; 
Bank  v.  Cunningham,  24  Pick.  (Mass.)  270 ;  Hubbard  v.  Savage,  8  Conn.  215 ; 
Foster  v.  Reynolds,  38  Mo.  553. 

=•  Banking  Co.  v.  Leonard  (Ky.),  13  S.  W.  Rep.  521. 

*  Wilkerson  v.  Tillman,  66  Ala.  532 ;  McKinster  v.  Babcock,  26  N.  Y.  378 ; 
Shirras  v.  Caig,  7  Cranch  (U.  S.),  34 ;  Hall  v.  Tay,  131  Mass.  192. 

*  Johnson  v.  Anderson,  30  Ark.  745 ;  Spader  v.  Lawier,  17  Ohio,  371. 
8  Curtis  V.  Root,  28  111.  367. 


THE    DEBT    SECURED.  521 

purpose  of  defeating  the  mortgage,  but  it  may  to  ascertain 
the  amount  due  on  it ;  and  the  mortgage  will  be  held  good 
for  that  amount  as  against  subsequent  incumbrancers  with 
notice/ 

When  a  fixed  sum  is  expressed  as  secured  by  the  mortgage, 
it  cannot  be  shown  by  parol  evidence  that  a  further  sum  was 
intended  to  be  secured  as  against  junior  incumbrancers.^ 

The  mortgage  must  set  forth  the  foundation  of  the  liability 
which  it  is  intended  to  secure  at  the  time  of  the  execution  of 
the  mortgage.^  If  this  is  done,  and  the  intention  of  the  parties 
made  manifest,  and  the  duty  is  pointed  out  which  the  mortgage 
is  to  secure,  it  is  enough  to  satisfy  the  requirements  of  a  statute 
which  provides  that  a  "  mortgage  must  specify  the  debt  to 
secure  which  it  is  given,"  even  though  no  limit  is  set  to  the 
advances,  as  if  they  are  to  be  made  for  carrying  on  a  farm 
during  the  year.^ 

§  489.  Subsequent  Parol  Agreements  to  Extend  the 
Mortgage  to  Advances. — Subsequent  parol  agreements  to  ex- 
tend the  mortgage  to  advances  and  liabilities  other  than  those 
contemplated  at  the  time  of  the  execution  of  the  mortgage,  have 
been  upheld  as  between  the  parties  and  those  claiming  under 
them  with  notice  of  the  agreement,  but  not  as  to  third  persons 
in  the  early  English  cases.^ 

In  Massachusetts,  such  agreements  are  upheld  in  equity  as 
against  the  mortgagor  or  his  grantee  with  notice.  But  such 
agreement  would  not  be  upheld  as  against  subsequent  mort- 
gagees or  bona  fide  purchasers,  or  attaching  creditors,  nor  in 
law  where  the  legal  title  is  involved.^  Other  States  hold  the 
same  doctrine  and  allow  a  mortgage  partly  or  wholly  paid  to 

^  Farnum  v.  Burnett,  21  N.  J.  Eq.  87. 

"^  Stoddard  (•.  Hart,  23  N.  Y.  558 ;  Townsend  v.  Empire,  etc.,  Co.,  6  Duer  (N. 
Y.),  208;  Murray  v.  Barney,  84  Barb.  (N.  Y.)  336. 
^Bank  v  Godfrey,  23  111.  579. 

*  Allen  V.  Lathrop,  46  Ga.  133;  Collier  v.  Faulk,  69  Ala.  58;  Jarratt  v. 
McDaniel,  32  Ark.  598. 

^Demainbray  r.  Metcalfe,  2  Vern.  698;  Baxter  v.  Manning,!  Vern.  244; 
Holliday  v.  Kirtland,  2  Ch.  R.  361. 

*  Joslyn  V.  Wynian,  5  Allen  (Mass.),  62  ;  Stone  v.  Lane,  10  Allen  (Mass.),  74. 


522  NATURE   AND    REQUISITES    OF    THE   CONTRACT. 

be  given  as  securit}^  for  further  advances  up  to  the  amount  so 
paid,  though  a  different  mortgagee  is  one  of  the  parties.' 

But  on  foreclosure  the  mortgagor  or  junior  incumbrancer 
may  redeem  by  payment  of  the  mortgage  debt  only,  no  matter 
to  what  amount  he  may  be  indebted  on  other  accounts.^ 

An  agreement  indorsed  on  the  mortgage  and  recorded  with  a 
marginal  reference  to  the  record  of  the  original  mortgage,  is 
valid. ^  But  if  the  amount  is  indorsed  on  the  bond  only  and 
not  on  the  mortgage,  and  no  record  is  made  of  this  change,  the 
agreement  is  void.* 

But  such  parol  agreements  are  not  generally  upheld,^  in  this 
country  nor  by  the  decisions  of  England.^ 

After  a  mortgage  has  been  paid,  it  is  functus  officio  and  ex- 
tinguished, and  cannot  be  made  use  of  by  the  parties  as  a  con- 
tinuing security .'^  The  agreement  for  the  advances  must  be 
contemporaneous,  and,  hence,  a  subsequent  parol  agreement  is 
invalid.^ 

§  490.  It  is  not  Necessary  that  the  Mortgage  should 
Show  on  its  Face  that  it  was  Given  to  Secure  Future 
Advances. — A  mortgage  may  be  made  to  secure  an  obligation, 
under  the  Louisiana  code,  "  which  has  not  yet  arisen  into 
existence  ;  "  but  in  such  case  the  mortgage  can  only  be  enforced 

'  Walker  v.  Walker,  17  S.  Car.  329  ;  Underbill  v.  Atwater,  22  N.  J.  Eq.  16  ; 
Upton  V.  Bank,  120  Mass.  153. 

2  Lee  V.  Stone,  5  Gill  &  J.  (Md.)  1 ;  Hughes  v.  Worley,  1  Bibb  (Ky.),  200  ; 
Schiffer  v.  Feagin,  51  Ala.  335. 

^  Choteau  v.  Thompson,  2  Ohio  St.  114. 

*  Stoddard  v.  Hart,  23  N.  Y.  558. 

*  Flower  v.  O'Bannon,  43  La.  Ann.  1042 ;  Townsend  v.  Empire  Co.,  6 
Duer  (N.  Y.),  208 ;  James  r.  Morey,  2  Cow.  (N.  Y.)  293  ;  Sims  v.  Mead,  29 
Kan.  124  ;  Mizner  v.  Kussell,  29  Mich.  229  ;  Gray  v.  Helm,  60  Miss.  131.  Com- 
pare Hendricks  v.  Robinson,  2  Johns.  Ch.  (N.  Y.)  309  ;  Brinkerhoff  v.  Marvin, 
5  Johns.  Ch.  (N.  Y.)  320. 

®  Ex  parte  Hooper,  1  Meriv.  7. 

'  Murray  v.  Barney,  34  Barb.  (N.  Y.)  336  ;  Truscott  v.  King,  6  N.  Y.  147. 
See,  also,  Edwards  v.  Dwight,  68  Ala.  389  ;  Doyle  v.  White,  26  Me.  341 ;  Mou- 
not  V.  Ibert,  33  Barb.  (N.  Y.)  24  ;  Thomas'  Appeal,  30  Pa.  St.  378  ;  O'Neill  v. 
Capelle,  62  Mo.  202. 

8  Truscott  V.  King,  6  N.  Y.  147,  161 ;  Walker  v.  Snediker,  Hoff.  Ch.  (N.  Y.) 
145 ;  Hall  v.  Crouse,  13  Hun  (N.  Y.),  557. 


THE    DEBT   SECURED.  623 

in  so  far  as  the  future  obligation  sliall  have  been  created. 
It  is  not  necessary  that  the  mortgage  should  express  upon 
its  face  that  it  was  executed  to  secure  future  advances.^  It 
will  be  security  for  the  specific  amount  named.^ 

The  mortgage  will  be  good  for  all  advances  made,  if  they 
are  not  specifically  named,  before  the  rights  of  third  parties 
intervene.^ 

Such  mortgage  may  cover  present  indebtedness  and  future 
advances,  and  such  fact  may  not  be  stated  on  the  face  of  the 
instrument.* 

An  absolute  conveyance  given  as  a  mortgage  may  be  used 
to  secure  future  advances.^ 

§491.  Notice — Such  Mortgages  are  a  Valid  Lien  from 
THE  Date  of  Execution. — A  mortgage  made  in  good  faith 
to  cover  future  advances  of  money  or  materials,  or  future 
indorsements,  is  a  valid  lien  from  the  date  of  its  execution,  if 
properly  recorded,^  as  against  subsequent  purchasers  or  incum- 
brancers, except  as  to  advances  made  after  actual  as  distin- 
guised  from  record  notice  of  a  subsequent  incumbrance,  though 
the  mortgage  does  not  disclose  upon  its  face  that  it  is  given  in 
part  for  future  advances,  if  the  amount  of  liability  is  expressly 

^  Morris  v.  Executors,  39  La.  Ann.  712.  See,  also,  Lehman  v.  Godberry,  40 
La.  Ann.  219. 

'  Collins  V.  Carlisle,  13  111.  254  ;  Darst  v.  Gale,  83  111.  136 ;  Hendrix  v.  Gore, 
8  Oreg.  406 ;  Townsend  v.  Empire,  etc.,  Co.,  6  Duer  (N.  Y.),  208 ;  Foster  v.  Rey- 
nolds, 38  Mo.  553 ;  McCarty  v.  Chalfant ;  14  W.  Va.  531 ;  Forsyth  v.  Freer,  62 
Ala.  443 ;  Huckaba  v.  Abbott,  87  Ala.  409 ;  Griffin  v.  Oil  Co.,  il  N.  J.  Eq.  49  ; 
Bank  v.  Finch,  3  Barb.  Ch.  (N.  Y.)  293. 

^  Robinson  v.  Williams,  22  N.  Y.  380  ;  Fassett  v.  Smith,  23  N.  Y.  252 ;  Div- 
ver  V.  McLaughlin,  20  Am.  Dec.  653,  and  note ;  Hubbard  v.  Savage,  8  Conn. 
215  ;  Lovelace  •;;.  Webb,  62  Ala.  271. 

*  TuUy  V.  Harloe,  35  Cal.  302 ;  Summers  v.  Roos,  42  Miss.  749 ;  Hendrix  v. 
Gore,  8  Oreg.  406 ;  Evenson  v.  Bates,  58  Wis.  24 ;  Keyes  v.  Bump,  59  Vt.  391 ; 
Bassett  v.  Daniels,  136  Mass.  547. 

*  Harper's  Appeal,  64  Pa.  St.  315  ;  Fessler's  Appeal,  75  Pa.  St.  483.  Com- 
pare Bank  v.  Godfrey,  23  111.  579. 

« Tulley  ?'.  Harloe,  35  Cal.  302,  309;  95  Am.  Dec.  102;  Ackerman  i'.  Hun- 
sicker,  85  N.  Y.  46 :  39  Am.  Dec.  621 ;  Googins  v.  Gilmore,  47  Me.  13 ;  74  Am. 
Dec.  472 ;  Morris  v.  Cain,  39  La.  Ann.  712 ;  Shirras  v.  Caig,  7  Cranch  (U.  S.) 
34 ;  McDaniels  v.  Colvin,  16  Vt.  300 ;  42  Am.  Dec.  521 ;  Ward  v.  Cooke,  17  N.  J. 
Eq.  93,  99;  3  Pom.  Eq.  Jur.,  sects.  1197,  1198;  Tapia  v.  Demartini,  77  Cal.  383. 


524  NATURE   AND    REQUISITES   OP    THE    CONTRACT. 

limited.*  But  it  is  generally  held,  that  the  lien  of  the  mort- 
gage cannot  be  enforced  as  against  subsequent  incumbrancers, 
of  which  the  mortgagee  has  actual  notice,  for  advancements  or 
indorsements  made  or  given  after  such  notice.  The  notice,  as 
held  by  many  courts,  must  be  actual.  Constructive  notice, 
by  the  recording  of  subsequent  incumbrances,  is  not  suffi- 
cient.^ 

But  actual  notice  is  not  necessary  in  some  jurisdictions,  and 
it  is  held  that  the  record  of  the  junior  mortgage  is  notice  to  the 
first  mortgagee  and  to  all  other  parties,  and  any  advance  made 
thereafter  shall  be  postponed  to  such  junior  incumbrancer.^ 
Where  constructive  notice  is  sufficient,  the  lien  of  the  mort- 
gage attaches  as  to  these  subsequent  optional  advances,  only 
from  the  time  they  are  made  and  not  from  the  date  of  the  mort- 
gage. So  when  advances  were  made,  and  a  subsequent  judg- 
ment entered  on  the  same  day,  though  the  judgment  was 
entered  a  few  hours  after  the  former,  the  claims  of  both  mort- 
gage and  judgment  creditor  were  ordered  paid  pro  rata,  as  the 
law  does  not  recognize  fractions  of  a  day  in  such  cases.*  The 
weight  of  authority  has  been  that  actual  notice  is  necessary ; 
the  doctrine  is  otherwise  now. 

§  492.  Mechanic's  Lien — Priority. — The  same  rules  as  to 
priority  of  lien  of  a  mortgage  to  secure  future  advances,  and 
the  necessity  of  actual  notice  as  distinguished  from  record  no- 
tice of  a  subsequent  lien,  apply  to  holders  of  subsequent 
mechanics'  liens,  and  in  favor  of  a  beneficiary  not  named  in 

'  Tapia  v.  Demartini,  77  Cal.  383. 

2  Ackerman  v.  Hunsicker,  85  N.  Y.  52 ;  39  Am.  Dec.  621 ;  Ward  v.  Cooke,  17 
N.  J.  Eq.  93,  99;  Shirras  v.  Caig,  7  Cranch  (U.  S.),  34;  3  Pom.  Eq.  Jur.,  sect. 
1199 ;  McDaniels  v.  Colvin,  16  Vt.  300 ;  McCarty  v.  Chalfant,  14  W.  Va.  531 ; 
Nelson  v.  Boyce,  7  J.  J.  Marsh.  (Ky.)  401 ;  Witezinski  v.  Everman,  51  Miss. 
841  ;  Lovelace  v.  Webb,  62  Ala.  271 ;  Ripley  r.  Harris,  3  Biss.  C.  C.  199. 

3  Kramer  r.  Bank,  15  Ohio,  254 ;  Spader  v.  Lawler,  17  Ohio,  371 ;  Terhoven  v. 
Kerns,  2  Barr  (Pa.),  96;  Parmentier  v.  Gillespie,  9  Barr  (Pa.),  86;  Bank's 
Appeal,  36  Pa.  St.  170 ;  Ladue  v.  Railroad  Co.,  13  Mich.  380.  And  see  Collins 
V.  Carlisle,  13  111.  254 ;  Boswell  v.  Goodwin,  31  Conn.  74 ;  3  Am.  Law  Reg. 
(N.  S.)  92  and  note ;  Meeker  v.  Clinton,  etc..  Railroad  Co.,  2  La.  Ann.  971 ; 
Adams  v.  Wheeler,  10  Pick.  (Mass.)  199. 

*  McClure  v.  Roman,  52  Pa.  St.  458. 


THE    DEBT    SECURED.  625 

the  mortgage,  who  seeks  to  enforce  a  lien  for  advances  under  a 
trust  created  for  his  benefit  in  such  a  mortgage  for  a  sum  cer- 
tain given  to  another  person.^  In  Wisconsin,  however,  con- 
structive notice  is  sufficient.  Thus,  a  mortgage  of  land,  exe- 
cuted in  good  faith  to  secure  advances  to  be  made,  to  pay  for 
labor  performed  and  materials  furnished  in  and  for  the  erection 
of  a  building  on  the  premises,  and  advances  were  so  made, 
although  after  the  commencement  of  the  building,  becomes  a 
lien  upon  the  premises  from  the  time  of  the  execution  and 
recording  thereof ;  and  if  it  is  recorded  before  the  commence- 
ment of  the  building  it  will  take  precedence  of  liens  for  labor 
performed  and  materials  used  in  the  erection  of  the  building.^ 

Merely  staking  off  the  land  is  not  such  a  beginning  as  to 
defeat  the  precedence  of  a  mortgage  executed  afterward  but  before 
anything  more  had  been  done.  Something  must  be  done  which 
is  intended  to  remain  permanently  as  a  part  of  the  building.^ 

Where  a  building  was  erected  while  the  mortgagor  w^as  in 
possession  under  a  contract  of  sale,  but  before  the  conveyance 
and  mortgage  were  given,  the  mortgage  executed  simultaneously 
with  the  deed  and  given  to  secure  both  the  j)urchase-money 
and  advances  made  by  the  mortgagee  to  aid  in  the  construction 
of  the  building  in  pursuance  of  an  agreement  made  at  the  time 
of  the  contract  of  sale,  was  given  precedence  over  the  mechan- 
ics' lien  both  as  to  purchase-money  and  the  advances.  The 
seisin  of  the  mortgagor  was  instantaneous  and  not  sufficient  to 
allow  a  mechanics'  lien  to  attach  as  against  the  mortgagee.  In 
like  manner  where  a  lease  for  ninety-nine  years  renewal  forever 
was  given,  and  the  leasehold  was  simultaneously  mortgaged  to 
secure  the  lessor  for  advances  to  aid  in  the  construction  of  a 
building  on  the  leased  land,  the  mortgage  was  paramount  to  a 
prior  judgment  against  the  lessee.* 

'Tapiav.  Demartini,  77  Cal.  383;  Maroney's  Appeal,  24  Pa.  St.  372.  See, 
also,  Piatt  V.  Griffith,  27  N.  J.  Eq.  207. 

^Wisconsin  Planint;  Mill  Co.  v.  Schuda,  72  Wis.  277.     See,  also,  Lyle  v. 
Ducomb,  5  Binn.  (Pa.)  585;  Taylor  v.  Le  Bar,  25  N.  J.  Eq.  222;  Brooks  v. 
Lester,  36  Md.  65 ;  Choteau  v.  Thompson,  2  Ohio  St.  114. 
V  'Mackintosh  v.  Thurston,  25  N.  J.  Eq.  242. 

*Ahern  v.  White,  39  Md.  409. 


526  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

Where  the  mortgagee  is  compelled  to  make  advances,  he  is 
entitled  to  the  security  of  the  mortgage  for  all  his  advances 
whether  made  before  or  after  the  attaching  of  the  intervening 
rights  of  third  parties,  and  with  or  without  knowledge  of  such 
claims/ 

Thus,  where  a  railroad  company  made  a  mortgage  to  a  trus- 
tee upon  all  its  property  then  owned  or  afterward  to  be  owned 
and  acquired,  to  secure  bonds  which  the  company  had  agreed 
to  issue  to  a  contractor  in  payment  for  the  building  of  its 
road,  the  mortgage  was  paramount  to  a  lien  for  material 
afterward  furnished  the  company,  and  used  upon  the  road, 
although  the  advances  were  made  after  notice  of  the  material- 
man's claim  of  a  lien.^ 

§  493.  The  Future  Advances  Should  be  Described  with 
Reasonable  Certainty. — The  mortgage  should  contain  the 
subject-matter  and  all  facts  necessary  to  a  certain  result.  It 
should  define  the  incumbrance  in  such  a  way  as  to  prevent  the 
substitution  of  everything  which  a  fraudulent  grantor  may  de- 
vise to  shield  himself  from  the  demand  of  his  creditors.^  It  is 
enough  if  the  extent  of  the  incumbrance  can  be  ascertained  by 
ordinary  diligence.* 

Nor  is  it  necessary  in  such  mortgages  that  a  definite  or  spe- 
cific sum  should  be  stated  on  the  face  of  the  instrument  as  the 
ultimate  amount  intended  to  be  secured.  There  is,  however,  a 
considerable  diversity  of  opinion  on  this  subject,  but  this  con- 

'  Brinkmeyer  v.  Helbling,  57  Ind.  435 ;  Boswell  v.  Goodwin,  31  Conn.  74 ; 
Alexandria  Saving  Inst.  v.  Thomas,  29  Gratt.  (Va.)  483 ;  Taylor  v.  Cornelius,  60 
Pa.  St.  187 ;  Lovelace  v.  Webb,  62  Ala.  271. 

^  Nelson  v.  lova,  etc.,  R.  R.  Co.,  8  Am.  Railroad  Rep.  82. 

A  case  of  frequent  occurrence  coming  under  this  rule  is,  that  where  the 
mortgagee  binds  himself  to  make  advances  to  enable  the  mortgagor  to  erect 
buildings,  such  advances  to  be  made  as  the  work  progresses,  and  if  in  such 
cases  the  mortgage  is  made  before  the  work  is  begun  on  the  building,  it  will 
take  i^reference  over  a  mechanic's  hen  of  the  builders  or  materialmen, 
though  the  work  was  begun  or  materials  furnished  before  any  advances  were 
actually  made  under  the  mortgage. 

^Pettibone  v.  Griswold,  4  Conn.  158. 

*  Stoughton  V.  Pasco,  5  Conn.  449 ;  Collier  v.  Faulk,  69  Ala.  58 :  Witczinski 
V.  Everman,  51  Miss.  841 ;  Garber  v.  Henry,  6  Watts  (Pa.),  57. 


THE    DEBT   SECURED.  527 

elusion  is  sustained  by  the  weight  of  authority  as  the  better 
rule.'  All  that  can  be  required  is  that  a  mortgage  designed  to 
secure  such  future  liabilities  should  describe  the  nature  and 
amount  of  them  with  reasonable  certainty,  so  that  they  may  be 
ascertained  by  the  exercise  of  ordinary  diligence  on  proper  in- 
quiry.^ 

A  claim  against  the  mortgagor  as  indorser  of  the  note  of  a 
third  party,  which  was  purchased  by  the  mortgagee  from  the 
mortgagor,  and  which  has  been  regularly  presented  and  allowed 
as  an  unsecured  claim  against  the  estate  of  the  deceased  mort- 
gagor, cannot  be  foreclosed,  in  whole  or  in  part,  as  a  claim 
under  the  terms  of  the  mortgage  for  "  further  advances  to  the 
mortgagor  by  the  mortgagee,  and  other  indebtedness  to  the 
mortgagor  by  the  mortgagee  that  may  exist,  arise,  or  be  con- 
tracted before  the  satisfaction  thereof,"  not  exceeding  a  certain 
sum.  The  mortgagee  was  not  thereby  authorized  to  buy  up 
notes  of  third  parties  upon  which  the  mortgagor  was  a  simple 
indorser,  and  hold  the  same  as  secured  by  the  mortgage.^ 

A  note  secured  by  mortgage  issued  by  a  planter  to  the  order  of 
his  merchant  to  make  good  all  advances  in  the  working  of  the 
plantation,  although  received  as  collateral  security,  may  be 
sued  on  directly  by  the  holder  for  the  exact  amount  of  the  ad- 
vances.* 

If  the  mortgagee  fails  to  advance  the  entire  amount,  he  may 
enforce  the  security  for  the  amount  actually  advanced,  subject, 
however,  to  the  right  of  the  mortgagor  to  have  a  rebate  to  the 
extent  of  his  loss.'^ 

In  Connecticut  the  mortgage  must  truly  describe  the  debt 
intended  to  be  secured  ;  and  it  is  not  sufficient  that  the  debt  be 

1  Divver  v.  McLaughlin,  20  Am.  Dec.  653,  658  ;  2  Wend.  (N.  Y.)  596 ;  Love- 
lace V.  Webb,  62  Ala.  271 ;  Collier  v.  Faulk,  69  Ala.  58. 

'  Witczinski  v.  Everman,  61  Miss.  841 ;  Collier  v.  Faulk,  69  Ala.  58. 

"  Moran  r.  Gardemeyer,  82  Cal.  96.  See,  also,  Moran  v.  Gardemeyer,  82 
Cal.  102. 

*ChafFe  v.  Whitfield,  40  La.  Ann.  631. 

^  Watts  r.  Bonner,  66  Miss.  629 ;  Coleman  v.  Galbreath,  53  Miss.  303  ;  For- 
syth r.  Freer,  62  Ala.  443 ;  Robinson  v.  Cromelein,  15  Mich.  316 ;  Turpie  v. 
Lowe,  114  Ind.  37  ;  Kline  v.  McGuckin,  25  N.  J.  Eq.  433.  Compare  Walker 
V.  Carleton,  97  111.  582. 


528  NATURE    AND    REQUISITES   OF    THE    CONTRACT. 

of  a  character  that  it  might  have  been  secured  by  the  mortgage 
had  it  been  truly  described/ 

A  mortgage  conditioned  to  pay  all  sums  due  and  to  become 
due  is  sufficiently  certain.^  "  What  I  may  owe  him  on  book  " 
was  construed  to  refer  to  future  accounts,  no  accounts  subsist- 
ing between  the  parties  when  the  mortgage  was  executed.^ 
And  when  a  mortgage  is  given  to  secure  future  advances  for 
carrying  on  a  plantation,  the  mortgagor's  liability  is  not 
limited  to  the  year  in  which  the  mortgage  was  executed/ 

§494.  Continuing  Security. — The  security  may  be  con- 
tinued. Thus,  when  the  condition  of  the  bond  is  "  to  pay  all 
advances  which  may  be  made  to  them  under  this  agreement  at 
the  times,  in  the  manner,  and  with  the  interest  agreed  upon," 
it  is  sufficient  to  make  the  mortgage  a  continuing  security  for 
all  unpaid  advances.  The  bond  is  like  a  penal  official  bond  by 
an  officer  required  to  keep,  pay  over,  and  account  for  all  moneys 
which  come  under  his  hands,  in  whatever  amount,  and  at  what- 
ever times.  Such  moneys  may  be  a  hundred-fold  greater  than 
the  penalty  of  the  bond,  and  when  all  have  been  paid  or 
accounted  for  except  an  amount  equal  to  or  within  the  penalty 
of  the  bond,  the  securities,  even,  are  held  liable  on  such  bond 
for  such  deficit.^ 

So  a  mortgage  to  secure  future  advances  is  valid,  though 
the  amount  named  in  the  note  is  not  the  amount  absolutely 
secured  to  be  paid.  Thus,  a  note  was  given  for  $15,000,  and 
it  was  held  that  the  mortgage  was  valid  ''for  a  balance  of 
account  and  future  advances  "  to  the  extent  of  $15,000." 

So  a  guaranty  given  to  secure  the  payment  of  $1,800  of 
successive  advances  was  held  to  secure  a  same  amount  of  any 

1  Bramhall  v.  Flood,  41  Conn.  72.  Compare  Mix  v.  Cowles,  20  Conn.  420 ; 
Townsend  v.  Todd,  91  U.  S.  452 ;  Hubbard  v.  Savage,  8  Conn.  215 ;  Shepard  r. 
Shepard,  6  Conn.  37 ;  Pettibone  v.  Griswold,  4  Conn.  158 ;  Stoughton  v.  Pasco, 
5  Conn.  442 ;  Ketchum  v.  Jauncey,  23  Conn.  123. 

2  Michigan  Ins.  Co.  v.  Brown,  ll  Mich.  266. 
^McDaniels  v.  Cohnn,  16  Vt.  300. 

*Bryce  v.  Massey  (S.  Car.),  14  S.  E.  Rep.  768. 

5  Shores  v.  Doherty,  65  Wis.  153,  158,  opinion  by  Orton,  J. 

« Fisher  v.  Otis,  2  Pin.  (Wis.)  78. 


I 


THE    DEBT   SECURED.  529 

future  time,  toties  quoties,  whenever  the  antecedent  transactions 
were  discharged,  and  that  it  was  a  continuing  guaranty/ 

A  guaranty  of  the  payment  by  another  of  goods  to  be  sold 
in  the  future,  secured  by  a  mortgage  on  land,  is  revoked  by  the 
death  of  the  guarantor,  and  thereupon  the  land  may  be  re- 
deemed from  the  mortgage  upon  payment  for  the  goods  sold  up 
to  that  time.  Judge  Knowlton  says  :  "  We  are  of  the  opinion 
that  the  right  to  sell  upon  the  faith  of  the  guaranty,  rests  upon 
a  continuing  authorit}^,  and  that  where  a  mortgage  is  given 
instead  of  a  personal  promise  as  security,  the  authority  proceeds 
from  the  mortgagor,  and  is  terminated  by  his  death."  ^ 

The  English  doctrine  is  the  same,  with  this  exception  :  The 
guaranty  is  terminated,  not  by  the  death  of  the  guarantor,  but 
by  notice  of  his  death.^ 

§  495.  Limitations  of  the  Security. — As  a  general  rule  all 
limitations  as  to  amounts,  time,  and  the  nature  of  advances 
must  control.*  However,  other  expressions  may  modify  this 
rule.  Thus,  when  advances  are  made  to  enable  the  mortgagor 
to  raise  a  crop,  a  court  of  equity,  if  necessary  to  carry  out  the 
purposes  of  the  trust,  will  protect  and  uphold  additional 
advances  over  and  above  the  limitations  in  the  deed.^  So 
where  a  mortgage  was  given  to  secure  a  note  for  $5,500,  and 
such  advances  as  had  been  or  might  be  made  within  two  years, 
not  to  exceed  in  all  an  indebtedness  of  $6,000,  and  advances 
were  made  to  an  amount  largely  over  $6,000,  the  mortgage  was 
held  to  cover  the  advances  and  the  note  for  $5,500.^  And  if 
limited  in  amount  and  time,  and  the  full  amount  be  advanced 
and  paid,  and  then  further  loans  are  made  within  the  specified 
time,  these  loans  also  will  be  covered  by  the  mortgage ;  ^  if  the 

^  Douglass  V.  Reynolds,  7  Pet.  (U.  S.)  11.3.     See,  also,  Fassett  v.  Smith,  23 
N.  Y.  252;  Commercial  Bank  v.  Cunningham,  24  Rich.  (Mass.)  270. 

^  Hyland  v.  Habich,  150  Mass.  112. 

"  Harriss  v.  Fawcett,  L.  R.  15  Eq.  311 ;  L.  R.  8  Ch.  866 ;  Coulthart  v.  Clement- 
son,  5  Q.  B.  Div.  42,  47 ;  Lloyd  v.  Harper,  16  Ch.  Div.  290,  314,  319. 

*  Miller  r.  Whittier,  36  Me.  577. 

^  Bell  v.  Radcliff,  32  Ark.  645. 
V  6  Lawrence  v.  Tucker,  23  How.  (U.  S.)  14. 

^  Wilson  V.  Russell,  13  Md.  494. 
VOL.  I. — 34 


530  NATURE   AND    REQUISITES   OP    THE    CONTRACT. 

advances  had  been  made  after  the  time,  the  mortgage  would 
not  have  covered  them/ 

Where,  in  an  action  to  foreclose  a  $15,000  mortgage  given  as 
security  for  the  payment  of  any  and  all  notes,  checks,  and 
drafts  indorsed  by  the  mortgagee  for  the  benefit  or  accommoda- 
tion of  the  mortgagor,  and  it  appears  that  when  the  mortgage 
was  given,  the  mortgagee  was  indorser  for  the  mortgagor  upon 
only  one  note  for  $3,000,  the  mortgage  will  be  held  to  secure 
future  indorsements  made  by  the  mortgagee,  in  ignorance  of  a 
second  mortgage  on  the  same  premises,  to  secure  other  indorse- 
ments.^ As  he  had  no  notice,  actual  or  constructive,  of  the 
existence  of  the  other  mortgage,  he  had  the  same  right  to 
make  indorsements  upon  the  faith  of  his  mortgage  security  as 
if  the  other  mortgage  had  not  been  made.^ 

Article  3. 
Indemnified  Mortgagee  for  Future  Advances. 

§  496.  Validity.  I  502.  When  Action  Can  Be  Main- 

§  497.  Description  of  the  Debt.  tained  on  the  Mortgage, 

i  498.  Parol  Evidence.  §  503.  Creditor's  Rights  of  Substitu- 

§  499.  Limitation  of  Security.  tion. 

I  500.  Continuing  Security.  f  504.  Subrogation  of  Surety  to  the 

I  501.  The    Lien    of    an     Indemnity  Rights  of  the  Creditors. 

Mortgage  Attaches  with  the    ^  505.  Release  of  Security. 

Execution  and  Delivery. 

§496.  Validity. — A  mortgage  may  be  given  to  secure  the 
mortgagee  from  loss  by  reason  of  a  liability  that  he  may  sub- 
sequently incur.^  So  a  mortgage  may  be  given  to  indemnify 
the  mortgagee  for  becoming  surety  or  indorser.^  Indemnity 
mortgages  are  valid  if  honestly  and  fairly  given.  And  if 
merely  an  indemnity  to  the  extent  of  securing  the  mortgagor's 
debts,  and  made  with  the  express  concurrence  of  the  creditors, 

1  Miller  v.  Whittier,  36  Me.  577. 

"  Farr  v.  Nichols,  (N.  Y.)  30  N.  E.  Rep.  834. 

'  Ackerman  v.  Hunsicker,  85  N.  Y.  43. 

*  Goddard  v.  Sawyer,  9  Allen  (Mass.),  78. 

6  Uhler  V.  Semple,  20  N.  J.  Eq.  288 ;  Clark  v.  Oman,  15  Gray  (Mass.),  521. 


\ 


THE   DEBT   SECURED.  531 

it  is  valid.^  So  a  mortgage  given  to  indemnify  the  mortgagee 
against  loss  in  consequence  of  his  drawing  notes  in  favor  of  the 
mortgagor  is  as  vahd  where  the  notes  are  to  be  drawn  in 
futuro  as  where  they  are  already  drawn. ^  So  where  a  promis- 
sory note  secured  by  mortgage  was  given  in  order  to  indemnify 
the  promisee  against  any  loss  which  he  might  suffer  by  reason 
of  his  subsequent  indorsing  for  the  accommodation  of  the 
promisor,  such  notes  are  valid.^ 

The  true  consideration  should  be  fairly  and  fully  stated  in 
order  to  guard  against  suspicion  of  a  fraudulent  transaction, 
though  such  consideration  may  be  explained.* 

A  promise  by  one  person  to  indemnify  another  for  becoming 
a  guarantor  for  a  third  is  not  within  the  statute  of  frauds.  Such 
promise  need  not  be  in  writing,  and  the  assumption  of  the 
responsibility  is  a  sufficient  consideration  for  the  promise.^ 

A  liability  to  loss  on  the  part  of  the  mortgagee  is  a  consider- 
ation for  the  mortgage  given  to  secure  him  against  it,  as  such 
is  a  direct  benefit  to  the  mortgagor,  of  whatever  nature  it  may 
be,^  and  it  is  not  essential  that  any  consideration  shall  pass  at 
the  time  of  the  execution  of  the  mortgage.'^  Hence,  where  a 
cashier  of  a  bank  procured  a  party  to  execute  his  note  to  the 
bank,  to  be  used  as  a  collateral  for  the  bank's  accommodation, 
and  at  the  time  promised  to  protect  the  party  against  loss  there, 
the  execution  of  the  note  was  a  good  consideration  for  the 
cashier's  promise,  and  a  good  consideration  also  for  a  mortgage 
afterward  made  by  him  to  the  party  to  secure  the  partly  against 
his  contingent  liability  on  the  note.^ 

Adams  v.  Niemann,  46  Mich.  135. 

'  Lyle  V.  Ducomb,  5  Binn.  (Pa.)  585. 

^  Gardner  v.  Webber,  17  Pick.  (Mass.)  407. 

*  McKinster  v.  Babcock,  26  N.  Y.  378 ;  Commercial  Bank  v.  Cunningham, 
24  Pick.  (Mass.)  270. 

^  Chapin  v.  Merrill,  4  Wend.  (N.  Y.)  657.  See,  also,  Holmes  v.  Knights,  10 
N.  H.  175 ;  Dunn  v.  West,  5  B.  Men.  (Ky.)  376 ;  Lucas  v.  Chamberlain,  8  B. 
Men.  (Ky.)  276. 

« Magruder  v.  State  Bank,  18  Ark.  9 ;  Haden  v.  Buddenrick,  49  How.  Pr. 
(N.  Y.)  241 ;  Simpson  v.  Robert,  35  Ga.  180. 

'  Wright  V.  Bundy,  11  Ind.  398 ;  Cooley  v.  Hobart,  8  Iowa,  358. 

^  Duncan  v.  Miller,  64  Iowa,  223. 


532  NATURE    AND    REQUISITES    OF    THE   CONTRACT. 

§  497.  Description  of  the  Debt. — When  such  a  mortgage 
discloses  the  nature  of  the  debt  or  liability  to  be  secured,  it  is 
a  valid  description.  If  the  description  states  that  the  mort- 
gage is  an  indemnity  against  a  contingent  liability  it  is  suf- 
ficient.^ 

Thus,  a  mortgage  given  to  a  bank  to  secure  payment  of 
$10,000  in  six  months,  containing  a  proviso  that  the  mortgage 
was  given  to  secure  whatever  amount  of  indebtedness  at  any 
time  hereafter  existing  from  the  mortgagor  to  the  mortgagee,  is 
not  restricted  by  the  proviso  to  the  indebtedness  of  the  mort- 
gagor to  the  mortgagee  arising  from  direct  dealings  between 
them,  but  is  security  also  for  the  amount  of  notes  made  by 
the  mortgagor  to  the  order  of  a  third  person  which  the  bank 
discounted.^ 

So  where  a  mortgage  is  made  to  indemnif}^  one  against  loss 
by  reason  of  becoming  surety  upon  a  note  executed  to  negotiate 
a  loan  to  carry  on  business,  it  was  held  that  while  a  provision 
in  the  deed  rendering  the  property  liable  for  "  no  more  than 
for  $5,000,  is  a  limitation  upon  any  increase  of  the  debt,"  yet 
interest  is  recoverable  as  incident  to  the  debt.^  If  a  certain  term 
is  specified,  and  the  term  is  "be  the  debts  more  or  less,"  the  mort- 
gage covers  all  debts  for  which  the  mortgagee  is  surety.*  A 
mortgage  conditioned  to  indemnify  the  mortgagee  for  indorsing 
notes,  where  hereafter  requested,  to  an  amount  of  $7,000,  and 
also  renewal  notes,  is  valid.^ 

When  the  description  shows  that  the  notes  are  to  be  dis- 
counted at  a  certain  bank,  the  mortgage  is  valid  though  the 
notes  were  discounted  at  another  bank.^  So  a  mortgage  to 
secure  an  "  accommodation  indorser  and  signer  on  sundry 
notes,  drafts,  and  bills  of  exchange,  now  maturing  in  sundry 
banks,  and  in  the  hands  of  sundry  individuals,  to  the  amount 

'  TJtley  V.  Smith,  24  Conn.  290.  See,  also,  Merrills  v.  Swift,  18  Conn.  257 ; 
Bacon  v.  Brown,  19  Conn.  29. 

2  Nat.  Bank  v.  Byard,  26  N.  J.  Eq.  255. 

3  Stafford  V.  Jones,  91  N.  Car.  189. 
*Orr  V.  Hancock,  1  Root  (Conn.),  265. 

*  Ketclium  v.  Jauncey,  23  Conn.  123. 

*  Patterson  i'.  Johnston,  7  Ohio,  225. 


THE    DEBT    SECURED.  533 

of  $50,000,  a  particular  description  of  which  we  are  not  able 
to  give,  or  in  whose  hands  thej^  are,"  is  valid.^  Stating  that 
the  indemnitor  had  indorsed  two  bills  of  exchange,  when  he 
had  indorsed  but  one  and  paid  the  other,  does  not  make  the 
mortgage  invalid.^ 

§  498.  Parol  Evidence. — Parol  evidence  is  admissible  to 
show  the  true  nature  of  the  mortgage,  and  for  what  purpose  and 
for  what  consideration  it  was  given.  Thus,  a  mortgage  given  for 
a  definite  sum,  without  specifying  the  liabilities  secured,  may  be 
shown  by  parol  evidence  to  have  been  given  to  indemnify  the 
mortgagee  against  his  liability  as  an  indorser  or  surety  for  the 
mortgagor.^  So  when  the  condition  is  to  indemnify  the  mort- 
gagee for  indorsements  of  certain  notes,  payable  at  two  banks 
specified,  parol  evidence  is  admissible  to  show  what  notes  had 
been  indorsed  by  the  mortgagee  and  were  intended  to  be 
secured.* 

If  the  mortgage  is  for  a  definite  sum,  and  secures  the  pay- 
ment of  notes  for  definite  amounts,  it  may  be  shown  that  it  is 
simply  an  indemnity  mortgage.^ 

Where  a  mortgage  recited  that  the  mortgagor  was  in- 
debted to  the  mortgagee  in  a  certain  sum,  "  being  for  money 
advanced,"  and  that  the  mortgage  was  made  to  secure  the  pay- 
ment of  such  debt,  the  mortgagee  is  not  precluded  from  show- 
ing that  the  real  consideration  of  the  mortgage  was  the  indorse- 
ment by  him  of  the  mortgagor's  note  for  that  sum.^ 

§  499.  Limitation  of  the  Security. — To  create  a  liability 
upon  a  mortgage  given  to  guarantee  a  loan,  the  loan  should 

'Lewis  V.  De  Forest,  20  Conn.  427. 

''Fetter  v.  Cirode,  4  B.  Mon.  (Ky.)  482. 

» Shirras  v.  Caig,  7  Cranch  (U.  S.),  34 ;  Bank  r.  Finch,  3  Barb.  Ch.  (N.  Y.)  293 ; 
Lawrence  v.  Tucker,  23  How.  (U.  S.)  14 ;  McKinster  v.  Babcock,  26  N.  Y.  378. 

*  Benton  v.  Sumner,  57  N.  H.  117. 

^  Price  V.  Gover,  40  Md.  102 ;  Moses  v.  Hatfield,  27  S.  Car.  324 ;  Jones  v. 
Guaranty  and  Ind.  Co.,  101  U.  S.  622 ;  Mayer  v.  Grottendick,  68  Ind.  1.  See, 
also,  Athol  Savings  Bank  v.  Pomroy,  115  Mass.  573 ;  Vegan  v.  Caminetti,  65 
Qal.  438. 

«  McKinster  v.  Babcock,  26  N.  Y.  378. 


534  NATURE   AND    REQUISITES    OF    THE    CONTRACT. 

correspond  with  that  recited  in  the  mortgage.^  So  a  mortgage 
to  secure  the  mortgagee  from  all  liability  that  he  may  incur  by 
reason  of  his  becoming  surety  or  indorser  on  the  notes  of  the 
mortgagor,  does  not  secure  notes  given  to  the  mortgagee  for 
money  lent  by  him  to  the  mortgagor  and  received  as  evidence 
of  the  loan.^ 

The  conditions  of  a  mortgage  were  that  the  mortgagor  should 
pay  "  the  just  and  full  sum  of  all  moneys  "  which  he  might  owe 
to  the  mortgagee,  "  either  as  maker  or  indorser  of  any  notes  or 
any  bills  of  exchange,  bonds,  checks,  overdrafts,  or  securities  of 
any  kind,  given  by  him  according  to  the  conditions  of  any  such 
writings  obligatory,  executed  by  him  to  the  mortgagee  as  col- 
lateral security."  It  was  held  that  this  instrument  called  for 
written  evidence  of  debt,  signed  or  indorsed  by  the  mortgagor, 
and  could  be  satisfied  by  no  other,  and  that  it  could  not  be 
made  available  as  a  security  for  debts  not  in  writing.^ 

§  500.  Continuing  Security. — An  indemnity  mortgage 
stands  as  security  for  all  renewals  of  the  notes  secured.  When 
new  securities  are  given  for  the  mortgage  debt,  the  mortgage 
will  not  be  deemed  discharged,  unless  there  be  an  express 
agreement  to  that  effect.*  Thus,  when  a  mortgage  was  given, 
conditioned  to  save  harmless  the  mortgagee  from  his  indorse- 
ments on  specified  notes,  and  such  notes,  as  they  became  due, 
were  renewed  by  the  substitution  of  other  notes  or  drafts,  having 
different  names  on  them,  but  the  obligation  of  the  original 
indorsements  by  the  mortgagee  was  preserved  through  all  the 
renewals,  and  the  substituted  paper  was  ultimately  discharged 
by  the  mortgagee,  the  mortgage  remained  in  force  as  security 
for  the  subsequent  indorsements.  By  the  change  of  parties  the 
original  notes  were  satisfied,  and  yet  the  mortgage  was  held 
not  discharged  by  such  substitution.^ 

1  Thomas  v.  Olney,  16  111.  53. 

2  Clark  )'.  Oman,  15  Gray  (Mass.),  521. 

3  Bank  V.  Paine,  31  Barb.  (N.  Y.)  213. 

*  Chapman  v.  Jenkins,  31  Barb.  (N.  Y.)  164. 

*  Pond  v.  Clarke,  14  Conn.  334 ;  Brinkerhoff  v.  Lansing,  4  Johns.  Ch.  (N.  Y.) 
65. 


THE    DEBT   SECURED.  535 

The  general  rule  is  that  a  deed  of  trust  or  mortgage  executed 
as  an  indemnity  to  the  sureties,  will  be  upheld  whilst  the 
liability  continues.^  And  such  mortgage  protects  the  mort- 
gagee from  a  liability  incurred  by  him  jointly  with  the  mort- 
gagor, for  money  borrowed  to  pay  a  prior  note.^  And  notes 
substituted  may  be  indorsed  by  a  new  firm  formed  by  taking 
another  partner ;  ^  and  such  notes  need  not  be  given  for  the 
same  amounts  and  for  the  same  time  as  the  original.*  And  a 
mortgage  to  indemnify  a  surety  upon  a  guardian's  bond  will 
cover  a  renewal  of  that  bond.^ 

A  mortgage  to  two  persons,  "  as  a  continuing  security  and 
indemnity,"  includes  such  liabilities  as  were  named,  incurred 
by  either  of  them  separately  and  individually  and  jointly.^  It 
also  covers  liabilities  made  in  the  name  of  a  firm  after  one  of 
the  members  has  secretly  withdrawn/ 

When  such  a  mortgage  is  assigned,  the  liability  which  the 
mortgagee  would  incur  follows  the  assignment.^  An  indemnity 
mortgage  may  provide  in  terms  that  it  shall  be  a  continuing 
security.^ 

§  501.  The  Lien  of  an  Indemnity  Mortage  Attaches 
WITH  ITS  Execution  and  Delivery. — The  lien  of  an  indem- 
nity mortgage  begins  with  its  execution  and  delivery,  and  not 
with  the  payment  of  the  debt  indemnified  against.^" 

Thus,  of  two  mortgages  of  indemnity,  that  which  is  first  exe- 
cuted and  duly  recorded  is  the  senior  lien.^^     The  lien  attaches 

» Elliott  V.  Mayfield,  5  Port.  (Ala.)  182 ;  Hawkins  v.  May,  12  Ala.  673 ; 
Mayer  v.  Grottendick,  68  Ind.  1. 

*  Nesbit  V.  Worts,  37  Ohio  St.  378. 

^  Bank  v.  Cunningham,  24  Pick.  (Mass.)  270. 

^Gault  V.  McGrath,  32  Pa.  St.  392. 

*Bobbitt  V.  Flowers,  1  Swan  (Tenn.),  511. 

«  Bank  v.  Bigler,  83  N.  Y.  51. 

'  Bank  v.  Howard,  35  N.  Y.  500. 

*0'Hara  v.  Baum,  88  Pa.  St.  114. 

^  Fassett  v.  Smith,  23  N.  Y.  252. 

"  Brinkmeyer  v.  Helbhng,  57  Ind.  435 ;  Brinkmever  v.  Browneller,  55  Ind. 
487. 

"  Krutsinger  v.  Brown,  72  Ind.  466. 


536  NATURE   AND    REQUISITES    OF   THE    CONTRACT. 

upon  its  execution  and  overreaches  all  subsequent  conveyances 
affected  with  notice/ 

However,  it  is  held  that  a  mortgage  to  secure  one  who  is  ex- 
pected to  make,  indorse,  or  accept  negotiable  paper  for  the 
accommodation  of  another,  is  only  a  lien  from  the  time  such 
liability  is  incurred.^  Then  the  mortgage  constitutes  a  lien 
from  the  time  the  liability  is  incurred  and  is  paramount  to  a 
subsequent  judgment.^ 

§  502.  When  Action  Can  Be  Maintained  on  the  Mort- 
gage.— When  the  contract  is  one  of  indemnity  alone — to  save 
the  mortgagee  harmless  if  required  to  pay  the  note,  he  can 
sustain  no  action  upon  the  mortgage  until  he  has  sustained 
injury  by  paying  the  debt  or  a  portion  of  it.* 

When  the  mortgage  simply  indemnifies  the  mortgagee  for 
a  liability  he  has  incurred  or  may  incur,  the  amount  of  the 
mortgage,  or  of  the  mortgage  note,  seems  merely  to  limit  the 
extent  of  the  security.  The  mortgagee  being  compelled  to  pay 
the  debt,  can  claim  of  his  principal  the  amount  he  has  paid  as 
surety,  with  interest  from  the  date  of  the  payment.* 

But  a  distinction  must  be  made  between  a  mortgage  condi- 
tioned to  secure  against  a  specific  thing,  and  one  of  indemnity 
against  damages  by  reason  of  the  non-performance  of  the 
thing  specified.  When  the  indemnity  provides  against  a  fixed 
legal  liability,  the  right  of  action  becomes  complete  on  the 
principal's  failure  to  do  the  particular  thing  according  to  agree- 
ment.    When  the  mortgage  provides  for  indemnity  only,  and 

1  Watson  V.  Dickens,  12  Sm.  &  M.  (Miss.)  608;  Burdett  v.  Clay,  8  B.  Mon. 
(Ky.)  287 ;  Taylor  v.  Cornelius,  60  Pa.  St.  187  ;  Lyle  v.  Ducomb,  5  Binn.  (Pa.) 
585. 

"Choteau  v.  Thompson,  2  Ohio  St.  114;  Bank's  Appeal,  44  Pa.  St.  423; 
Bank's  Appeal,  36  Pa.  St.  170. 

3  Kramer  v.  Bank,  15  Ohio,  253 ;  Hartley  v.  Kirlin,  45  Pa.  St.  49 ;  Smith  v. 
Harry,  91  Pa.  St.  119. 

*  Gregory  v.  Hartley,  6  Nebr.  356 ;  Forbes  v.  McCoy,  15  Nebr.  632 ;  Stout  v. 
Folger,  34  Iowa,  74;  Lathrop  v.  Atwood,  21  Conn.  117  ;  In  re  Ne^rus,  7  Wend. 
(N.  Y.)  499  ;  Thomas  v.  Allen,  1  Hill  (N.  Y.),  145 ;  Churchill  v.  Hunt,  3  Denio 
(N.  Y.),  321 ;  Wilson  v.  Stilwell,  9  Ohio  St.  467. 

'  Athol  Savings  Bank  v.  Pomroy,  115  Mass.  573 ;  Vegan  v.  Caminetti,  65 
Cal.  438. 


THE    DEBT   SECURED.  537 

resultant  damages,  these  must  be  actually  suffered  before  the 
mortgagee  has  a  right  of  action  against  his  indemnitor/  If 
the  mortgage  is  one  of  surety  as  well  as  of  indemnity,  it  is 
not  necessary  to  show  that  damages  have  been  sustained  before 
action  against  the  principal.  Thus,  a  mortgage  given  to  in- 
demnify the  mortgagee  from  loss,  by  reason  of  having  become 
a  surety  upon  a  note  executed  by  one  of  the  mortgagors,  and 
which  stipulates  that  the  mortgagors  "  will  pay  the  sum  of  money 
above  secured,"  is  one  of  security,  and  the  mortgagee  may  begin 
action  upon  failure  of  the  maker  to  pay  the  note  at  maturity.^ 

The  surety  cannot  recover  from  his  principal  for  remote  and 
unexpected  consequences.'^  The  fact  that  the  surety  has  taken 
indemnity  does  not  deprive  him  of  his  right  against  the  princi- 
pal, unless  it  is  agreed  that  he  shall  look  to  the  indemnity  alone.* 

If  the  security  is  a  mortgage  note  which  is  due,  the  surety 
can,  and  perhaps  should,  collect  it  and  turn  it  into  money.* 
If  the  security  is  a  note  or  bond  from  the  principal,  the  surety 
can  only  recover  the  sum  he  has  paid,  although  the  nominal 
value  may  be  more.^  If  the  security  is  a  bond  for  conveyance, 
he  acquires  no  lien  on  the  land,  but  after  payment  may  go  into 
equity  for  reimbursement. 

If  the  payment  is  a  voluntary  one,  the  surety  cannot  look  to 
his  indemnity  for  reimbursement,^  and  if  he  absolutely  assumes 
the  debt  and  becomes  principal,  he  cannot  look  to  a  deed  of 
indemnity  given  him  by  his  principal.^  A  surety  who  has 
been  discharged  by  acts  of  the  creditors  may  still  enforce  a 
mortgage  given  him  for  the  benefit  of  the  creditors.^'' 

'  Bank  r.  Bigler,  83  N.  Y.  51,  61 ;  Gilbert  v.  Wiman,  1  N.  Y.  550. 

'  Gunel  V.  Cue,  72  Ind.  34.  See,  also,  Loosemore  v.  Radford,  9  Mees.  & 
Wei.  657  ;  Wilson  v.  Stilwell,  9  Ohio  St.  467 ;  Gilbert  v.  Wiman,  1  N.  Y.  550. 

'  Harden  v.  Cabot,  17  Ma&«.  169;  Wynn  v.  Brooke,  5  Rawle  (Pa.),  106. 

*  Cornwall  r.  Gould,  4  Pick.  (Mass.)  444 ;  West  v.  Bank,  19  Vt.  403. 

^  Hunter  v.  Levan,  11  Cal.  11. 

« Child  V.  Eureka  Works,  44  N.  H.  354 ;  Monell  v.  Smith,  5  Cow.  (N.  Y.) 
441. 

'  Porter  v.  Howard,  1  A.  K.  Marsh.  (Ky.)  358. 

« Bachellor  v.  Priest,  12  Pick.  (Mass.)  .399. 

v'Bank  r.  Stewart,  4  Dana  (Ky.),  27. 

1"  Newsam  v.  Finch,  25  Barb.  "(N.  Y.)  175. 


538  NATURE   AND   REQUISITES   OP    THE    CONTRACT. 

Where  the  principal  debtor  makes  default  in  the  payment  of 
the  notes,  the  sureties  may  enforce  the  payment  of  the  mort- 
gage given  to  secure  them  and  have  the  money  applied  on  the 
debt.  This  is  the  law  where  the  contract  is  more  than  a  mere 
indemnity ;  ^  but  the  surety  cannot  recover  more  from  the 
principal  debtor  than  he  has  paid  for  him.^ 

§  503.  Creditor's  Right  op  Substitution, — The  creditor  is 
entitled  to  the  benefit  of  all  pledges  or  securities  given  to,  or  in 
the  hands  of  a  surety  of  the  debtor  for  his  indemnity  w^hether 
the  surety  is  damnified  or  not,  as  it  is  a  trust  created  for  the 
better  security  of  the  debt  and  attaches  to  it.^  The  creditor 
may  reach  this  security,  in  equity,  without  even  a  judgment 
against  the  principal  debtor,*  The  creditor  after  substitution 
has  no  higher  right  than  the  surety.^ 

Such  indemnity  mortgages  create  a  trust  and  give  the  cred- 
itor an  equitable  lien  on  the  land.^ 

When  the  surety  obtains  a  mortgage  to  secure  him  against 
liability  and  also  to  secure  his  private  debt,  the  creditor  has 
the  preference  and  must  be  first  paid  from  the  proceeds.'^ 

This  right  of  the  creditor  to  be  substituted  in  the  place  of 
the  surety  continues  until  the  liability  of  the  surety  is  fixed  by 
default  of  the  mortgagor.^ 

Three  joint  indorsers  of  the  paper  of  a  manufacturing  con- 
cern executed  separate  mortgages  to  a  trustee  under  an  agree- 
ment that  if  either  should  pay  more  than  his  proportion  of 
the  liabilities,  he  should  recover  from  each  of  the  others  the 
shares  they  ought  respectively  to  contribute.     Held,  that  the 

^  Hellams  v.  Abercombie,  15  S.  Car.  117 ;  McDaniel  v.  Austin,  32  S.  Car. 
601. 

2  Kendrick  v.  Forney,  22  Gratt.  (Va.)  748 ;  Gieseke  v.  Johnson,  115  Ind.  308. 

3  Roberts  v.  Colvin,  3  Gratt.  (Va.)  358 ;  Bank  v.  Robertson,  19  Ala.  798 ; 
Owens  V.  Miller,  29  Md.  144 ;  Van  Orden  v.  Durham,  35  Cal.  136 ;  Bibb  v. 
Martin,  22  Miss.  87 ;  Haven  v.  Foley,  18  Mo.  130 ;  Rice's  Appeal,  79  Pa.  St. 
168 ;  Green  v.  Dodge,  6  Ohio,  80  ;  Osborn  v.  Noble,  46  Miss.  449, 

^  Ray  V.  Proflfet,  15  Lea  (Tenn.),  517. 

^  Bush  V.  Stamps,  26  Miss.  463. 

«  Paris  V.  Hulett,  26  Vt.  308. 

'Ten  Eyck  v.  Holmes,  3  Sand.  Ch.  (N.  Y.)  428. 

8Tilford  V.  James,  7  B.  Mon.  (Ky.)  336. 


THE    DEBT    SECURED.  539 

agreement  and  mortgages  secured  the  equality  of  payment  be- 
tween the  sureties,  and  also  the  payment  of  the  indorsed  notes 
to  the  holders  who  might  join  with  the  trustees  in  foreclosing 
the  mortgage.^ 

§  504.  Subrogation  of  Surety  to  the  Rights  op  Cred- 
itors.— A  surety  who  has  paid  the  debt  will  be  subrogated  to 
all  the  rights  of  the  creditor.  Thus,  where  the  mortgage  of 
indemnity  given  the  sureties  was  invalid,  they  were  subrogated 
to  the  place  of  a  judgment  creditor  who  had  made  a  levy.^  So 
a  surety  will  have  the  benefit  of  a  trust  deed  by  which  the 
debt  was  secured.^  So  where  the  creditor  holds  security  both 
from  the  debtor  and  the  surety,  he  must  hold  all  the  first  for 
the  surety's  benefit.*  < 

§  505.  Release  of  Security. — An  indorser  or  surety  hold- 
ing a  mortgage  for  indemnity,  whilst  solvent,  may,  for  a  bona 
fide  consideration,  assign  the  mortgage  ;  but  when  insolvent  his 
interest  in  the  property  is  made  to  yield  to  the  superior  equity 
in  favor  of  the  creditor,  for  whom  he  is  surety,  and  he  cannot 
then  dispose  of  the  mortgage.^  If  a  surety  releases  the  security 
taken  for  his  indemnity  from  the  principal  debtor,  before  the 
creditor  seeks  to  subject  it  to  the  debt,  the  creditor  has  no 
remedy  to  reach  it.^  When  the  liability  of  the  surety  is  con- 
tingent, as  when  he  becomes  an  accommodation  indorser,  he 
has  no  right  to  insist  on  the  application  of  the  mortgage  prop- 
erty, until  his  liability  is  fixed,  and  before  it  is  fixed  may  re- 
lease the  mortgage.''  But  when  the  mortgage  is  conditioned  to 
pay  the  indorsed  notes  at  their  maturity  "  to  the  holders  of 
them,"  the  mortgagee  has  no  right  to  release  the  property,  be- 
cause such  a  mortgage  is  a  security  for  the  payment  of  the 

'  Seward  v.  Huntington,  26  Hun  (N.  Y.),  217. 
^  Hooe  V.  Barber,  4  Hen.  &  M.  (Va.)  439. 
^  Billings  V.  Sprague,  49  111.  509. 

*Bank  i-.  Maud,  18  Week.  Rep.  312.     See,  also,  Borland  v.  Muerer,  139  Pa. 
St.  513. 
*Woodville  v.  Reed,  26  Md.  179,  181. 
V*  Stone  V.  Furber,  22  Mo.  App.  498. 
'Tilford  V.  James,  7  B.  Mon.  (Ky.)  336. 


540  NATURE    AND    REQUISITES    OF    THE    CONTRACT, 

notes,  as  well  as  an  indemnity  to  the  indorser,  and  it  inures  to 
the  benefit  of  any  one  in  whose  hands  the  notes  might  be,  and 
the  mortgagee,  therefore,  has  no  power  to  release  the  mortgage/ 
And  the  holders  of  such  notes  are  entitled  to  share  in  the 
property  in  proportion  to  their  respective  interests.^  After  the 
surety's  liability  is  fixed,  the  creditor  has  an  equitable  claim 
to  the  security,  and  can  have  the  mortgage  assigned  to  him.^ 

The  application  of  the  security  for  the  benefit  of  third  persons 
can  only  be  had  in  equity  when  the  mortgagee  has  not  parted 
with  it.* 

Article  4. 
Mortgages  for  Support. 

§  506.  Preliminary.  1 511.  Designation  of  Place  where  the 
'i  507.  The  Nature  of  the  Contract.  Support  Shall  Be  Furnished. 

§508.  Construction  of  Contract— Com-  ?512.  Parol  Evidence. 

pensation.  §513.  Trustee    Process    or    Garnish- 
§  509.  The  Mortgagor  Has  the  Right  ment. 

of  Possession.  §  514.  Settlement  by  Arbitration. 

2  510.  Alternative  Condition  of  Pay-  §  515.  Bona  Fide  Grantee. 

ing  Money  or  Supporting  the  §  516.  Foreclosure. 

Mortgagee.  §517.  Redemption. 

§  506.  Preliminary. — Mortgages  for  support  are  not  inter- 
preted alike  in  all  the  States.  Some  holding  that  a  deed,  con- 
ditioned for  the  support  of  a  person,  is  not  a  mortgage,  and 
that  the  interest  of  neither  party  is  assignable  without  the  con- 
sent of  the  other.  Chief  Justice  Bell  says  :  "  It  is  not  every 
conveyance  of  land  upon  condition  which  is  in  equity  regarded 
as  a  mortgage.  Early  definitions  of  mortgages  are  found, 
where  no  other  conditional  conveyances  are  regarded  as  mort- 
gages, but  such  as  are  made  for  the  security  of  a  loan  or  money. 
At  another  date  we  find  the  equitable  doctrines  as  to  mortgages 
extended   to    all    cases   where   the   conveyance   is   a   security 

1  Boyd  V.  Parker,  43  Md.  182. 

2  Lewis  V.  Do  Forest,  20  Conn.  427. 

3  New  Bedford  Inst.  v.  Bank,  9  Allen  (Mass.),  175 ;  Thornton  v.  B?nk,  71  Mo. 
221 ;  Eastman  v.  Foster,  8  Met.  (Mass.)  19;  Riddle  v.  Bowman,  27  N.  H.  236; 
Rice  V.  Dewey,  13  Gray  (Mass.),  47. 

*  Thrall  v.  Spencer,  16  Conn.  139 ;  Post  v.  Bank,  28  Conn.  420. 


THE    DEBT   SECURED.  541 

for  any  debt ;  and  the  most  modern  notion  is  to  apply  the 
same  doctrines  to  cases  generally,  where  conditional  deeds  are 
made  as  a  security  for  the  performance  of  a  contract. 

"  But  upon  consideration  it  will  be  seen  that  this  principle, 
though  generally  true,  can  have  no  application  to  any  other 
contracts  than  such  as  by  their  non-performance  create  a  debt, 
or  a  demand  in  nature  of  a  debt,  against  the  delinquent  party. 
Wherever  the  condition,  when  broken,  gives  rise  to  no  claim 
for  damages  whatever,  or  to  a  claim  for  unliquidated  damages, 
the  deed  is  not  to  be  regarded  as  a  mortgage  in  equity,  but  as 
a  conditional  deed  at  common  law.  It  has  the  incidents  of  a 
mortgage  only  to  a  limited  extent,  and  the  party,  if  relieved 
by  a  court  of  equity  from  the  forfeiture  resulting  from  the 
non-performance  of  the  condition,  will  not  be  relieved  as  in 
cases  of  a  mortgage.  It  is  not,  however,  intended  to  say  that  the 
same  principle  of  justice  which  has  led  courts  of  equity  to  estab- 
lish the  system  of  relief  from  forfeiture  in  cases  of  mortgages, 
will  not  entitle  a  party  to  analogous  relief  in  cases  where  the 
design  of  the  parties  is  to  make  a  conveyance  by  way  of 
security.  The  holder  of  a  mortgage  has  been  in  equity  re- 
garded as  a  trustee,  holding  the  property  for  his  own  security 
first ;  but  any  residue  remaining  after  such  security  is  obtained, 
for  the  benefit  of  the  grantor ;  and  in  a  case  of  that  kind  no 
reasonable  doubt  can  be  entertained  that  the  powers  of  courts 
of  equity  are  ample  to  afford  suitable  relief.  Such  relief  must 
be  adapted  to  the  nature  of  each  case,  and  must  be  as  various 
as  the  differing  character  of  the  contracts  in  question.  The 
system  of  rules,  adapted  to  do  justice  between  debtor  and  cred- 
itor, may  furnish  analogies  as  to  the  modes  of  affording  relief, 
but  they  are  not  likely  to  be  suitable  where  the  relations  of  the 
parties  are  different."  ^ 

The  mortgages  for  support  are  not  looked  upon  as  desirable 
contracts  for  the  mortgagee.  The  wisdom  of  such  contract  is 
very  questionable. 

The  Son  of  Sirach  denounces  such  transactions,  as  bringing 
disaster  to  the  mortgagee.     He  says :  "  Give  not  thy  son  and 

*  Bethlehem  v.  Annis,  40  N.  H.  34,  39. 


542  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

wife,  thy  brother  and  friend,  power  over  thee  while  thou  livest, 
and  give  not  thy  goods  to  another ;  lest  it  repent  thee,  and 
thou  entreat  for  the  same  again.  As  long  as  thou  livest  and 
hast  breath  in  thee,  give  not  thyself  over  to  any.  For  better 
it  is  that  thy  children  should  seek  to  thee  than  thou  shouldst 
stand  in  their  courtesy.  In  all  thy  works  keep  to  thyself  the 
pre-eminence :  leave  not  a  stain  in  thine  honor.  At  the  time 
when  thou  shalt  end  thy  days  and  finish  th}^  life  distribute 
thine  inheritance."  ^ 

This  same  idea  is  set  forth  in  the  tragedy  of  Lear,  when  the 
fool  confirms  the  opinion  of  the  wise  man  of  the  Apocrypha : 
"  Would  I  had  two  coxcombs  and  two  daughters.  If  I  gave 
them  all  my  living,  I'd  keep  my  coxcombs  myself." 

One  of  the  evil  consequences  which  seems  almost  invariably 
to  attach  itself  to  such  arrangements  is  the  distressing  family 
discord  and  lawsuits  which  spring  from  such  mortgages. 
When  the  land  is  given  to  a  child  wdth  a  mortgage  back  to 
the  parent,  courts  should  hold  the  child  to  the  strict  perform- 
ance of  his  part  of  the  contract,  and  give  the  parent  the  right 
to  recall  the  gift  if  he  fails.^ 

§  507.  The  Nature  of  the  Contract. — Whether  such 
mortgage  is  assignable  is  a  question  answered  differently  by 
many  courts.  One  line  of  decisions  holds  that  such  a  contract 
is  personal  ;  that  the  mortgagor  cannot  transfer  such  duty  of 
support  to  third  persons,  and  substitute  them  in  his  stead, 
without  the  consent  of  the  mortgagee  ;  and  if  the  mortgagor 
fails  to  superintend  the  fulfillment  of  this  duty,  he,  thereby, 
makes  default.^ 

The  language  of  the  condition,  and  the  relationship  of  the 
parties  to  the  deed,  indicate  generally  that  there  is  a  personal 
trust  reposed  in  the  mortagor,  and  a  personal  obligation  as- 
sumed by  him,  which  he  cannot  assign  over  to  third  persons, 
substituting  them  in  his  place.*    The  mortgagor  cannot  assign 

^  Ecclesiasticus,  xxxiii,  19-2.3. 

2  Soper  V.  Guernsey,  71  Pa.  St.  219. 

'Flanders  v.  Lamphear,  9  N.  H.  201. 

*  Bethlehem  v.  Annis,  40  N.  H.  34 ;  Eastman  v.  Batchelder,  36  N.  H.  141. 


I 


THE   DEBT   SECURED.  543 

his  interest  to  a  stranger  and  enable  him  to  discharge  the 
former  obhgation,  without  the  mortgagee's  consent,  and  the 
mortgagee  cannot  assign  his  interest  until  after  breach  of 
condition.^ 

However,  this  rule  is  not  general,  for  the  Vermont  court 
holds  that  a  mortgage  conditioned  for  the  support  of  the  mort- 
gagee admits  of  compensation,  and  where  the  mortgagor  has 
conveyed  his  interest,  the  purchaser  will  be  permitted  to  re- 
deem by  making  compensation  for  past  support  and  by  paying 
a  specified  allowance  for  the  future  support  of  the  mortgagee.^ 

A  mortgagee  of  land,  with  a  mortgage  conditioned  for  the 
support  of  himself  and  wife  during  their  joint  lives,  and  the 
life  of  the  surviver,  is  a  trustee  for  that  purpose,  and  on  his 
death,  and  condition  of  the  mortgage  broken,  the  court  will 
appoint  a  trustee  to  appropriate  the  land  for  the  purpose  of 
the  trust.* 

When  the  condition  is  to  be  performed  by  the  mortgagor, 
his  heirs,  executors,  or  administrators,  the  duty  cannot  be 
transferred  to  a  third  person.  If  the  mortgagor  dies,  then  his 
heirs,  executors,  or  administrators  must  perform  the  agreement, 
and  the  property  thus  held  cannot  be  disposed  of  by  the  ad- 
ministrator to  pay  the  debts  of  the  mortgagor.* 

The  parties  must  agree  on  definite  terms.  If  their  minds 
do  not  meet  on  some  definite  agreement,  then  no  valid  con- 
tract ever  existed  between  them  and  they  do  not  stand  as 
mortgagee  and  mortgagor,  or  obligee  and  obligor.^ 

On  the  separation  of  husband  and  wife,  the  husband  gave 
$400  to  the  wife's  brother,  who  agreed  to  support  the  wife 
without  cost  to  the  husband,  to  save  him  harmless  from  all 
charges  for  her  support,  and  secured  the  agreement  by  mort- 
gage. It  was  held  that  the  fact  that  the  mortgagor,  after  the 
husband  and  wife  had  been  divorced,  made  a  settlement  with 

'  Bryant  r.  Erpkine,  55  Me.  153. 

^  Austin  V.  Austin,  9  Vt.  420 ;  Henry  v.  Tupper,  29  Yt.  358. 

^Perkins  v.  Perkins,  60  N.  H.  373,  opinion  by  Allen,  J. 

*  Eastman  v.  Batchelder,  36  N.  H.  141 ;  Bryant  v.  Erskine,  55  Me.  153 ;  Beth- 
lehem V.  Annis,  40  N.  H.  34. 

*  French  v.  Case,  77  Mich.  64. 


544  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

her   in  which  he  accounted  to  her  for  $400,  did  not  extin- 
guish the  mortgage  when  it  did  not  appear  that  she  accepted 
the  settlement  in  satisfaction  of  her  claim  for  support.^ 
The  mortgagor's  interest  may  be  sold  on  execution.^ 

§  508.  Construction  of  Contract — Compensation. — Courts 
must  construe  contracts  as  made  by  the  parties,  in  the  light  of  all 
legitimate  surrounding  circumstances.  Parties  to  such  contracts 
for  support  may  expressly  stipulate  that  the  support  furnished 
them  under  the  mortgage  shall  be  provided  by  one  personally, 
and  if  not  so  done  that  the  estate  shall  be  forfeited  ;  and  this 
seems  the  better  rule,  for  courts  of  equity  may  in  their  discretion 
grant  relief  from  the  forfeiture  of  an  estate,  conditional  for  the 
maintenance  and  support  of  a  person,  when  the  forfeiture  is 
incurred,  and  the  relief  asked,  by  the  original  party  to  the  con- 
tract.^ Equity  will  relieve  from  forfeiture  on  such  terms  as  will 
provide  a  full  compensation  and  indemnity  for  all  damages  sus- 
tained by  reason  of  the  breach  of  the  contract. 

So  the  conditions  in  a  deed  for  the  support  of  the  grantor 
during  her  life  may  be  performed  by  another  person  than  the 
grantee,  when  not  otherwise  stipulated ;  hence,  the  owner  of  a 
mortgage  executed  by  the  grantee,  under  a  decree  of  foreclosure, 
is  entitled  to  the  possession,  on  his  performing  the  conditions, 
as  against  a  tenant  of  the  grantor.* 

A  condition  in  a  conveyance  may  be  enforced  by  ejectment 
in  Pennsylvania,  but  a  consideration,  even  amounting  to  a 
covenant  on  the  part  of  the  vendor,  cannot.  A  recovery  by  a 
father  in  ejectment,  after  breach,  effectually  revests  the  title  in 
him  as  would  a  re-entry  for  condition  broken.^ 

It  is  generally  held  that  a  court  of  equity  may  grant  relief 
from  the  forfeiture  of  an  estate  conditioned  for  the  maintenance 
and  support  of  the  grantee  when  the  forfeiture  was  accidental 

1  Coleman  v.  Whitney,  62  Vt.  123. 
^  Bodwell  Granite  Co.  v.  Lane,  83  Me.  168. 

=*  Austin  V.  Austin,  9  Yt.  420  ;  Henry  v.  Tupper,  29  Vt.  358,  375  ;  Joslyn  r. 
Parlin,  54  Vt.  670. 
*  Joslyn  V.  Parlin,  54  Vt.  670. 
^Soper  V.  Guernsey,  71  Pa.  St.  219. 


THE    DEBT    SECURED.  545 

1 

and  unintentional,  and  not  attended  with  irreparable  injury. 
But  it  rests  in  the  sound  discretion  of  the  court  when  relief  shall 
be  granted  in  this  class  of  cases.^  Therefore  the  court  will 
generally  award  compensation  to  the  mortgagee  for  non- 
performance of  the  personal  services.^  Such  mortgage  will 
be  construed  to  be  such  support  as  is  proper  and  suitable  for 
the  mortgagee  according  to  his  station  in  life ;  and  the  amount 
required  for  such  support  can  be  ascertained  with  reasonable 
certainty. 

The  granting  of  relief  to  the  mortgagee  rests  in  the  sound 
discretion  of  the  court,  after  the  mortgagor  makes  default.^ 

§509.  The  Mortgagor  Has  the  Right  of  Possession. — 
It  is  unreasonable  to  suppose  that  the  mortgagor,  under  such  a 
mortgage,  should  not  hold  possession,  and  it  is  held  that  such  an 
agreement  raises  the  implication  that  he  should  retain  the  pos- 
session, to  enable  him  to  fulfill  the  condition.*  It  is  inferred, 
as  a  necessary  implication,  nothing  appearing  to  the  contrary, 
that  the  mortgagee  is  not  to  enter  until  condition  is  broken.^ 

So  if  the  mortgagee  takes  a  lease  from  the  mortgagor  of  the 
same  premises,  the  lease  does  not  extinguish  the  mortgage,  but 
is  merely  ancilliary  to  it.* 

§  510.  Alternative  Condition  of  Paying  Money  or  Sup- 
porting Mortgagee. — When  a  mortgage  is  given  with  an 
alternative  condition  to  support  the  mortgagee  or  to  pay 
money,  the  mortgagor  may  have  his  election  to  retain  posses- 
sion and  support  the  mortgagee.  After  having  chosen,  he  is 
then  bound  by  his  election,  which  is  also  conclusive  upon  the 
mortgagee,^  and  the  mortgage  becomes  security  for  the  per- 

^  Henry  v.  Tupper,  29  Vt.  358. 

^  2  Greenl.  Cruise,  80  n ;  Hoyt  v.  Bradly,  27  Me.  242. 

*  Bryant  v.  Erskine,  55  Me.  153;  Bethlehem  v.  Annis,  40  N.  11.  34;  Rowell 
V.  Jewett,  G9  Me.  293 ;  Henry  v.  Tupper,  29  Vt.  358,  375. 

*  Hartshorn  v.  Hubbard,  2  N.  H.  453 ;  Dearborn  v.  Dearborn,  9  N.  H.  117. 
^Flandera  v.  Lamphear,  9  N.  H.  201 ;  Rhoades  v.  Parker,  10  N.  H.  83; 

Brown  v.  Leach,  35  Me.  39,  41 ;  Bryant  v.  Erskine,  55  Me.  153. 
«  Powers  V.  Patten,  71  Me.  583. 
'  Bryant  v.  Erskine,  55  Me.  153. 
VOL.  I. — 35. 


546  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

formance  of  the  condition  accepted  by  the  mortgagor.^  Such 
property  is  not  chargeable  for  the  support  of  the  mortgagee 
elsewhere,  unless  he  was  justified  in  leaving  the  mortgagor.^ 

A  mortgage  to  secure  the  payment  of  $500  in  five  years,  to 
be  paid  in  furnishing  the  mortgagee  support,  does  not  give  the 
mortgagor  his  election  to  pay  in  money.^ 

§  511.  Designation  of  Place  v^^here  the  Support  Shall 
BE  Furnished. — This  class  for  support  has  often  come  before 
the  courts,  and  it  is  generally  held  that  when  no  place  of 
performance  is  specified  in  the  contract,  the  party  to  be  sup- 
ported has  the  right  to  select  his  place  of  residence  and  place 
where  he  will  receive  the  support  contracted  for,  provided  the 
party  obligated  to  furnish  the  support  is  not  thereby  put  to 
unreasonable  and  needless  expenses.* 

Chief  Justice  Royce  says:  "The  general  rule  is  that  where  sup- 
port is  secured  by  a  conditional  deed  or  mortgage,  and  no  place  is 
stipulated  wh-er.e  the  person  to  be  supported  is  to  receive  the  sup- 
port, he  has  the  right  to  be  supported  wherever  he  may  choose  to 
live,  provided  he  does  not  impose  any  unreasonable  exjDense  on 
the  party  obligated  to  furnish  the  support ;  and  the  condition  of 
the  deed  is  broken  by  declining  to  pay  for  the  board  of  the 
party  to  be  supported  at  a  suitable  place."  ^  Where  the  sup- 
port is  to  be  furnished  on  the  premises,  the  mortgagee  may 
have  a  separate  room  away  and  apart  from  the  family,  unless 
stipulated  to  the  contrary.®  He  must  pay  for  the  support  of 
the  mortgagee  at  a  suitable  place,  even  though  the  mortgagee 
makes  no  demand  for  such  support ;  and  if  the  mortgagor  de- 
clines to  pay  for  such  support,  he  makes  a  default.'^ 

1  Furbish  v.  Sears,  2  Cliff.  C.  C.  454  ;  Lindsey  v.  Bradley,  53  Vt.  682. 

2  Lindsey  v.  Bradley,  53  Vt.  682. 

^  Hawkins  v.  Cleermont,  15  Mich.  511 ;  Evans  v.  Norris,  6  Mich.  369. 

*  Wilder  v.  Whittemore,  15  Mass.  262  ;  Thayer  v.  Richards,  19  Pick.  (Mass.) 
.398 ;  Fiske  v.  Fiske,  20  Pick.  (Mass.)  499 ;  Hubbard  v.  Hubbard,  12  Allen 
(Mass.),  586;  Petee  «.  Case,  2  Allen  (Mass.),  546;  Flanders  v.  Lamphear,  9  N. 
H.  201 ;  Holmes  v.  Fisher,  13  N.  H.  9 ;  Rowell  v.  .Tewett,  69  Me.  293 ;  Lamb 
V.  Clark,  29  Vt.  273 ;  Borst  v.  Crommie,  19  Hun  (N.  Y.),  209 ;  Savings  Bank  v. 
Holt,  58  Vt.  166 ;  Joslyn  v.  Parlin,  54  Vt.  670 ;  2  Wash.  Real  Prop.  66. 

=>  Young  V.  Young,  59  Vt.  342 ;  Powers  v.  Mastin,  62  Vt.  433. 

6  Hubbard  v.  Hubbard,  12  Allen  (Mass.),  586. 

'Pettee  v.  Case,  2  Allen  (Mass),  546. 


THE    DEBT    SECURED.  647 

He  must  provide  a  home  according  to  the  terms  of  the  mort- 
gage.    If  the  house  decays  he  must  furnish  an  equivalent.' 

If  the  mortgagor  gives  a  bond  conditioned  to  furnish  suita- 
ble and  appropriate  rooms  for  the  use  of  the  obligee  and  his 
wife  as  long  as  it  should  be  their  pleasure  to  occupy  the  same, 
and  in  case  they  should  become  dissatisfied  with  the  treatment 
of  the  obligor  or  his  family,  they  were  to  have  the  privilege  of 
going  to  reside  with  some  other  family,  and  the  obligor  was,  at 
all  times  and  places  to  furnish  the  support  provided  for  them 
in  the  bond,  the  mortgagee  and  his  wife  have  an  option  to 
reside  with  the  mortgagor  on  the  premises  conveyed,  or  in 
some  other  place.^ 

§512.  Parol  Evidence. — The  court  in  construing  a  con- 
tract for  future  support  must  construe  such  contract  in  the  light 
of  all  legitimate  surrounding  circumstances.  The  intention 
of  the  parties  to  a  contract  is  to  be  ascertained  by  applying  its 
terms  to  the  subject-matter ;  and  the  admission  of  parol  testi- 
mony for  that  purpose  does  not  infringe  upon  the  rule  that 
makes  a  written  instrument  the  proper  and  only  evidence  of 
the  agreement  contained  in  it.^ 

The  place  where  the  support  is  to  be  furnished  not  being 
named  in  the  mortgage,  and  without  explanation,  it  must  be 
left  as  a  fact  to  be  inferred  from  the  language  used,  and  if  the 
language  is  ambiguous,  it  is  competent  to  consider  the  facts  and 
circumstances  developed  upon  the  hearing  as  explanatory  of 
that  ambiguity.* 

§  513.  Trustee  Process  or  Garnishment. — The  Vermont 
court  says  by  Chief  Justice  Royce,  that  while  an  obligation  for 
future  support  may  not  be  a  trusteeable  debt,  yet  where  the 

'Gibson  v.  Taylor,  6  Gray  (Mass.),  310.  See,  also,  Jenkins  v.  Stetson, 
9  Allen  (Mass.),  128;  Thayer  v.  Richards,  19  Pick.  (Mass.)  398;  Rhoades  v. 
Parker,  10  N.  H.  83 ;  Fiske  v.  Fiske,  20  Pick.  (Mass.)  499. 

^  French  v.  Case,  77  Mich.  04. 

•■'  Young  V.  Young,  59  Vt.  342. 

*  1  Addison  on  Contracts,  183 ;  Gray  r.  Clark,  11  Vt.  58.1 ;  Thompson  v. 
Prouty,  27  Vt.  14  ;  Joslyn  v.  Parlin,  54  Vt.  670  ;  Young  ?'.  Y^)ung,  59  Vt.  342 ; 
Mason  v.  Mason,  67  Me.  646;  Wales -y.  Mellen,  1  Gray"(Mass.),  512. 


548  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

obligor  has  failed  to  support,  and  arbitrators  have  awarded  a 
specific  sum  against  him  because  of  such  failure,  such  award 
is  a  debt  subject  to  attachment  by  trustee  process  ;  and  when 
the  obligee  in  such  case  has  brought  his  petition  to  foreclose  the 
mortgage  to  secure  his  support,  the  obligor  can  deduct  the 
amount  for  which  he  had  been  adjudged  trustee/ 

But  when  the  trustee  executes  his  bond,  conditioned  for  the 
support  of  the  mortgagee  or  obligee  during  life,  it  is  a  debt 
which  does  not  come  within  the  trustee  process,  because  the 
creditor  has  no  greater  right  than  the  mortgagee,  and  can 
enforce  preference  of  the  bond  in  no  other  way  than  the  obligee 
can  ;  and  if  the  right  can  be  attached  then  the  creditor  would 
be  substituted  in  the  place  of  the  obligee,  and  be  allowed  to 
enjoy  the  mortgagee's  right  personally,  which  cannot  be  done.^ 

The  obligation  for  support  being  of  a  personal  character  the 
property  would  not  be  subject  to  attachment  by  trustee  process.' 

Such  a  contract  does  not  come  within  a  trustee  process, 
because  the  trustee  cannot  be  chargeable,  as  the  thing  or  money 
due  from  him  to  the  obligee  or  mortgagee  depends  upon  a  con- 
tingency. The  duty  to  support  is  contingent  upon  the  life  of 
the  party  to  be  supported.  And  so  the  value  of  the  support  to 
be  rendered  is  incapable  of  estimation  and  cannot  be  attached.' 

§  514.  Settlement  by  Arbitration. — The  parties  may 
settle  their  differences  by  arbitration,  and  the  arbitrators  may 
construe  the  bond  when  one  has  been  given. 

When  an  award  is  made  in  favor  of  the  mortgagee  in  a  defi- 
nite sum  of  money  it  is  subject  to  attachment  by  the  creditors 
of  the  mortgagee.  Thus,  arbitrators  were  chosen  and  passed 
upon  all  matters  submitted  to  them,  and  gave  an  award  of 
$203.87  for  the  past  support  and  maintenance  of  the  mort- 
gagee. It  was  held  that  such  an  award  was  a  debt  subject  to 
attachment  or  garnishment,  and  judgment  may  be  rendered 

*  Dickinson  v.  Dickinson,  59  Vt.  678. 

*  Briggs  V.  Beach,  18  Vt.  1 15. 

3  Stanley  v.  Bobbins,  36  Vt.  422 ;  Dickinson  v.  Dickinson,  59  Vt.  678,  682. 
See,  also,  Hastie  v.  Kelley,  57  Vt.  293 ;  Marsh  v.  Austin,  1  Allen  (Mass.),  235. 

*  Dickinson  v.  Dickinson,  59  Vt.  678. 


I 


THE    DEBT   SECURED.  549 

against  the  mortgagor  as  trustee  of  the  mortgagee  for  the  amount 
found  due  not  exceeding  the  specified  award.  ^ 

But  when  it  is  conditioned  in  a  bond  that  the  parties  may 
resort  to  arbitration  to  settle  their  rights,  such  agreement  does 
not  prevent  an  action  for  breach  of  condition  by  the  mort- 
gagee, because  an  agreement  for  arbitration,  according  to  the 
general  principle,  shall  not  deprive  a  party  of  his  legal  reme- 
dies.^ 

§  515.  Bona  fide  Grantee. — The  grantee  in  such  convey- 
ances has  no  rights  superior  to  any  other  grantee.  So  a  con- 
veyance of  land  by  an  insolvent  father  to  his  son,  in  consider- 
ation of  his  son's  promise  to  support  and  maintain  his  mother 
and  father  during  their  natural  lives,  is  fraudulent  and  void  as 
against  existing  creditors  of  the  grantor,  and  the  grantee  is  not 
entitled  to  protection  against  the  creditors  as  a  bona  fide  pur- 
chaser for  value.^ 

No  debtor,  especially  if  insolvent,  is  permitted  to  tie  up  his 
property  by  a  conveyance  of  this  kind,  in  trust  for  the  enjoy- 
ment of  himself  and  family,  so  as  to  place  it  beyond  the  reach 
of  his  creditors.* 

§  516.  Foreclosure. — The  administrator  of  the  grantee  of 
a  mortgage,  given  to  secure  an  agreement  for  the  support  of  the 
grantee  and  his  wife  during  their  Hves,  is  entitled  to  foreclosure 
of  the  mortgage  for  breach  of  condition,  occurring  before  and 
since  the  grantee's  death,  although  the  grantee's  widow  is  living, 
and  does  not  appear  in  the  suit.* 

But  such  mortgage  cannot  be  foreclosed  for  the  benefit  of 
persons  who  had  boarded  the  mortgagee  at  the  request  of  the 
mortgagor.* 

In  such  mortgages  it  is  impossible  to  determine  in  advance 

*  Dickingon  v.  Dickinson,  59  Vt.  678,  681. 

*  Hill  V.  More,  40  Me.  515. 
MVoodall  V.  Kelly,  85  Ala.  368. 

*  Sandlin  v.  Eobbins,  62  Ala.  477  ;  Benedict  v.  Renfro,  75  Ala.  121 ;  Dow  v. 
Jewell,  18  N.  H.  340. 

^  Marsh  v.  Austin,  1  Allen  (Mass.),  235, 
^     'Daniels  v.  Eisenlord,  10  Mich.  454. 


550  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

what  damages  may  result  in  the  future  from  failure  to  perform 
a  condition,  and  whenever  complaint  is  made,  the  damages 
must  be  determined  on  the  merits  of  each  case.  No  court  has 
any  authority  to  make  a  decree  in  advance  which  shall  limit 
the  amount  of  recovery  for  such  future  violation.' 

And  such  an  agreement  without  seal  will  be  construed  as  a 
mortgage.  And  where  it  grants  to  them,  the  father  and  wife, 
"  each  and  severally  a  life  lien  or  dower  or  lien  of  maintenance 
for  life,"  after  breach  the  father  alone  may  sustain  an  action 
against  the  mortgagor  ;  ^  or  the  widow  may  claim  dower  against 
the  person  claiming  under  the  mortgagor.^ 

When  the  mortgagor  gives  a  bond  in  a  fixed  sum,  such  sum 
will  be  regarded  as  a  penalty,  and  the  mortgage  may  be  fore- 
closed, under  some  circumstances  without  redemption.*  So  it 
is  not  necessary  to  entitle  the  mortgagee  to  the  full  penalty  of 
the  bond  as  damages,  especially  if  the  condition  has  been  sat- 
isfactorily carried  out  for  some  years,  and  no  evidence  is  given 
of  the  actual  injury  resulting  from  the  breach.^ 

Where  the  obligor  has  agreed  to  arbitration,  and  a  specific 
amount  has  been  awarded  the  obligee  as  damages  for  pas*  sup- 
port, creditors  of  the  obligee  may  garnish  him  or  attach  this 
sum  ;  and  when  in  such  case  the  obligee  has  brought  his 
petition  to  foreclose  the  mortgage  executed  to  secure  his  sup- 
port, the  obligor  can  deduct  the  amount  for  which  he  had  been 
adjudged  trustee.®  The  obligor  should  have  tendered  money 
sufficient  to  pay  both  the  award  less  the  amount  for  which  he 
was  held  trustee,  and  also  the  expense  of  the  obligee's  support, 
to  the  time  of  the  tender.'^ 

Where  a  party  receives  a  certain  amount,  in  consideration  of 
which  he  agrees  to  support  a  certain  person  during  life,  and  at 
death  bury  her  and  erect  a  tombstone  at  her  grave,  and  to  secure 

» Tucker  v.  Tucker,  24  Mich.  426 ;  35  Mich.  365. 
^^Gilson  V.  Gilson,  2  Allen  (Mas?.),  115. 
^Lanfair  v.  Lanfair,  18  Pick.  (Mass.)  299. 
*Bresnahan  v.  Bresnahan,  46  Wis.  385. 
nVright  V.  Wright,  49  Mich.  624. 
8  Dickinson  v.  Dickinson,  59  Vt.  678. 
'Dickinson  v.  Dickinson,  59  Vt.  678,  682. 


THE   DEBT   SECURED.  551 

the  performance  of  this  agreement,  he  executed  a  deed  with  a 
condition  thereto  attached,  that  the  deed  should  be  void  if  the 
agreement  should  be  performed  ;  it  was  held  that  such  a  trans- 
action was  a  mortgage  which  could  be  foreclosed  on  failure  to 
perform  the  agreement.* 

§517.  Redemption. — The  granting  of  relief  in  such  forfeit- 
ure is  in  the  sound  discretion  of  the  court.  If  the  forfeiture  has 
been  accidental  or  unintentional,  and  not  attended  with  irre- 
parable injury,  the  court  will  allow  redemption,^  and  the 
amount  to  be  paid  is  susceptible  of  definite  calculation,  and  the 
breach  is  not  gross  and  willful.^ 

Cases  of  this  character  should  be  viewed  by  the  court  with 
something  of  distrust,  and  relief  afforded  the  mortgagor  with 
more  reserve  and  circumspection  than  in  ordinary  cases  of  col- 
lateral duties.  While  it  may  not  be  necessary  in  all  cases  that 
it  shall  appear  that  the  forfeiture  arises  from  surprise,  accident, 
or  mistake,  yet  relief  should  not  be  granted  when  the  omission 
was  willful  and  wanton,  or  attended  with  suffering  or  serious 
inconvenience  to  the  grantee  or  mortgagee,  or  there  is  any  good 
ground  to  apprehend  a  recurrence  of  the  failure  to  perform.* 

^Cook  V.  Bartholomew,  60  Conn.  24. 

'  Henry  v.  Tapper,  29  Vt.  358,  375.    See,  also,  Bryant  v.  Erskine,  55  Me. 
153 ;  Hoyt  v.  Bradley,  27  Me.  242 ;  Bethlehem  v.  Annis,  40  N.  H.  34,  43. 
3  Rowell  V.  Jewett,  69  Me.  293. 
*  Henry  v.  Tupper,  29  Vt.  358,  375. 


CHAPTER  XIV. 


the  consideration. 

Article  1. 
A  Valid  Consideration. 


?  518.  Consideration  as  Between   the    §  528. 

Parties. 
2  519.  Explanation  of  the  Real  Con-    g  529. 

sideration. 
§  520.  Sufficient  Consideration. 
I  521.  Statutory  Provisions.  ^  530. 

?  522.  Indemnity.  l  531. 

§  523.  Truth  of  the  Recitals. 
§  524.  Extension  of  Time.  §  532. 

§  525.  Adequate  Consideration.  §  533. 

?  526.  Relationship. 
§  527.  Purchaser  as  Assignee  in  Equity    §  534. 

of  the  Debt.  ^  535. 


Settlement  of  Disputed 

Claims. 
Money  Subject  to  a  Devise  or 

Bequest — Giving  Notes  by 

Remaindermen. 
Pre-existing  Debts. 
Substitution  of  New  Mortgage 

and  Notes. 
Wife's  Separate  Property. 
Compromise  among  Members 

of  Family. 
Passing  of  the  Consideration. 
Accommodation  Mortgages. 


§  518.  Consideration  as  Between  the  Parties. — As  be- 
tween the  parties  and  their  representatives,  the  consideration 
named  in  a  mortgage  does  not  determine  the  amount  of  a 
mortgage.  Judge  Walker  says  that  the  consideration  in  a  mort- 
gage is  not  determinative  of  the  amount  of  the  mortgage,  nor 
is  it,  when  of  record,  notice  of  the  amount  due  upon  it,  nor  a 
limitation  of  the  amount  secured  thereby. 

"  A  mortgage  given  to  secure  the  sum  named  in  the  consid- 
eration clause  may  be  half  paid  a  week  after  it  is  executed,  so 
that  it  will  stand  as  security  for  only  half  the  consideration 
named,  or  it  may  be  one  of  long  standing,  with  a  large  accu- 
mulation of  interest  upon  it,  making  the  amount  due  upon  it 
double  the  consideration  named  in  the  mortgage,  so  that  it 
would  stand  as  security  for  double  the  consideration  named."  * 

And  it  is  generally  held  that  the  real  consideration  of 
deeds  and  mortgages  may  be  shown,   although  different  from 

1  Keyes  v.  Bump,  59  Vt.  391,  398. 
652 


THE    CONSIDERATION.  553 

that  expressed  in  the  instrument.  The  consideration  named 
in  the  instrument  is  never  conclusive.     It  is  open  to  inquiry.^ 

It  is  not  essential,  even,  that  any  amount  be  named  in  the 
consideration  clause  of  the  mortgage.^ 

It  is  settled  that  the  sum  or  amount  named  as  the  considera- 
tion is  of  no  moment,  as  the  mortgage  stands  as  a  security  for 
the  amount  of  liabilities  or  indebtedness,  whatever  the  sum 
may  be,  and  it  is  not  essential  that  any  amount  should  be 
named  in  the  security.^ 

When  the  conveyance  nor  the  agreernent  to  pay  was  in- 
tended to  be  absolute,  a  creditor  acquires  no  lien  upon  the  land 
by  virtue  of  such  arrangement  to  secure  the  payment  of  his 
claim.*  In  the  absence  of  direct  evidence  of  the  consideration — 
the  mortgagor  having  absconded  and  the  mortgagee  being 
dead,  it  will  be  inferred  from  the  fact  of  the  indebtedness  from 
the  mortgagor  to  the  mortgagee  at  the  date  of  the  mortgage, 
and  its  continuance  and  increase,  that  the  mortgage  was  given 
to  secure  such  indebtedness  and  such  future  indebtedness  as 
might  arise.^ 

§  519.  Explanation  of  the  Real  Consideration. — The 
consideration  stated  and  acknowledged  in  a  deed  or  mortgage, 
is,  however,  presumed  to  be  the  real  one  until  the  contrary  is 
proved.^ 

While  the  acknowledgment  of  a  consideration  in  a  deed 
cannot  be  contradicted  for  the  purpose  of  defeating  or  affecting 
the  title  conveyed,'^  yet  it  is  always  competent  to  prove  by  parol 
what  the  real  consideration  was  in  an  action  upon  the  cove- 
nants.^    And  where  a  note  and  mortgage  were  executed  to  the 

*  Stevens  v.  Griffith,  3  Vt.  448 ;  Wood  v.  Beach,  7  Vt.  522. 

*  Robinson  r.  Williams,  22  N.  Y.  380. 

*  Miller  ik  Lockwood,  32  N.  Y.  293. 

*  Marshall  v.  Blass,  82  Mich.  518. 
*Lanahan  v.  Lawton  (N.  J.),  23  Atl.  Rep.  476. 

*  Belden  v.  Seymour,  8  Conn.  310 ;  BayUss  v.  Williams,  6  Coldw.  (Tenn.) 
440  ;  Clements  r.  Landnim,  26  Ga.  401. 

'M'Crea  v.  Purmort,  16  Wend.  (N.  Y.)  460;  Irvine  v.  McKeon,  23  Cal.475; 
^  Wilkinson  v.  Scott,  17  Mass.  257. 

*  Rhine  v.  Ellen,  36  Cal.  362 ;  Pierce  v.  Brew,  43  Vt.,  295 ;  Lawtun  v.  Buck- 


554  NATURE    AND    REQUISITES    OF    THE   CONTRACT. 

same  party  and  bore  the.  same  date,  and  the  mortgage  recited 
that  it  was  given  to  secure  a  sum  equal  to  the  amount  of  the 
note,  it  will  be  presumed  that  the  note  is  secured  by  the  mort- 
gage.^ 

Notes  and  mortgage  of  a  husband  and  wife  on  his  land  were 
executed.  The  husband  died  and  the  wife  as  administratrix, 
after  such  notes  and  mortgage  were  barred  by  the  statute  of 
limitations,  gave  a  new  mortgage  and  notes  to  secure  the  prior 
mortgage  and  also  to  secure  notes  given  by  her  ;  it  was  held 
that,  as  to  the  husband's  mortgage,  the  consideration  was 
void.^ 

§  520.  Sufficient  Consideration. — A  valuable  considera- 
tion is  one  that  is  either  a  benefit  to  the  party  promising  or 
some  trouble  or  prejudice  to  the  party  to  whom  the  promise 
is  made.^ 

Any  damage,  or  suspension,  or  forbearance  of  a  right,  will 
be  sufficient  to  sustain  a  promise.^  So  any  benefit  to  the  mort- 
gagor or  to  a  stranger,  or  damage  or  loss  to  the  mortgagee, 
rendered  or  sustained  at  the  request  of  the  mortgagor,  is  suffi- 
cient.^ 

A  person  obtaining  negotiable  paper,  in  good  faith,  and  for 
a  valuable  consideration  before  maturity,  is  protected  in  its 
acquisition,  and  the  mortgage  given  in  such  case  is  protected 
equally  with  the  note.® 

Where   there    is  no  consideration,  the   mortgage   may   be 

ingham,  15  Iowa,  22 ;  Harper  v.  Perry,  28  Iowa,  63 ;  Hannan  v.  Oxley,  2.3  Wis. 
519 ;  Penna.  Manf.  Co.  v.  Neel,  54  Pa.  St.  9  ;  Huebsch  v.  Scheel,  81  111.  281 ; 
Paige  V.  Sherman,  6  Gray  (Mass.),  511 ;  Rabsuhl  v.  Lack,  35  Mo.  316 ;  Morris 
Canal  v.  Ryerson,  3  Dutch.  (N.  J.)  467  ;  Hubbard  v.  Allen,  59  Ala.  283.  But 
see  Mendenhall  v.  Parish,  8  Jones  L.  (N.  Car.)  106. 

>  Bailey  v.  Fanning  Orphan  School  (Ky.),  14  S.  W.  Rep.  908. 

*  Rosenberg  v.  Ford,  85  Cal.  610. 

^  Jones  V.  Ashburnham,  4  East,  455 ;  Lent  v.  Padelford,  10  Mass.  236. 

*  Seaman  v.  Seaman,  12  Wend.  (N.  Y.)  381 ;  Morton  v.  Burn,  2  Nev.  &  P. 
297. 

*  Parsons  v.  Clark,  132  Mass.  569  ;  Magruder  v.  Bank,  18  Ark.  9;  Sykes  v. 
Lafferry,  27  Ark.  407 ;  Popple  v.  Day,  123  Mass.  520 ;  Harlan  v.  Harlan,  20 
Pa.  St.  303. 

^Barnum  v.  Phenix,  60  Mich.  388. 


THE    CONSIDERATION.  555 

released  upon  showing  to  that  effect.  Thus,  when  a  married 
woman  gave  a  mortgage  to  a  party,  from  fear  that  her  husband 
would  induce  her  to  mortgage  her  separate  property  to  secure 
his  creditors,  such  mortgage  will  be  cancelled  when  this  fact  is 
shown.^ 

The  surrender  of  a  vendor's  lien  is  a  valuable  consideration 
for  a  mortgage.^ 

The  omission  from  the  description  of  a  note  in  a  mortgage 
of  a  nugatory  clause  in  the  note  does  not  constitute  variance.^ 
And  a  mortgage  will  protect  a  note  intended  to  be  covered 
by  it,  though  by  mistake  or  omission  it  is  misdescribed,  and 
the  rule  applies  as  against  an  attaching  creditor  of  the  mort- 
gagor, if  there  is  no  substantial  difference  between  the  note 
described  and  the  one  intended.* 

The  acceptance  of  a  note  for  $8,000,  secured  by  a  mortgage, 
for  an  unsecured  debt  of  $9,922,  is  a  good  accord  and  satisfac- 
tion, and  hence  such  mortgage  is  given  for  a  valuable  consider- 
ation.^ And  where  one  of  the  considerations  for  a  note  and 
mortgage  was  certain  land  which  the  mortgagee  agreed  to  con- 
vey, and  the  mortgagor  was  put  into  immediate  possession 
thereof,  there  was  no  failure  of  consideration  because  the  mort- 
gagee did  not  execute  a  deed,  the  same  not  having  been  de- 
manded, or  because  the  land  was  subsequently  forfeited  for 
non-payment  of  taxes,  since  the  forfeiture  was  in  consequence 
of  the  mortgagor's  default.^ 

§  521.  Statutory  Provisions. — At  the  time  a  note  was  made 
and  a  mortgage  executed,  the  statute  provided,  as  it  still  pro- 
vides, that  no  estate  should  be  "  incumbered  by  an  agreement, 
unless  it  is  inserted  in  the  condition  of  the  conveyance,  and 
made  part  thereof,  stating  the  sum  of  money  to  be  secured  or 
other  thing  to  be  performed  ;"^  the  indemnifying  clause  in  the 

'Colt  V.  McConnell,  116  Ind.  249. 
'Lane  v.  Logue,  12  Lea  (Tenn.),  681. 
'Hoskins  v.  Cole,  34  111.  App.  541. 
^Denser  v.  Walkup,  43  Mo.  App.  625. 
*Postf.  Bank,  138  111.  559. 
^   «Choate  v.  Kimball  (Ark.),  19  S.  W.  Rep.  108. 
'  Rev.  Stat,  of  N.  H.,  ch.  131,  sect.  2 ;  Gen.  Laws,  ch.  136,  sect.  2. 


556  NATURE    AND    REQUISITES    OF    THE   CONTRACT. 

condition  of  two  mortgages  given  by  the  mortgagor  was  in 
one,  "  and  hold  the  said  H.  B.  harmless  from  all  liabilities 
where  he  is  bound  for  me  ;"  in  the  other,  "  also  shall  hold  the 
said  H.  B.  harmless  from  all  loss,  cost,  and  expense  from  all 
liabilities  he  may  be  under  by  reason  of  signing  notes,  bonds, 
receipts,  and  other  papers  with  me  ;"  it  was  held  sufficient  to 
include  a  liability  incurred  by  signing  as  surety  for  the  defend- 
ant a  note  and  a  loss  from  the  payment  of  the  same  before  the 
mortgages  were  made,  although  the  particular  note  is  not  de- 
scribed in  the  condition  of  the  mortgages  ;  and  the  note  may  be 
identified,  by  extrinsic  evidence,  as  one  for  the  payment  of 
which  the  mortgages  were  intended  to  secure.^  So  a  condition 
in  a  mortgage  to  indemnify  the  mortgagee  against  loss  by 
reason  of  his  having  indorsed  for  the  mortgagor  certain  notes 
is  a  sufficient  consideration,  and  parol  evidence  may  be  admitted 
to  show  what  notes  indorsed  by  the  mortgagee  were  intended 
to  be  secured  by  the  mortgage.^ 

So  where  a  note  or  obligation  is  offered  in  evidence  in  con- 
nection with  a  mortgage,  it  is  not  necessary  that  all  the  par- 
ticulars of  it  should  be  specified  in  the  condition  in  order  to 
identify  it  as  the  note  intended  to  be  and  actually  secured  by 
the  mortgage.  A  general  agreement  with  the  description  is 
sufficient,  and  parol  evidence  may  be  introduced  to  further 
identify  it.' 

The  condition  in  the  mortgage  was  the  payment  of  $5,000, 
according  to  a  bond  for  that  sum  of  the  same  date  with  the 
mortgage. 

The  condition  of  the  bond  was  for  the  payment  to  the  mort- 
gagee or  obligee  of  all  notes,  drafts,  or  acceptances  "  made, 
indorsed,  drawn,  or  accepted,  by  said  Willard  to  said  bank," 
on  or  before  a  date  named,  with  interest,  cost,  and  damages, 
and  for  indemnifying  the  bank  against  loss  from  discounting 
the  notes,  drafts,   and  acceptances.      The   description  of    the 

'  Barker  ;;.  Barker,  62  N.  H.  366. 

''Benton  v.  Sumner,  57  N.  H.  117;  Bassett  v.  Bassett,  10  N.  H.  64;  Bank  v. 
Willard,  10  N.  H.  210 ;  Boody  v.  Davis,  20  N.  H.  140. 
^Melvin  v.  Fellows,  33  N.  H.  401. 


THE    CONSIDERATION.  557 

indebtedness  or  the  liability  indemnified  against,  was  held 
sufficiently  certain/ 

So  in  Maryland,  under  the  statute,^  no  mortgage  is  valid 
except  as  between  the  parties,  unless  there  be  indorsed  thereon 
an  oath  or  affirmation  of  the  mortgagee  that  the  consideration 
in  said  mortgage  is  true  and  bona  fide  as  therein  set  forth. 

The  want  of  such  affidavit  is  fatal  to  the  validity  of  the 
mortgage,  when  assailed  by  interested  third  parties.^  And 
when  this  affidavit  is  made  by  an  agent,  it  must  show  it  or  the 
mortgage  will  be  invalid.*  One  claiming  under  a  mortgage 
with  notice  stands  in  the  same  position  as  the  mortgagor.^ 

§  522.  Indemnity. — A  desire  of  a  debtor  to  indemnify  his 
surety  on  a  promissory  note  against  loss  which  would  occur  if 
the  surety  should  be  compelled  to  discharge  the  debt  is  a  suf- 
ficient consideration.^ 

To  indemnify  a  mortgagee  against  loss  or  damage  is  a  suffi- 
cient consideration  for  a  mortgage.^ 

A  liability  to  loss  or  damage  on  the  part  of  the  mortgagee  is 
a  consideration  for  a  mortgage  given  to  secure  him  against  it, 
as  much  so  as  a  direct  benefit  to  the  mortgagor,  of  whatever 
nature  it  may  be.* 

§  523.  Truth  of  the  Recitals. — A  statement  of  a  larger 
amount  in  one  of  the  notes  than  was  really  due  does  not 
avoid  the  mortgage  as  to  a  purchaser  without  actual  knowledge. 
Definiteness  or  certainty  as  to  the  amount  in  the  statement  was 
unnecessary.^ 

But  when  the  securities  state  neither  a  definite  amount  nor 
any  such  data  respecting  it  as  would  put  any  one  interested  in 

'  Benton  v.  Sumner,  57  N.  H.  117. 

"^  Code  of  1860,  art.  24,  sect.  29. 

^  Cockey  v.  Milne,  16  Md.  200. 

*Milholland  v.  Tiffany,  64  Md.  455. 

^Phillips  V.  Pearson,  27  Md.  242. 

« Williams  v.  Silliman,  74  Tex.  626. 

'Simpson  v.  Robert,  35  Ga.  180. 

*Haden  v.  Buddensick,  4  Hun  (N.  Y.),  649. 

^Miller  v.  Rouser,  25  111.  App.  88 ;  Adams  v.  Niemann,  46  Mich.  135. 


558  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

the  inquiry  upon  the  track,  leading  to   its  discovery,  then  the 
consideration  is  invahd/ 

Both  parties  to  a  mortgage  have  a  right  to  show  the  truth 
as  to  the  consideration,  no  matter  what  may  be  the  recitals." 
Because  a  mortgage  is  given  for  an  amount  greater  than  the 
real  debt  does  not  make  it  invalid;^ 

§  524.  Extension  of  Time. — Extension  of  time  of  a  mort- 
gage to  a  mortgagor  is  a  sufficient  consideration  to  support  a 
mortgage  given  by  a  third  person,  and  covenants  by  him  to 
pay  it.* 

Giving  of  future  time,  however  short  for  the  payment  of  an 
existing  debt,  is  a  valuable  consideration,^  and  becomes  bind- 
ing wdiere  a  mortgage  is  delivered ;  ^  but  if  no  extension  of  time 
is  given  the  mortgagee  is  not  a  bona  fide  purchaser  for  a  valu- 
able consideration  as  to  third  parties.^ 

§  525.  Adequate  Consideration. — The  recital  of  the  pay- 
ment of  one  dollar,  the  receipt  of  which  is  acknowledged,  as  a 
consideration  of  a  mortgage,  is  sufficient.  A  valuable  consid- 
eration, however  small  or  nominal,  if  given  or  stipulated  for  in 
good  faith,  is,  in  the  absence  of  fraud,  sufficient.* 

Parties,  acting  in  good  faith,  must  be  left  free  to  determine 
for  themselves  the  adequacy  of  the  consideration  upon  which 
disposition  of  property  may  be  made,  and  whether  their  bar- 
gains and  contracts  are  discreet,  profitable,  or  unprofitable.* 

'  Bank  v.  Godfrey,  23  111.  604 ;  Battenhausen  v.  Bullock,  11  111.  App.  665 ; 
Bullock  ?'.  Battenhausen,  108  111.  28. 

2  Leach  v.  Shelby,  58  Miss.  681;  Wimberly  v.  Wortham  (IMiss.),  3  South. 
Rep.  459. 

^  Nazro  r.  Ware,  38  Minn.  443 ;  Kcycs  v.  Bump,  59  Vt.  391.  Miller  v.  Rouser, 
25  111.  App.  88 ;  Adams  v.  Niemann,  46  INIich.  135. 

*  Forrester  v.  Parker,  14  Daly  (N.  Y.),  208. 

5  Thames  v.  Rembert,  63  Ala.  561 ;  Sullivan  Sav.  Inst.  v.  Young,  55  Iowa, 
132 ;  Gary  v.  AVhite,  52  N.  Y.  138 ;  Schumpert  v.  Dillard,  55  Miss.  348 ;  Gil- 
christ V.  Gough,  63  Ind.  576 ;  Phelps  v.  Fockler,  61  Iowa,  340. 

« Pennsylvania  Coal  Co.  v.  Blake,  85  N.  Y.  226;  Bank  v.  Wallace,  45  Ohio 
St.  152 ;  Martin  v.  Nixon,  92  Mo.  26. 

^  First  Nat.  Bank  v.  Ins.  Co.  (Ind.),  28  N.  E.  Rep.  695. 

*  Boiling  V.  Munchus,  65  Ala.  558. 
'Judge  t;.  Wilkins,  19  Ala.  765. 


I 


THE    CONSIDERATION.  559 

If  there  be  no  fraud  or  imposition,  the  least  consideration 
will  suppoii;  a  contract  deliberately  made  with  full  knowledge 
of  all  the  circumstances.^  But  recitals  in  a  mortgage  may  be 
contradicted  in  Alabama,  by  parol  evidence.^ 

A  recital  in  the  mortgage  of  a  consideration  of  one  dollar,  the 
receipt  of  which  is  acknowledged  by  the  mortgagor,  jwima  facie 
shows  a  valuable  consideration,  and  its  actual  payment.^ 

§  526.  Relationship. — Relationship  is  a  sujERcient  consid- 
eration. Thus,  the  relationship  existing  between  father  and 
daughter  is  sufficient  to  uphold  a  mortgage  given  by  her  to  him 
as  security  for  her  deceased  husband's  debts,  though  they  could 
not  have  been  enforced  against  her.  This  consideration  would 
uphold  the  mortgage  as  a  conveyance  of  her  interest  in  the 
estate  and  make  it  valid.* 

§  527.  Purchaser  as  Assignee  in  Equity  of  the  Debt. — 
A  purchaser  at  a  foreclosure  sale  is,  in  equity,  the  assignee  of 
the  mortgage  foreclosed,  and  a  release  of  this  equity  is  a  suffi- 
cient consideration  for  a  promise  to  pay.  And  a  conveyance 
of  land  by  a  purchaser  at  a  foreclosure  sale  to  a  person  who 
had  a  contract  for  the  land  before  sale,  is  consideration  for  a 
mortgage  whether  or  not  the  latter  was  made  a  party  to  the 
foreclosure  suit.^ 

§  528.  Settlement  of  Disputed  Claims. — The  settlement 
of  a  disputed  claim,  in  good  faith,  is  a  legal  consideration  for 
a  promise.® 

If  the  account  constitutes  even  a  doubtful  claim,  it  may  fur- 
nish a  good  consideration  to  support  the  settlement  and  subse- 
quent  promise   based    in    part   thereon.^     So    a  release  of  a 

•Train  r.  Gold,  5  Pick.  (Mass.)  .380;  Hubbard  v.  Coolidge,  1  Met.  (Mass.) 
03 ;  Haijjjh  v.  Brooks,  10  Ad.  &  El.  309. 
^  Griinball  v.  Masfin,  77  Ala.  553. 
^  Lawrence  v.  McCalmont,  2  How.  (U.  S.)  426. 
'  Ray  V.  Hallenbeck,  42  Fed.  Rep.  381. 
^  Wii.son  V.  White,  84  Cal.  2.39. 
^  Wahl  V.  Barnum,  116  N.  Y.  87. 
'  Grans  v.  Hunter,  28  N.  Y.  394. 


560  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

plausible  or  colorable  claim  by  settlement  between  the  parties 
constitutes  a  good  consideration.^  Accordingly  a  mortgage 
given  for  settlement  of  a  disputed  claim  is  a  good  considera- 
tion, and  therefore  valid.^ 

So  where  a  settlement  of  accounts  has  been  made  by  parties 
competent  to  contract,  and  a  promissory  note  executed  by  one 
to  the  other  to  secure  an  amount  covering  both  the  balance 
found  to  be  due  and  an  additional  sum  for  forbearance,  and  a 
mortgage  has  been  made  to  secure  the  notes,  and  no  fraud  or 
unfair  dealing  on  the  part  of  the  mortgagee  is  shown,  such 
settlement  is  a  sufficient  consideration  for  the  notes.^ 

§  529.  Money  Subject  to  a  Devise  or  Bequest — Givinu 
Notes  by  Remaindermen. — A  testator  by  his  will  gave  his 
widow  a  life  estate  in  a  tract  of  land,  with  power  to  sell  and 
dispose  of  the  same  for  her  own  use  and  benefit,  and  what 
might  remain  unexpended  at  her  death,  to  his  two  sons. 
During  her  life  the  widow  sold  the  land,  and  shortly  after  made 
certain  loans  of  money  to  the  two  sons,  secured  by  mortgage, 
and  she  admitted  in  her  lifetime  that  the  money  she  let  one  of 
the  sons  have  ^vas  his  money.  It  was  held  that  the  sale  of  the 
land  for  cash,  and  the  subsequent  loan  of  the  money,  made  a 
prima  facie  case  that  the  money  loaned  was  that  derived  from 
the  sale,  and  the  notes  should  therefore  bo  cancelled.* 

§  530.  Pre-existing  Debts. — One's  own  debt,  though  past 
due,  is  always  a  sufficient  consideration  to  support  his  mort- 
gage to  the  creditor  to  secure  the  debt,  and,  as  to  parties  and 
privies,  is  as  effectual  as  if  made  upon  an  adequate  new  con- 
sideration. No  cases  can  be  found  in  which  a  man's  own  debt 
has  been  ruled  to  be  an  insufficient  consideration  between  him 
and  his  creditor,  for  a  mortgage  or  other  security  received 
by    tlie   creditor     from  the    debtor.^      And    in   many  States 

1  White  V.  Hoyt,  73  N.  Y.  505. 

''ZoebiFch  v.  Von  Minden,  120  N.  Y.  406. 

^MrLane  ?'.  Piagorio,  24  Fla.  71. 

*Pritchard  v.  Walker,  121  111.  221 ;  22  111.  App.  286. 

5  Turner  v.  McFee,  61  Ala.  468 ;  Machette  v.  Wanless,  1  Colo.  225 ;  Paine  v. 
Benton,  .32  Wis.  491 ;  Smith  v.  Worman,  19  Ohio  St.  145 ;  Kranert  v.  Simon, 
65  111.  344. 


THE    CONSIDERATION.  561 

a  trustee  or  mortgagee,  whether  for  old  or  new  debts,  is  a  pur- 
chaser for  a  valuable  consideration.^  It  is  said  that  whatever 
distinction  there  may  have  been  formerly  supposed  to  exist  be- 
tween a  mortgage  to  secure  a  past  indebtedness,  or  one  made  at 
the  time  of  execution  as  to  consideration,  has  been  exploded.^ 

But  many  courts  hold  that  a  pre-existing  debt  is  not  suffi- 
cient consideration  to  make  the  mortgagee  a  purchaser  for  value 
so  as  to  protect  him  against  the  rights  of  third  persons.^ 

It  is  held,  in  order  to  protect  the  mortgagee  as  jDurchaser 
against  prior  equities,  he  must  have  received  some  new  con- 
sideration, or  must  have  relinquished  some  security  for  a  pre- 
existing debt  due  him,*  and  this  seems  to  be  the  weight  of 
authority.  A  pre-existing  indebtedness  repels  the  idea  that 
the  mortgagee  is  a  bona  fide  party  to  the  transaction.  He  parts' 
with  nothing,  nor  does  he  relinquish  any  security  or  incur  any 
liability  upon  the  faith  of  the  mortgage.^ 

But  a  debtor  may  give  a  bona  fide  security  for  any  claim; 
against  him.^  And  a  mortgage  to  secure  a  cash  loan  and  a 
pre-existing  debt  is  not  given  simply  to  secure  a  pre-existing 
debt,  but  is  based  on  a  valid  present  consideration.^ 

In  Illinois  a  mortgage  given  for  a  pre-existing  debt,  and  the 
mortgagee  not  surrendering  the  evidence  of  such  debt,  is  invalid 
as  to  the  rights  of  third  parties,  and  will  not  entitle  the 
mortgagee  to  protection  against  prior  equities.^ 

'  McDowell  V.  Lockhart,  93  N.  Car.  191 ;  Evans  v.  Pence,  78  Ind.  4.39 ;  Bafe- 
cock  V.  Jordan,  24  Ind.  14 ;  Jackson  v.  Reid,  30  Kan.  10. 

2  Potts  V.  Blackwell,  4  Jones  Eq.  (N.  Car.)  58. 

'  Pancoast  v.  Duval,  26  N.  J.  Eq.  445 ;  Dickerson  v.  Tillinghast,  4  Paige 
(N.  Y.),  215;  Coddington  v.  Bay,  20  Johns.  (N.  Y.)  637;  Morse  v.  Godfrey,  3 
i^tory,  C.  C.  364,  389 ;  De  Lancey  v.  Stearns,  66  N.  Y.  157  ;  Phelps  v.  Fockler, 
61  Iowa,  .340;  First  Nat.  Bank  v.  Ins.  Co.  (Ind.),  28  N.  E.  Rep.  695;  Edwards 
V.  McKernan,  55  Mich.  520,  523. 

^Pickett  V.  Barron,  29  Barb.  (N.  Y.)  505;  Spurlock  r.  Sullivan,  36  Tex.  511. 
See,  also,  Schumpert  r.  Dilkrd,  55  Miss.  348;  Withers  r.  Little,  50  Cal.  370; 
Lawrence  r.  Clark,  .36  N.  Y.  128. 

^  Woodburn  ?;.  Chamberlin,  17  Barb.  (N.  Y.)  446 ;  Van  Slyck  v.  Foote,  10 
Hun  (N.  Y.),  554;  Thompson  r.  Van  Vechten,  27  N.  Y.  568. 

« Wright  V.  Towle,  67  Mich.  255 ;  Jordan  v.  White,  38  Mich.  253. 

^  Branch  v.  Griffin,  99  N.  Car.  173 ;  Bank  v.  Bridgets,  98  N.  Car.  67. 

^Metropolitan  Bank  v.  Godfrey,  23  111.  004. 
VOL.  I.— 36 


562  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

But  SO  far  as  negotiable  paper  is  concerned,  an  indorsee 
taking  it  before  maturity  as  payment  or  security  for  a  pre- 
existing debt  is  a  holder  for  value,  and  takes  it  free  from  latent 
defenses  on  the  part  of  the  maker/ 

Judge  Drummond  says  that  a  mortgagee  of  real  estate  in 
Illinois  is  a  bona  fide  purchaser,  even  though  the  mortgage  was 
given  to  secure  a  pre-existing  debt  ;  "^  this  doctrine,  in  the 
absence  of  fraud,  is  certainly  correct. 

While  the  Iowa  rule  is  that  a  mortgage  for  a  pre-existing 
debt  without  any  additional  consideration  is  junior  to  a  subse- 
quent mortgage,^  yet  where  the  time  of  payment  of  the  pre- 
existing debt  is  extended  for  a  definite  time,  and  a  mortgage 
is  taken  to  secure  the  debt  as  thus  extended,  a  new  considera- 
tion enters  in  which  gives  the  mortgage  priority  according  to 
its  date  and  record.* 

In  New  Jersey,  where  a  married  woman  voluntarily  joins 
with  her  husband  in  executing  a  mortgage  on  her  own  real 
estate,  to  secure  a  pre-existing  debt  of  her  husband,  a  new  or 
independent  consideration  is  not  required.^ 

§  531.  Substitution  op  New  Mortgage  and  Notes. — 
Where  one  surrenders  a  mortgage  and  the  accrued  interest 
thereon,  and  takes  a  new  mortgage,  this  is  a  mortgage  for  a 
valuable  consideration.^ 

So  a  mortgage  duly  delivered  and  recorded  is  not  affected  by 
the  substitution  of  new  notes  of  the  same  amount  and  terms  as 
the  original  notes  secured  thereby .'^ 

§  532.  Wife's  Separate  Property. — In  some  of  the  States 
a  wife  may  mortgage  her  property  in  the  same  manner  as  her 
husband  can  his.  And  in  other  States  where  money  is  bor- 
rowed by  the  wife,  or  by  the  husband  and  wife,  or  by  either 

'  Doolittle  V.  Cook,  75  111.  354 ;  Manning  v.  McClure,  36  111.  490. 

2  Partridge  v.  Smith,  2  Biss.  C.  C.  183,  187. 

3  Phelps  ?;.  Fockler,  61  Iowa,  340. 
*Koon  V.  Tramel,  71  Iowa,  132. 

*  Lomerson  v.  Johnston,  44  N.  J.  Eq.  93. 
«  Constant  v.  University,  111  N.  Y.  604. 
'  Reid  V.  Abernethy,  77  Iowa,  438. 


THE    CONSIDERATION.  563 

of  them,  for  the  purpose  of  discharging  a  valid  lien  existing 
on  the  wife's  separate  property,  or  for  a  purpose  which  inures 
to  its  benefit  or  protection,  the  mortgage  is  valid/ 

And  the  wife  may  relinquish  her  dower  right  in  her  hus- 
band's property,  without  any  pecuniary  consideration.^ 

§  533.  Compromise  Among  Members  of  Family. — A  com- 
promise among  members  of  a  family  of  disputed  claims  of 
family  property  is  a  valid  consideration  for  contracts  entered 
into  in  effecting  a  settlement ;  and  a  mortgage  may  be  given 
by  one  of  the  parties  to  secure  his  agreement  to  such  com- 
promise.^ 

§  534.  Passing  of  the  Consideration. — The  consideration 
need  not  pass  at  the  time  of  the  execution  of  the  mortgage. 
Thus,  a  creditor  gave  the  debtor  time  upon  the  debt,  provided 
that  he  would  secure  it  by  a  mortgage  upon  property  executed 
by  a  third  person.  This  was  a  legal  consideration  for  the  mort- 
gage." 

A  mortgage  given  to  secure  past  debts  is  for  a  past  consider- 
ation, and  is  valid.^ 

So  a  personal  engagement  by  the  mortgagee  to  raise  the 
money  in  the  future  is  a  good  consideration  for  a  mortgage." 
Such  consideration  passes  when  the  money  is  procured  or  the 
service  performed.'' 

An  agreement  to  purchase  land  and  then  to  mortgage  it 
is  express,  and  is  a  specific  lien,  and  the  consideration  is 
valid.^ 

Whenever  the  mortgagee  agrees  to  raise  money  to  pay  the 

>  Noland  v.  State,  115  Ind.  529. 

^  McLane  v.  Piaggio,  24  Fla.  71. 

*  Adams  v.  Adams,  70  Iowa,  253.  See,  also,  Stapilton  v.  Stapilton,  1  Atk.  2 ; 
Zane  v.  Zane,  6  Munf.  (Va.)  406 ;  Paris  v.  Dexter,  15  Vt.  379. 

*]Magruder  v.  Bank,  18  Ark.  9. 
■_  ^  Duncan  v.  Miller,  (M  Iowa,  223,  226 ;  Moore  v.  Fuller,  6  Oreg.  272 ;  Wright 

wSm        "•  Bundy,  11  Ind.  398. 
HB  *  Stevenson's  Appeal,  68  Pa.  St.  212. 

^H      ,    'Johnson  v.  MeCurdy,  83  Pa.  St.  282 ;  Schafer  v.  Eeilly,  50  N.  Y.  61. 
^H  nVright  V.  Shumway,  1  Bias.  C.  C.  23 ;  Fleming  v.  Harrison,  2  Bibb  (Ky.), 

^^^_^  171 ;  Longworth  v.  Taylor,  1  McLean,  C.  C.  395. 

■ 


564  NATURE   AND   REQUISITES   OF   THE    CONTRACT. 

mortgagor,  or  has  negotiated  bonds  and  performed  his  agree- 
ment, then  the  consideration  passes  and  is  vaHd/ 

By  an  express  written  agreement  to  make  a  mortgage,  a  lien 
is  created  on  the  land,  in  equity,  on  the  principle  that  what 
has  been  agreed  to  be  performed  shall  be  performed,  and  the 
transaction  is  valid.^ 

§  535.  Accommodation  Mortgages. — The  indorsement  of 
a  note  by  one  not  a  party  to  it,  and  the  execution  of  a  mort- 
gage by  the  indorser  to  secure  it,  must  have  a  new  considera- 
tion, if  the  indorsement  be  made,  and  the  mortgage  executed 
after  the  making  of  the  note.  But  if  they  are  contemporaneous 
with  the  making  of  the  note,  the  consideration  for  the  note 
is  sufficient.  That  is,  in  States  where  a  pre-existing  debt  is 
not  regarded  as  a  valid  consideration,  if  the  debt  of  a  third 
person,  which  is  secured  by  assigning  the  mortgage,  be  already 
incurred  there  must  be  a  new  consideration.^ 

When  a  mortgage  is  made  for  the  accommodation  of  another, 
it  is  not  material  that  it  be  negotiated  in  the  precise  manner 
contemplated,  when  the  interest  of  the  party  making  it  be  not 
j)rejudiced.* 

Article  2. 
Wa7it  of  Consideration. 

I  536.  Failure  of  Consideration.  §  541.  Estoppel  of  Mortgagor. 

g  537.  Gift.  §  542.  Placing  the  Note  and  Mort- 

§  538.  Agent's  Acts.  gage  in  Escrow. 

§  539.  Written  Contract.  §  543.  Parol  Evidence. 

I  540.  Seal. 

§  53 G.  Failure  of  Consideration. — If  the  consideration 
fails,  then  the  mortgage  becomes  invalid.  Thus,  a  note  and 
mortgage  given  for  a  fixed  sum  and  payable  absolutely,  but 
with  no  consideration  except  an  agreement  to  furnish  goods 

'  Wood  V.  Condit,  34  N.  J.  Eq.  434  •  Koberts  v.  Bauer,  35  La.  Ann.  453. 

^Hankey  v.  Vernon,  2  Cox,  12. 

^  Davidson  v.  King,  51  Ind.  224. 

*  Jacobsen  v.  Dodd,  32  N.  J.  Eq.  403. 


THE    CONSIDERATION.  565 

which  the  mortgagee  afterward  failed  to  furnish  cannot  be 
enforced  against  the  mortgagor  as  tlie  consideration  has  failed/ 

A  failure  of  consideration  makes  the  mortgage  invalid.^  So 
when  a  mortgage  is  given  for  money  to  be  advanced,  but  which 
is  never  paid,  it  is  invalid.^ 

When  made  for  future  advances  it  is  good  only  for  ad- 
vances made.* 

And  the  mortgage  debt  may  be  questioned  by  a  third  person 
having  an  interest.^ 

Where  a  second  mortgage  was  executed  by  a  mortgagor  to 
the  holder  of  the  first  mortgage,  proof  is  admissible  to  show 
that  it  was  given  as  the  payment  of  the  interest  due  on  the  first.^ 

A  purchaser  received  deeds  from  one  having  no  title,  and 
took  possession  of  the  land ;  it  was  held  that  he  received  some 
consideration  for  a  note  and  mortgage  given  on  the  land  to 
secure  a  deferred  payment,  and  that  there  was  not  a  total  failure 
of  consideration  for  such  note/ 

And  where  mortgages  for  $18,000  are  given  on  an  accounting 
which  shows  a  balance  due  the  mortgagee  of  at  least  $25,000, 
and  the  mortgagor  for  three  years,  until  his  death,  pays  the 
interest  on  and  acquiesces  in  the  mortgages,  the  heirs  of  the 
mortgagor  have  no  standing  to  dispute  the  validity  of  the 
mortgages  for  want  of  consideration/ 

§  537.  Gift. — A  gift  is  a  good  consideration,  and  the 
grantee  has  a  good  title  as  against  the  grantor  and  any  subse- 
quent grantee  or  mortgagee  under  him,  or  any  subsequent 
creditor.^ 

^  Fisher  v.  Meister,  24  Mich.  447. 

=*  Smith  V.  Newton,  38  111.  230;  Conwell  v.  Clifford,  45  Ind.  392;  Brown  v. 
Witts,  57  Cal.  304. 
3  McDowell  V.  Fisher,  25  N.  J.  Eq.  93. 

*  Marvin  v.  Chambers,  12  Blatchf.  C.  C.  495. 

*  Mossop  V.  His  Creditors,  41  La.  Ann.  296.  See,  also,  Dwyer  v.  "Woulfe,  39 
La.  Ann.  423. 

*  Blair  v.  Carpenter,  75  Mich.  167. 
'Sunderland  v.  Bell,  .39  Kan.  21. 

» Howell  V.  Griffiths  (N.  J.  Ch.),  22  At.  Rep.  928. 

"  Gall  V.  Gould,  40  Mich.  515 ;  Page  v.  Kendrick,  10  Mich.  300 ;  Keeler  v. 
Ullrich,  32  Mich.  88. 


k 


666  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

However,  a  grantee,  without  notice,  in  a  duly  recorded  deed, 
the  sole  consideration  for  which  was  love  and  affection  of  the 
grantor,  cannot  hold  the  land  as  against  a  prior  unrecorded 
deed  of  the  same  property  for  a  valuable  consideration.^ 

In  general  a  mortgage  may  be  sustained  against  everybody 
but  existing  creditors,  although  it  was  intended  merely  as  a 
gift.^ 

When  executed  and  delivered,  it  is  as  valid  as  if  it  was 
based  upon  a  valuable  consideration,  and  is  not  open  to  the 
objection  that  it  is  a  voluntary  executory  agreement,  but  may 
be  enforced  according  to  its  terms  as  an  executed  conveyance.^ 
However,  when  a  mortgage  is  given  without  any  valuable  con- 
sideration, questions  can  arise  as  to  its  delivery  and  recording, 
which  could  not  otherwise  be  considered,*  and  when  it  is  shown 
that  there  was  no  consideration  of  any  kind,  the  mortgage  is 
invalid.^ 

§  538.  Agent's  Acts. — A  purchaser  of  a  bond  and  mortgage 
takes  them  subject  to  the  equities  between  the  original  parties ; 
it  is  only  where  the  owner  has,  by  his  own  affirmative  act,  con- 
ferred the  apparent  title  and  absolute  ownership  of  a  non-nego- 
tiable chose  in  action  upon  another,  on  the  faith  of  which  it 
has  been  transferred  ^or  valuable  consideration  that  he  is  pre- 
cluded from  asserting  his  real  title.  Thus,  a  wife  and  husband 
executed  to  a  party  a  bond  and  mortgage,  simply  as  an  ac- 
commodation, to  be  used  as  collateral  security  for  a  loan,  which 
the  mortgagee  sold  to  another  party.  It  was  held  that  the 
mortgagee  or  vendor  of  the  instruments,  having  no  authority 
to  sell  the  bond  and  mortgage,  conveyed  no  title  to  the  vendee, 
and  the  bond  and  mortgage  were  declared  void.^  So  if  the 
agent  had  used  them  to  secure  a  judgment  against  other  persons, 

'  Aubuchon  v.  Bender,  44  Mo.  560. 

'  Campbell  v.  Tompkins,  32  N.  J.  Eq.  170 ;  Peabody  v.  Peabody,  59  Ind.  556. 

^Brooks?'.  Dalrymple,  12  Allen  (Mass.),  102;  Bucklin  v.  Bucklin,  1  Abb. 
App.  Cas.  (N.  Y.)  242. 

^Brifjham  v.  Brown,  44  Mich.  59. 

5  Colt  V.  McConnell,  116  Ind.  249;  Brooks  v.  Owen  (Mo.),  19  S.  W.  Rep. 
723. 

*  Davis  V.  Bechstein,  69  N.  Y.  440. 


THE    CONSIDERATION.  567 

it  being  a  misappropriation  of  them,  it  renders  them  invalid.^ 
So  where  an  agent  empowered  to  take  an  assignment  to  his 
principal  of  certain  securities  and  receive  a  conveyance  to  the 
same  land  in  exchange  for  securities  by  such  principal,  takes  a 
conveyance  of  the  land  to  himself,  he  has  no  beneficial  interest 
therein,  but  is  a  naked  trustee ;  and  the  one  who,  being  charge- 
able with  notice  of  the  facts,  takes  a  mortgage  of  such  land, 
executed  by  such  agent  in  his  own  name  as  security  for  money 
loaned  him  for  his  own  use,  cannot  enforce  such  mortgage  as 
against  the  principal,  unless  the  transaction  is  subsequently 
ratified  by  the  principal.^ 

§  539.  Written  Contract. — A  written  contract,  such  as  a 
mortgage,  imports  a  consideration,  and  casts  the  burden  upon 
him  who  denies  it,  to  show  the  contrary  f  and  it  is  a  presump- 
tion of  fact  that  the  sum  mentioned  in  the  mortgage  is  the  con- 
sideration therefor,  correctly  stated  ;  and  very  convincing  proof 
is  required  to  rebut  this  presumption.* 

§  540.  Seal. — At  common  law  a  seal  implies  a  consideration, 
but  many  of  the  States  have  abolished  the  seal,  and  many 
others  have  destroyed  its  meaning  so  far  as  the  admission  of 
parol  evidence  is  concerned  to  explain  the  instrument,  and  to 
establish  the  amount  due  upon  it.  At  common  law  parol  evi- 
dence is  not  allowed  to  show  a  sealed  instrument  void  for  want 
of  consideration.^ 

In  Illinois,  any  deed,  bond,  note,  covenant,  or  other  instru- 
ment under  seal,  except  penal  bonds,  may  be  sued  and  declared 
upon  as  heretofore,  or  in  any  form  of  action  in  which  such  in- 
strument might  have  been  sued  upon  if  it  had  not  been  under 
seal.^  This  statute  abolishes  the  distinction  between  contracts 
under  seal  and  those  not  under  seal,  except  penal  bonds,  as  far 

•  Graver  v.  Wilson,  14  Abb.  Pr.  (N.  Y.)  N.  S.  374. 

^  Bank  v.  Morley,  19  Wis.  62.  See,  also.  Young  v.  White,  7  Beav.  500 ; 
Kingston  v.  Kincaid,  1  Wash.  C.  C.  454. 

^Bank  v.  McLeod,  67  Iowa,  718. 

MViswall  V.  Ayres,  51  Mich.  324. 

*Farnnm  ?'.  Burnett,  21  N.  J.  Eq.  87 ;  Maxwell  v.  Hartmann,  50  Wis.  060 ;  Cal- 
kins t'.  Long,  22  Barb.  (N.  Y.)  97  ;  Parker  v.  Parmele,  20  Johns.  (N.  Y.)  130, 134. 

•Rev.  Stat.,  ch.  110,  sect.  19. 


568  NATURE    AND    REQUISITES    OF    THE    CONTRACT. 

as  bringing  an  action  on  such  contracts  is  concerned.^  In  New 
York  a  seal  affords  only  presumptive  evidence  of  a  sufficient  con- 
sideration, which  may  be  rebutted  as  if  no  seal  had  been  affixed.^ 
In  New  Jersey  a  fraudulent  consideration  may  be  shown  as 
fully  as  if  the  seal  had  not  been  affixed.^ 

§  541.  Estoppel  of  Mortgagor. — A  mortgagor  is  not  es- 
topped by  the  execution  of  a  mortgage  from  showing  a  partial 
want  of  consideration  for  a  note  which  such  mortgage  was 
given  to  secure.* 

He  is  not  estopped  except  by  his  own  representations,  or 
those  made  by  others  with  his  consent ;  he  can  plead  "  no  con- 
sideration "  in  defense.^ 

The  holder  of  the  mortgage  given  to  secure  a  negotiable  note, 
stands  in  the  same  relation  to  the  mortgage  that  he  does  to  the 
note  itself,*^  and  if  he  be  an  assignee  for  value  before  maturity 
without  notice,  his  claims  are  valid,^  though  the  mortgage  was 
void  between  the  original  parties.^  But  this  rule  does  not 
apply  to  notes  absolutely  void,  as  in  violation  of  statutes.^ 

A  "  no-defense  "  paper  made  by  the  mortgagor  at  the  time 
of  giving  the  mortgage,  that  there  is  no  defense  to  it,  estops 
him  as  against  a  purchaser  of  the  mortgage  from  setting  up 
fraud  or  want  of  consideration.^"  But  this  rule  may  be  different 
if  the  "  no-defense  "  paper  was  procured  by  actual  fraud. 

1  Dean  v.  Walker,  107  111.  540. 

2  3  Rev.  Stat.  1875,  p.  G21 ;  Torry  v.  Black,  58  N.  Y.  185;  Best  v.  Thiel,  79 
N.  Y.  15. 

"Laws  of  1871,  p.  8 ;  Feldman  v.  Gamble,  26  N.  J.  Eq.  494,  496. 

*  Jones  V.  Jones,  20  Iowa,  388. 

^Wearse  v.  Peirce,  24  Pick.  (Mass.)  141. 

« Cornell  v.  Hichens,  11  Wis.  353. 

^  Stilwell  V.  Kellogg,  14  Wis.  461. 

8Taylor?\Page,  6  Allen  (Mass.),  86;  Cazet  v.  Field,  9  Gray  (Mass.),  329; 
Earl  V.  Clute,  2  Abb.  App.  Dec.  (N.  Y.)  1 ;  Brigham  v.  Potter,  14  Gray  (Mass.), 
622 ;  Coor  v.  Spicer,  65  N.  Car.  401 ;  Battles  Rev.  Stat,  of  N.  Car.,  1873,  ch.  50, 
sect.  5. 

^See  Bowyer  v.  Bampton,  2  Stra.  1155;  Kendall  v.  Robertson,  12  Cush. 
(Mass.)  156. 

loSchenck  v.  O'Neill,  23  Hun  (N.  Y.),  209 ;  Smyth  v.  Munroe,  19  Hun  (N.  Y.), 
550 ;  Payne  v.  Burnham,  62  N.  Y.  69 ;  Hutchinson  v.  Gill,  91  Pa.  St.  253.  See, 
also,  Best  v.  Thiel,  79  N.  Y.  15. 


the  consideration.  569 

§542.  Placing  the  Note  and  Mortgage  in  Escrow. — 
A  valid  delivery  is  necessary  to  give  legal  existence  to  a  mort- 
gage or  note.  So  when  a  mortgage  and  note  are  placed  in 
escrow  with  an  express  understanding  that  they  are  not  to 
be  delivered  to  the  mortgagee  except  upon  the  happening  of  a 
certain  event,  which  never  occurred,  the  consideration  has 
failed ;  and  if  they  are  turned  over  to  the  mortgagee  without 
authority  and  suit  is  brought  by  a  purchaser  in  good  faith,  for 
value,  before  maturity,  no  facts  appearing  to  charge  the  mort- 
gagor with  negligence,  then  they  are  invalid.^ 

The  mortgage  and  note  having  been  wrongfully  delivered, 
and  having  been  surreptitiously  put  into  circulation  without 
the  knowledge  or  consent  of  the  mortgagor,  they  never  had  a 
legal  existence  and  were  never  fully  executed.^ 

As  a  general  rule,  a  negotiable  promissory  note,  like  other 
written  contracts,  has  no  legal  inception  or  valid  existence  as 
such,  until  it  has  been  delivered  in  accordance  with  the  pur- 
pose and  intent  of  the  parties.^ 

When  the  custodian  delivers  the  mortgage  and  note  placed 
with  him  in  escrow,  without  authority,  and  the  mortgagor  has 
not  been  negligent,  they  do  not  become  operative  any  more  than 
though  they  had  been  stolen  from  the  possession  of  mortgagor 
and  put  in  circulation.  And  to  say  that  the  rules  and  princi- 
ples of  law  in  regard  to  negotiable  paper  preclude  the  mort- 
gagor from  showing  that  the  instruments  were  never  delivered 
and  consequently  never  had  any  legal  existence,  would  be  to 
extend  those  rules  and  principles  beyond  their  just  applica- 
tion. Bona  fide  holders  of  commercial  paper  should  be  pro- 
tected in  all  proper  cases,  but  they  are  not  the  only  parties 
who  have  rights  which  the  courts  are  bound  to  respect.  Nor 
does  the  principle  apply  that  when  one  of  two  innocent  per- 

'  Chipman  v.  Tucker,  38  Wis.  43. 

*  Tisher  v.  Beckwith,  30  Wis.  56 ;  Wait  v.  Pemeroy,  20  Mich.  425  ;  Puffer  v. 
Smith,  57  III.  527  ;  Taylor  v.  Atchison,  54  111.  196 ;  Putnam  v.  SuUivan,  4  Mass. 
45 ;  AVliitney  v.  Snyder,  2  Lans.  (N.  Y.)  477 ;  Chapman  v.  Rose,  44  How.  Pr. 
(N.  Y.)  364 ;  Nance  v.  Lary,  5  Ala.  370 ;  Hamilton  v.  Vought,  34  N.  J.  L.  187 ; 
Powell  V.  Waters,  8  Cow.  (N.  Y.)  669. 

^  Burson  v.  Huntington,  21  Mich.  416,  431,  432. 


570  NATURE   AND    REQUISITES    OF   THE    CONTRACT. 

sons  must  suffer  by  the  acts  of  a  third,  he  who  has  enabled 
such  third  person  to  occasion  the  loss  must  stand  it.  So  the 
custodian  has  no  legal  power  or  right  to  part  with  these  in- 
struments by  delivering  them  to  the  mortgagee.  If  he  had 
purloined  them  from  the  possession  of  the  mortgagor,  and 
delivered  them,  the  mortgagee's  title  would  be  as  good  as  to 
deliver  them  without  authority,  for  the  instruments  were  never 
delivered,  and  were  not  intended  to  be  delivered  until  ordered 
by  the  mortgagor.^ 

So  where  a  purchase-price  mortgage  has  been  executed 
and  deposited  iij  escrow  to  await  completion  of  title  in  the 
mortgagor  in  fulfillment  of  a  verbal  bargain  by  the  mortgagee 
to  sell  the  land  to  the  mortgagor,  and  the  title  to  the  land  in 
the  meantime  passes  into  other  hands,  the  delivery  of  the 
mortgage  in  violation  of  the  arrangement  will  not  operate  to 
make  it  a  valid  mortgage,  binding  upon  the  mortgagor.  The 
verbal  bargain  being  a  mere  nullity,  the  mortgage  when  exe- 
cuted was  without  consideration.^ 

So  a  deed  or  mortgage  purloined  from  the  grantor,  or  ob- 
tained from  him  fraudulently,  or  wrongfully,  without  his 
knowledge,  consent,  or  acquiescence,  does  not  jDass  title, 
even  as  against  a  subsequent  purchaser  for  value  without 
notice.  The  grantor  may,  however,  be  guilty  of  such  a  degree 
of  negligence  in  executing  it  and  permitting  it  to  be  exposed 
where  it  may  readily  be  taken  by  the  person  named  as  grantee, 
as  will  estop  him  from  setting  up  title  as  against  a  bona  fide 
purchaser  for  value  under  the  deed.^ 

The  fraudulent  procurement  of  a  deed  deposited  as  an  es- 
crow from  the  depositary  by  the  grantee  named  therein,  will 
not  operate  to  pass  title.'* 

So  a  mortgage  left  with  a  depositary  to  be  delivered  when  a 
,  prior   mortgage   had    been    discharged    and  other  conditions 

1  Thomas  v.  Watkins,  10  Wis.  550 ;  Burson  v.  Huntington,  21  Mich.  416,  431, 
432 ;  Walker  i\  Ebert,  29  Wis.  194 ;  Kellogg  v.  Steiner,  29  Wis.  626 ;  Puffer  v. 
Smith,  57  111.  527 ;  Butler  v.  Cams,  37  Wis.  61. 

*  PoAvell  V.  Conant,  33  Mich.  .396. 
3  Tisher  v.  Beck  with,  30  Wis.  55. 

*  Everets  v.  Agnes,  4  Wis.  343. 


I 


THE    CONSIDERATION.  571 

performed,  is  without  consideration  until  the  conditions  are 
performed  ;  and  if  delivered  without  authority  before  such 
conditions  have  been  fulfilled,  it  is  void.^ 

An  accommodation  note  has  a  consideration  from  the  time 
of  its  transfer,  pursuant  to  the  intention  with  which  it  was 
made.^ 

§543.  Parol  Evidence. — Parol  evidence  is  admissible  to 
explain  what  the  real  consideration  is,  and  the  intention  of  the 
parties.  Thus,  where  a  second  mortgage  was  executed  by  a 
mortgagor  to  the  holder  of  a  first  mortgage,  proof  is  admissible 
to  show,  though  the  second  mortgage  contained  no  reference  to 
the  first,  that  it  was  in  fact  given  as  a  payment  of  the  interest 
due  thereon.^ 

So  an  interested  third  party,  under  the  Louisiana  law,  may 
make  proof  of  simulation  by  parol  evidence  and  by  the  testi- 
mony of  the  party  to  the  act.^ 

Parol  testimony  may  be  admitted  to  show  the  real  intention 
of  the  parties.^ 

Where  a  note  was  given  for  a  sum  certain,  secured  by  a 
mortgage,  but  no  money  passed,  it  may  be  shown  by  parol 
what  the  agreement  was.® 

The  burden  is  upon  the  party  who  sets  up  the  want  of  con- 
sideration to  prove  it  was  made  without  consideration  ;  ^  and 
to  show  to  the  contrary  very  convincing  proof  is  required.* 

'  Cressinger  v.  Dessenburg,  42  Mich.  580. 

*  Bui'gess  V.  Bragaw  (Minn.),  52  N.  W.  Rep.  45. 
^  Blair  v.  Carpenter,  75  Mich.  167. 

*  Mossop  V.  His  Creditors,  41  La.  Ann.  296. 

*  McAteer  v.  McAteer,  31  S.  Car.  313 ;  Kaphan  v.  Ryan,  16  S.  Car.  352. 
HlfCaughin  v.  Williams,  15  S.  Car.  505 ;  Calvert  v.  Nickles,  26  S.  Car.  304. 
^  Bank  v.  McLeod,  67  Iowa,  718. 

*Wiswall  V.  Ayres,  51  Mich.  324.    See,  also,  Barker  v.  Barker,  62  N.  H.  366; 
Benton  v.  Sumner,  57  N.  H.  117 ;  Melvin  v.  Fellows,  33  N.  H.  401. 


572  nature  and  requisites  of  the  contract. 

Article  3. 
Illegal  Consideration. 

§544.  Against  Public  Policy.  Transactions,  Some  of  Which 

§  545.  In  Violation  of  Law.  Are  Illegal. 

I  546.  When  the    Parties    Are    Not  I  548.  To  be  Valid  in  Part  and  Void 

Equally  Guilty.  in  Part,  the  Mortgage  Must 

§  547.  When   the    Consideration    Is  be  given  in  Good  Faith. 

Made  Up  of  Several  Distinct  ^  549.  The  Burden  of  Proof. 

§  544.  Against  Public  Policy. — Considerations  of  public 
policy  are  deemed  paramount  to  private  rights  where  there  is 
a  conflict  between  them,  and  the  latter  must  yield.  Rules  of 
law  founded  upon  public  policy  and  the  safety  of  society  will 
not  be  set  aside  to  sustain  private  rights.^  Accordingly  a  bond, 
the  consideration  of  which  is  that  the  obligee  should  not 
appear  and  prosecute  for  perjury,  is  void.^  So  a  mortgage  to 
secure  a  sum  of  money  due  to  a  mortgagee,  but  executed  upon 
a  consideration  that  he  would  obtain,  without  improper  means, 
a  nolle  prosequi  for  a  fraudulent  conspiracy,  is  against  public 
policy  and  invalid.*  And  the  giving  of  a  mortgage  for  the 
procuring  of  witnesses  to  testify  to  certain  state  of  facts,  is  im- 
moral and  against  public  policy,  and  an  invalid  contract.* 
When  the  agreement  is  that  the  mortgagee  shall  prevent  the 
prosecution  of  a  party  for  embezzlement,  the  consideration  is 
illegal  and  void  as  against  public  policy.  It  is  void  because 
it  is  one  which  attempts  to  bind  an  individual  to  do  an  act 
prejudicial  to  the  security  of  the  community,  and  the  parties 
have  no  right  to  make  it.^  So  a  mortgage  whose  consideration, 
in  whole  or  in  part,  is  a  stifling  of  a  prosecution  for  a  conspiracy 
to  defraud  and  for  embezzlement  as  a  bank  official,  is  void.® 

But  the  law  will  not  aid  either  party  to  an  illegal  contract 
to  enforce  it  against  the  other  ;  neither  will  it  relieve  a  party  to 

^  Collins  V.  Blantern,  2  Wilson,  341 ;  Wallace  v.  Hardacre,  1  Camp.  45  ;  Keir 
V.  Leeman,  51  Eng.  Com.  L.  308  ;  58  Eng.  Com.  L.  371 ;  Marshall  v.  Railroad 
Co.,  16  How.  (U.  S.)  334. 

"^  Collins  V.  Blantern,  2  Wilson,  341 ;  1  Smith's  L.  Cas.  154. 

3  Wildey  v.  Collier,  7  Md.  278. 

*  Patterson  v.  Donner,  48  Cal.  369. 

^  Shaw  V.  Spooner,  9  N.  H.  197  ;  Roll  v.  Raguet,  4  Ohio,  408 ;  Bowen  v.  Buck, 
28  Vt.  308  ;  Crowder  v.  Reed,  80  Ind.  1. 

*Pearce  v.  AVilson,  111  Pa.  St.  14  ;   Clark  v.  Pomeroy,  12  Allen  (Mass.),  557. 


THE    CONSIDERATION.  673 

such  a  contract  who  has  actually  fulfilled  it,  and  who  seeks  to 
reclaim  his  money  or  whatever  article  of  property  he  may 
have  applied  to  such  a  purpose.  The  law  leaves  the  parties 
exactly  where  they  stand.^ 

The  suppression  of  illegal  contracts  is  far  more  likely,  in 
general,  to  be  accomplished  by  leaving  the  parties  without 
remedy  against  each  other ;  and  relief  is  not  granted  where 
both  parties  are  truly  in  pari  delicto.'^ 

A  note  and  mortgage  given  in  lieu  of  notes  and  mortgage 
that  were  given  in  part  to  suppress  a  prosecution  for  forgery 
are  not  enforceable  by  an  assignee  of  the  payee,  who  took  for 
value,  but  with  notice  of  the  illegality  of  the  considertion  ;  ^  the 
consideration  for  the  original  notes  being  in  part  illegal,  it 
cannot  be  questioned  that  the  notes  themselves  were  invalid  in 
the  hands  of  the  original  parties,  and  the  assignee  with  notice 
has  no  better  standing  under  the  law.*  Likewise,  a  note  given 
as  a  substitute  for,  or  renewal  of,  a  note  that  was  illegal  is  also 
invalid  between  the  original  parties.^- 

However,  a  mortgage  executed  to  secure  a  note  made  by  a 
cashier  of  a  bank  who  had  defaulted,  to  a  surety  on  his  bond 
as  such  cashier,  for  an  amount  paid  for  him  by  the  surety  in 
settlement  of  a  civil  liability,  growing  out  of  the  defalcation, 
there  being  no  agreement  not  to  prosecute  the  cashier  crimi- 
nally, is  not  illegal  and  void  as  against  public  policy.^  When 
an  instrument  is  executed  under  the  influence  of  duress  of  this 
nature,  and  the  mortgagee  or  other  purchaser  for  valuable  con- 
sideration does  not  participate  in  the  wrongful  act,  and  has  no 
notice  of  it,  the  validity  of  the  instrument  is  in  nowise  affected 
or  vitiated.^  And  in  general  a  mortgage  which  is  against  the 
policy  of  the  law  is  invalid.* 

^  At  wood  V.  Fisk,  101  Mass.  363. 

^  Claridge  v.  Hoare,  14  Ves.  59  ;  Laing  v.  McCall,  50  Vt.  657. 

'  Pierce  v.  Kibbee,  51  Vt.  559. 

*Streit  V.  Sanl>orn,  47  Vt.  702. 

*  Preston  v.  Jackson,  2  Stark.  237. 

8  Moog  V.  Strang,  69  Ala.  98. 

'  Shrador  v.  Decker,  9  Pa.  St.  14  ;  Green  r.  Scranage,  19  Iowa,  461 :  Talley  v. 
Robinson,  22  Gratt.  (Va.)  888 ;  Rogers  v.  Adams,  66  Ala.  600. 

^  Gilbert  v.  Holmes,  64  111.  548.  See,  also,  Luetchford  v.  Lord,  57  Hun  (N. 
Y.),  572. 


574  NATURE    AND    REQUISITES   OF    THE    CONTRACT. 

No  agreement  between  parties  to  do  a  thing  prohibited  by  Uiw, 
or  subversive  of  any  pubHc  interest  which  the  law  clierishes 
will  be  judicially  enforced.* 

§  545.  In  Violation  of  Law. — If  a  contract  contravenes 
the  statute  it  is  illegal,  and  no  agreement  to  do  an  act  forbidden 
by  statute,  or  to  omit  to  do  an  act  enjoined  by  statute  is  bind- 
ing.^ Hence,  a  mortgage  given  by  a  pre-emptor  upon  land 
pre-empted  before  entry  is  void,  as  forbidden  by  act  of  Con- 
gress.^ So  where  a  party  sells  intoxicating  liquors  contrary  to 
statute,  and  takes  a  mortgage  to  secure  payment  it  is  invalid.^ 
But  the  foreclosure  of  such  mortgage  has  the  effect  to  make  the 
title  absolute  in  the  mortgagee,  and  therefore  pays  the  debt.^ 

Illegality  of  consideration  avoids  a  mortgage  if  the  contract 
is  in  violation  of  statute,  or  of  the  common  law,^  and  courts 
will  not  aid  the  mortgagee  to  enforce  payment,  or  the  mort- 
gagor to  obtain  release  of  the  mortgage.^  The  maxim  "  ex  turpi 
causa,  non  oritur  actio"  rests  upon  the  clearest  principle  of  pub- 
lic policy,  and  never  to  be  ignored.  So  contracts  entered  into 
for  fraudulent  or  illegal  purposes  are  void,  and  the  law  will 
not  aid  either  party  to  enforce  them  while  they  remain  execu- 
tory, either  in  whole  or  in  part,  nor,  when  executed,  will  it  aid 
either  party  to  place  himself  in  statu  quo  by  a  rescission,  but  will 
in  both  cases  leave  the  parties  where  it  finds  them  ;^  and  if  the 

'  Bish.  on  Cont.,  sect.  471 ;  2  Rand  on  Com.  Paper,  sect.  517  ;  Brandt  on 
Sur.,  sect.  11 ;  Handy  v.  Publishing  Co.  (Minn.),  42  N.  W.  Rep.  872  ;  Scott  v. 
Gillmore,  .3  Taunt.  226. 

'  Do  Begins  v.  Armistead,  10  Bing.  110 ;  Hooker  v.  De  Palos,  28  Ohio  St.  251 ; 
Durgin  v.  Dyer,  68  Me.  143 ;  Milton  v.  Haden,  32  Ala.  30 ;  Cope  v.  Rowlands, 
2  Mees.  &  Wei.  153 ;  Clark  v.  Protection  Ins.  Co.,  1  Story,  C.  C.  109 ;  Kott- 
witz  V.  Alexander,  34  Tex.  689. 

^  Brewster  v.  Madden,  15  Kan.  249  ;  and  see,  MeCue  v.  Smith,  9  Minn.  252 ; 
Warren  v.  Van  Brunt,  19  Wall.  (U.  S.)  646. 

*  Baker  v.  Collins,  9  Allen  (Mass.),  253. 

^McLaughlin  v.  Cosgrove,  99  Mass.  4. 

« Gilbert  ?'.  Holmes;  64  111.  548 ;  Merrick  v.  Trustees,  8  Gill  (Md.),  59 ;  Scud- 
der  V.  Andrews,  2  McLean,  C.  C.  464 ;  Spalding  v.  Preston,  21  Vt.  9. 

'Atwood  V.  Fisk,  101  Mass.  363;  James  v.  Roberts,  18  Ohio,  548;  Snyder  v. 
Snyder,  51  Md.  77. 

8  Nellis  V.  Clark,  20  Wend.  (N.  Y.)  24 ;  Hoover  v.  Pierce,  26  Miss.  627 ; 
Hooker  v.  De  Palos,  28  Ohio  St.  251 ;  Atwood  v.  Fisk,  101  Mass.  363. 


THE    CONSIDERATION.  575 

parties  are  in  pari  delicto,  they  will  be  remediless  ;^  their  con- 
tract will  not  be  set  aside,  and  any  money  which  may  have 
been  paid  cannot  be  recovered  back.^  If  the  parties  are  not  m 
pari  delicto,  this  rule  is  different.^  So  whenever  a  party,  acting 
under  circumstances  of  great  need  or  oppression  makes  a  con- 
tract in  violation  of  a  law  or  rule  of  public  policy,  intended  to 
protect  persons  against  oppression,  he  is  not  in  equal  fault,  and 
may  recover  of  the  other  any  money  that  he  may  have  ad- 
vanced, or  he  may  have  the  contract  rescinded.'*  But  when 
an  illegal  consideration  has  been  paid  to  one  of  two  persons 
interested  in  it,  the  court  will  not  aid  the  other  to  recover  his 
share  of  it.^ 

In  Nevada  a  mortgage  was  declared  void  which  was  given 
for  a  legal  consideration  because  the  mortgagee  had  the  mort- 
gage given  to  a  non-resident  to  escape  taxation  upon  the  amount 
of  the  loan.  The  court  held  that  it  is  the  policy  of  the  rev- 
enue laws  that  all  property  within  the  State,  except  such  as  is 
in  terms  exempt,  shall  be  taxed  ;  and  any  mortgage  or  contract 
entered  into  for  the  purpose  of  placing  property  otherwise 
taxable  beyond  the  operation  of  the  revenue  laws,  is  opposed 
to  that  policy,  and  therein  illegal ;  so  where  a  mortgage  is  exe- 
cuted to  a  non-resident  for  the  sole  purpose  of  preventing  an 
assessment  and  of  evading  the  payment  of  taxes  upon  money 
at  interest,  secured  thereby,  is  void.*^ 

This  decision  is  wrong  in  principle.  In  New  York  a  mort- 
gage taken  in  the  name  of  a  third  person  to  defraud  creditors 
or  to  escape  taxation  cannot  be  successfully  attacked  by  subse- 
quent incumbrancers,  which  is  opposed  to  the  Nevada  rule.  In 
speaking  of  the  Nevada  case,  the  court  says :  "As  the  case  is 

'  Merrick  v.  Trustees,  8  Gill  (Md.),  59 ;  Scudder  v.  Andrews,  2  McLean,  C.  C. 
464 ;  Spalding  v.  Preston,  21  Vt.  9. 

^  Howson  V.  Hancock,  8  Term.  R.  575  ;  McLoskey  v.  Gordon,  2(5  IMiss.  260 ; 
Setter  v.  Alvey,  15  Kan.  157. 

^ Quirk  V.  Thomas,  6  Mich.  76. 

*  Lowell  V.  Boston,  etc..  Railroad  Co.,  2.3  Pick.  (Mass.)  32 ;  Scotten  v.  State, 
51  Ind.  52;  Bibb  v.  Miller,  11  Bush  (Ky.),  306. 

^    *  Wood  worth  v.  Bennett,  43  N.  Y.  273.     Compare  Sackner  v.  Sackner,  39 
Mich.  39 ;  Cox  v.  Wightman,  4  Hun  (N.  Y.),  799. 

«Drexler  v.  Tyrrell,  15  Nev.  114. 


576  NATURE    AND    REQUISITES    OF   THE   CONTRACT. 

not  authoritative  in  this  State,  it  is  sufficient  to  say  that  we 
have  considered  the  opinion  of  the  majority  of  the  court,  and  the 
cases  cited  to  sustain  it ;  and  we  do  not  think  it  correct  or  sus- 
tained by  the  citations.  As  we  think  the  opinion  fails  to  appre- 
ciate that  there  is  no  illegaUty  in  the  contract  of  loan  ;  and 
that  the  question  is  only  whether  one  who  has  borrowed  money 
shall  repay  it."  ^ 

§  546.  When  the  Parties  Are  Not  Equally  Guilty. — If 
the  parties  are  not  in  pari  delicto,  the  law  will  aid  the  one  not 
in  equal  fault ;  ^  so  the  general  rule  is  not  applicable.^ 

So  a  legal  estate  vests  in  a  trustee  under  a  deed  of  trust, 
though  he  does  not  give  a  bond  for  the  faithful  discharge  of 
his  duties  before  entering  upon  his  duties,  in  accordance  with 
the  provisions  of  the  statute.*  And  a  mortgage  for  a  loan  upon 
real  estate  security  is  valid  between  the  parties,  though  pro- 
hibited by  act  of  Congress.^  So  a  law  prohibiting  that  school 
funds  shall  be  loaned  only  upon  unincumbered  real  estate  does 
not  invalidate  a  mortgage  taken  in  violation  of  the  statute  by 
the  officer  charged  with  making  a  loan.  Such  mortgage  can 
be  enforced.*'  If  the  contract  be  executory  and  the  act  prohibited 
by  some  special  rule  of  public  policy,  and  one  party  advanced 
money  in  consideration  of  the  future  execution  of  the  illegal 
act,  the  intermediate  time  between  such  advance  and  the  per- 
formance of  the  act  is  a  locus  pcenitentisc,  during  which  he  may 
rescind  his  contract  and  utterly  abandon  it,  and  recover  the 
money  advanced.'^ 

The  rule  is,  that  in  so  far  as  the  contract  is  executory  the  de- 
fendant, although  in  pari  delicto,  or  any  one  acquiring  an 
interest  in  the  property  affected  by  the  contract  sought  to  be 

1  Nichols  V.  Weed  Sewing-Machine  Co.,  27  Hun  (N.  Y.),  200;  97  N.  Y.  650. 

''Lowell  V.  Boston,  etc.,  Railroad  Co.,  23  Pick.  (Mass.)  32;  Scotten  v.  State, 
51  Ind.  52. 

^Deming  v.  State,  23  Ind.  416. 

Kiardner  v.  Brown,  21  Wall.  (U.  S.)  36. 

^Bank  v.  Matthews,  98  U.  S.  621. 

^Deming  v.  State,  23  Ind.  416. 

'Tappenden  v.  Randall,  2  Bos.  &  Pul.  467 ;  White  v.  Bank,  22  Pick.  (Mass.) 
189 ;  Express  Co.  v.  Reno,  48  Mo.  264 ;  Hooker  v.  De  Polos,  28  Ohio  St.  251. 


THE    CONSIDERATION.  577 

enforced  may  set  up  the  illegality  of  its  consideration  in  de- 
fense. No  one  is  allowed  to  set  up  his  own  fraud  or  criminality 
to  defeat  an  innocent  party,  but  where  both  parties  are  parti- 
cipes  criminis,  the  fraud  may  be  set  up  and  proved  by  either 
party,  when  the  unexecuted  portion  of  the  contract  is  sought 
to  be  enforced  against  him.^ 

§  547.  When  the  Consideration  is  Made  Up  op  Several 
Distinct  Transactions,  some  of  which  are  Illegal. — If 
the  consideration  of  a  mortgage  is  made  up  of  several  distinct 
transactions,  some  of  which  are  illegal,  and  that  part  of  the 
consideration  which  is  illegal  can  be  separated  with  ease  and 
certainty  from  the  legal,  the  mortgage  may  be  held  valid  for 
that  part  of  the  consideration  free  from  illegality.^ 

If  the  mortgage  is  infected  by  an  illegal  consideration,  it  is 
void.  Thus,  upon  a  compromise  with  creditors,  the  mortgagor 
cannot  have  a  secret  understanding  between  himself  and  a 
creditor  that  his  debt  should  be  paid  in  full,  and  give  a  mort- 
gage, in  part  at  least,  to  carry  out  that  arrangement.  Such  a 
consideration  would  invalidate  the  mortgage  in  toto}  If,  how- 
ever, the  sum  secured  be  made  up  in  part  of  a  sum  inadvert- 
ently included  and  without  fraudulent  intent,  then  the  mort- 
gage may  be  valid  for  the  actual  debt  secured,  and  void  as  to 
the  balance.*  If  the  illegality  taints  the  whole  transaction,  the 
mortgage  is  invalid  in  totof' 

Thus,  where  promissory  notes  and  a  mortgage  are  given  for 
the  excess  over  a  certain  sum,  upon  an  invoice  of  goods,  which 

1  McQuade  v.  Rosecrans,  36  Ohio  St.  442 ;  Goudy  v.  Gebhart,  1  Ohio  St.  262  ; 
Raf;uet  v.  Roll,  7  Ohio,  77 ;  Williams  v.  Englebrecht,  37  Ohio  St.  383.  But 
the  Ohio  cases  go  beyond  the  general  rule. 

^  Carleton  v.  Woods,  28  N.  H.  2y0 ;  Robinson  v.  Green,  3  Met.  (Mass.)  159  ; 
Feldman  v.  Gamble,  26  N.  J.  Eq.  494  ;  Robinson  v.  Bland,  2  Burr.  1077  ;  Shaw 
V,  Carpenter,  54  Vt.  155 ;  Carradine  v.  Wilson,  61  Miss.  573 ;  Warren  v.  Chap- 
man, 105  Mass.  87  ;  Corbett  v.  Woodward,  5  Saw.  C.  C.  403  ;  Williams  v.  Fitz- 
hugh,  37  N.  Y.  444 ;  Cook  v.  Barnes,  36  N.  Y.  520 ;  Yundt  v.  Roberts,  5  Serg. 
&  R.  (Pa.)  139. 

^Lawrence  v.  Clark,  36  N.  Y.  128 ;  Sharp  v.  Teese,  4  Halst.  (N.  J.)  352,  440. 

*  Weeden  v.  Hawes,  10  Conn.  50. 

*  McQuade  V.  Rosecrans,  36  Ohio  St.  442;  Atwood  v.  Fisk,  101  Mass.  363, 
366 ;  Gerlach  v.  Skinner,  34  Kan.  86 ;  Hinnen  v.  Newman,  35  Kan.  709. 

VOL.  I.— 37 


578  NATURE    AND    REQUISITES   OF   THE   CONTRACT. 

is  found  to  have  been  made  by  the  payee  of  the  notes  and 
another  with  the  intention  of  cheating  and  defrauding  another, 
and  the  signatures  to  such  notes  and  mortgage  were  actually 
obtained  by  means  of  such  false  and  fraudulent  inventory,  the 
transaction  is  unlawful,  and  the  consideration  of  such  notes  and 
mortgage  is  illegal,  and  the  same  are  therefore  void.^ 

Whenever  the  unlawful  part  of  the  contract  can  be  separated 
from  the  rest,  it  will  be  rejected  and  the  remainder  established. 
But  this  cannot  be  done  when  one  of  two  or  more  considera- 
tions is  unlawful,  whether  the  promise  be  to  do  one  unlawful 
act,  or  two  or  more  acts,  part  of  which  is  unlawful ;  because 
the  whole  consideration  is  the  basis  of  the  whole  promise,  and 
the  parts  are  inseparable.^ 

While  a  partial  want  or  failure  of  consideration  avoids  a  bill 
or  note  only  pro  tanto,  illegality  in  respect  to  a  part  of  the  con- 
sideration avoids  it  in  toto.  The  reason  of  this  distinction  is 
founded,  partly,  at  least,  on  grounds  of  public  policy,  and 
partly  on  the  technical  notion  that  the  security  is  entire,  and 
cannot  be  apportioned  ;  and  where  parties  have  woven  a  web 
of  fraud  or  wrong,  it  is  no  part  of  the  duty  of  courts  of  justice 
to  unravel  the  threads,  and  separate  the  sound  from  the 
unsound  ;  and,  in  general,  it  makes  no  difference,  as  to  the 
effect,  whether  the  illegality  be  at  common  law  or  by  statute.^ 

§  548.  To  Be  Valid  in  Part  and  Void  in  Part,  the 
Mortgage  Must  Be  Given  in  Good  Faith. — When  the  con- 
sideration is  tainted  by  fraud,  though  separable,  the  mortgage 
is  void.  A  mortgage  cannot  be  valid  in  part  and  void  in  part 
whenever  there  is  a  fraudulent  intent.  If  K  part  of  the  con- 
sideration for  a  transfer  be  merely  a  nominal  or  colorable  con- 
sideration, contrived  to  hinder,  delay,  or  defraud  creditors,  the 
whole  transfer  is  void.^     So,   if  a  mortgage  is  made  with  the 

^  Fleming  v.  Greene  (Kan.),  30  Pac.  Rep.  11. 

*  Widoe  V.  Webb,  20  Ohio  St.  4.35 ;  Add.  on  Cont.  905 ;  Chit,  on  Cont.  730 ; 
1  Pars,  on  Cont.  456 ;  1  Pars.  N.  &  B.  271 ;  Byles  on  Bills,  111 ;  Chit,  on  Bills,  94. 

^Gerlach  v.  Skinner,  35  Kan.  89 ;  Collins  v.  Blantern,  2  Wils.  341. 

*  Floyd  V.  Goodwin,  8  Yerg.  (Tenn.)  484 ;  Marriott  v.  Givens,  8  Ala.  694 ; 
Burke  v.  Murphy,  27  Miss.  167 ;  McKenty  v.  Gladwin,  10  Cal.  227 ;  Fielder  v. 
Day,  2  Sand.  594 ;  Hall  v.  Haydon,  41  Ala.  242 ;  Albee  v.  Webster,  16  N.  H. 
362 ;  Coolidge  v  Melvin,  42  N.  H.  510 ;  Mead  v.  Combs,  19  N.  J.  Eq.  112. 


A 


THE    CONSIDERATION.  579 

intent  to  secure  a  part  of  the  property  to  the  mortgagee,  and  to 
cover  the  residue  for  the  use  of  the  debtor,  it  is  void  as  to  the 
whole.  To  render  an  instrument  vahd,  it  must  be  given  in 
good  faith,  and  without  any  intent  to  defraud  creditors.^ 

If  any  part  of  the  consideration  be  fraudulent,  the  instru- 
ment is  void.^ 

But  where  the  mortgage  is  executed  in  good  faith,  and  the  con- 
sideration is  separable,  it  may  be  valid  in  part  and  void  in  part.^ 

§  549.  The  Burden  of  Proof. — The  party  setting  up  that 
the  consideration  of  a  mortgage  arose  out  of  an  illegal  contract, 
has  the  burden  of  proof,  and  to  make  his  defense  successful  is 
bound  to  produce  sufficient  evidence  to  satisfy  the  court  his 
defense  is  true.* 

A  note  and  mortgage  regular  upon  their  face  are  prima  facie 
evidence  of  their  validity,  and  the  burden  of  proof  is  for  the 
mortgagor  to  show  that  they  are  without  consideration.^  So 
in  a  case  to  enforce  rights  under  a  promissory  note,  given  for 
the  price  of  intoxicating  liquors  sold,  before  the  passage  of  a 
statute  in  relation  thereto,  the  burden  of  proving  the  illegality 
of  the  sale  is  upon  the  defendant.^  And  when  the  validity  of 
a  note  or  mortgage  is  assailed,  parol  evidence  showing  payment 
of  interest  is  admissible.^  And  whenever  the  defense  of  ille- 
gality can  be  set  up,  it  must  be  specially  pleaded,  whether  the 
defense  be  made  under  the  common  law  or  under  the  statute.^ 

1  Russell  V.  Winne,  37  N.  Y.  591 ;  Swinford  v.  Rogers,  23  Cal.  233 ;  Sommer- 
ville  V.  Horton,  4  Yerg.  (Tenn.)  541 ;  Tickner  v.  Wiswall,  9  Ala.  305. 

2  Burt  V.  Place,  6  Cow.  (N.  Y.)  431 ;  Scott  v.  Gillmore,  3  Taunt.  22(5 ;  Mouys 
V.  Leake,  8  Term  Rep.  411 ;  Hinds  v.  Chamberlin,  6  N.  H.  225 ;  Frazier  v. 
Thompson,  2  Watts  &  Serg.  (Pa.)  235. 

•''  Leeds  v.  Cameron,  3  Sura.  C.  C.  488 ;  Johnson  v.  Richardson,  38  N.  H.  353 ; 
McMun-ay  v.  Connor,  2  Allen  (Mass.),  205 ;  Lavillebeuvre  v.  Frederic,  20  La. 
Ann.  374 ;  Judd  v.  Flint,  4  Gray  (Mass.),  557. 

*  Feldman  v.  Gamble,  26  N.  J.  Eq.  494,  496. 

*  Stuart  V.  Phelps,  39  Iowa,  14. 

« Brigham  v.  Potter,  14  Gray  (Mass.),  522. 

'  Floyd  County  v.  Morrison,  40  Iowa,  188. 

«  Barnett  r.  Glossop,  3  Dowl.  625  ;  1  Bing.  (N.  C.)  633  ;  Dickson  v.  Burk,  6 
Xrk.  307  ;  Huston  v.  AVilliams,  3  Blackf.  (Ind.)  170 ;  Suit  v.  Woodhall,  116 
Mass.  547 ;  United  States  v.  Sawyer,  1  Gall.  C.  C.  87 ;  Chambers  v.  Games,  2 
Icwa,  320. 


PART  11. 

RELATIVE  RIGHTS   OF   THE    PARTIES  TO 
Il^SIJRAKOE. 


CHAPTER  XV. 

insurable  interests. 
Article  1. 

TJie  Mortgagor's  Right  to  Insure  for  His  Own  Indemnity. 

?  550.  Insurable  Interest  of  Mortgagor.  ure  and  Before  the  Extin- 

^  551.  The   Mortgagor  Has  an  Insur-  guishment  of  His  Redemp- 

able  Interest  After  Foreclos-  tion. 

§  550.  Insurable  Interest  of  Mortgagor. — The  mortgagor 
has  an  insurable  interest  in  the  mortgaged  property  so  long  as 
he  has  any  right  to  redeem  the  property.^  So  long  as  the 
mortgagor  has  any  interest  in  the  property,  he  has  also  an  in- 
surable interest ;  ^  and  the  owner  of  the  equity  of  redemption 
has  an  insurable  interest  equal  to  the  value  of  the  buildings  on 
the  land,^  notwithstanding  the  existence  of  a  mortgage  on  the 
property  of  sufficient  amount  to  absorb  it* 

So  a  mortgagor  whose  right  in  equity  to  redeem  has  been 
seized  on  execution,  has  an  insurable  interest  in  the  property, 

*  Strong  V.  Manufacturers'  Insurance  Co.,  10  Pick.  (Mass.)  40 ;  Walsh  v.  In- 
surance Co.,  127  Mass.  383;  Columbian  Insurance  Co.  v.  Lawrence,  2  Pet.  (U. 
S.)  25 ;  Franklin  Insurance  Co.  v.  Findlay,  6  Whar.  (Pa.)  483 ;  Traders'  In- 
surance Co.  V.  Robert,  9  Wend.  (N.  Y.)  404 ;  Mechler  v.  Insurance  Co.,  38  Wis-'. 
665. 

''Essex  Savings  Bank  ?'.  Meridian  Ins.  Co.,  57  Conn.  335. 

*  Insurance  Co.  v.  Stinson,  103  U.  S.  25. 

*  Columbian  Ins.  Co.  v.  Lawrence,  2  Pet.  (U.  S.)  25 ;  May  on  Insurance, 
sects.  81,  82. 

580 


INSURABLE    INTERESTS.  58l 

which  is  not  divested  by  a  sale  on  execution  of  his  equity 
of  redemption,  so  long  as  his  right  to  redeem  such  equity  con- 
tinues.^ If  he  has  an  insurable  interest  at  the  time  the  policy 
was  effected,  and  an  interest  also  at  the  time  of  the  loss,  he  is 
entitled  to  recover  the  whole  amount  of  damages  to  the  prop- 
erty, not  to  exceed  the  sum  insured  ;  ^  and  it  does  not  change 
this  rule,  though  the  mortgagee  has  taken  possession  of  the 
property.^ 

Policies  of  insurance  are  not  deemed,  in  their  nature  inci- 
dent to  the  property  insured,  but  are  mere  special  agreements 
with  the  person  insuring  against  loss  or  damages  as  he  may 
sustain,  and  not  the  loss  or  damages  any  other  person,  hav- 
ing an  interest,  as  grantee,  or  mortgagee,  or  creditor,  or  other- 
wise, may  sustain  by  reason  of  the  subsequent  destruction  by 
fire.*  Therefore,  when  the  mortgagor  parts  with  his  interest 
in  the  property  before  loss  by  fire,  the  right  to  the  benefit 
of  the  insurance  does  not  pass  with  the  building  to  the 
purchaser.^ 

When  the  mortgagor  has  several  policies  of  insurance,  which 
contain  a  provision  that  he  should  not  be  entitled  to  recover 
any  greater  proportion  of  the  loss  than  the  amount  insured 
might  bear  to  the  whole  sum  insured  on  the  same  property,  in 
apportioning  the  loss,  the  value  of  the  equity  of  redemption 
must  be  taken  as  the  basis  of  settlement,  and  not  the  value  of 
the  entire  property.^  And,  in  general,  the  insurable  interest 
is  measured  by  the  value  of  the  interest,  if  this  does  not  ex- 
ceed the  value  of  the  property,^  according  to  his  interest.* 

When  there  are  no  facts  justifying  the  inference  that  the 

*  Strong  V.  Manufacturers'  Ins.  Co.,  10  Pick.  (Mass.)  40. 
^Hancox  v.  Fishing  Ins.  Co.,  3  Sum.  C.  C.  142. 

^Stephens  v.  111.  Mutual  Fire  Ins.  Co.,  43  111.  327 ;  111.  Fire  Ins.  Co.  v.  Stan- 
ton, 57  111.  354. 

*  Carpenter  v.  Providence  Washington  Ins.  Co.,  16  Pet.  (U.  S.)  495. 

*  Wilson  V.  Hill,  3  Met.  (Mass.)  66. 

«Tuck  V.  Hartford  Fire  Ins.  Co.,  56  N.  H.  326. 

'  Sussex  Co.  Mut.  Ins.  Co.  v.  Woodruff,  26  N.  J.  L.  .541 ;  Slocovich  v.  Ori- 
vCntal  Mut.  Ins.  Co.,  13  Daly  (N.  Y.),  264 ;  Tillou  v.  Kingston  Mut.  Ins.  Co.,  7 
Barb.  (N.  Y.)  570. 

«Mix  V.  Andes  Ins.  Co.,  9  Hun  (N.  Y.),  397. 


582         RELATIVE  RIGHTS  OF  THE  PARTIES  TO  INSURANCE. 

mortgagor  obtained  the  insurance  for  the  mortgagee's  benefit, 
the  mortgagee  has  no  equitable  Hen  upon  the  policy/ 

The  mortgagee's  claim  then  is  no  better  than  that  of  any 
creditor  of  the  mortgagor.  The  policy  is  strictly  a  personal 
contract;  it  does  not  attach  to  the  mortgage  or  to  the  land.  The 
mere  fact  that  the  mortgage  covers  the  property  insured,  and 
that  he  is  personally  liable  for  the  debt,  give  the  mortgagee  no 
claim  to  the  policy  or  the  proceeds  of  it  in  case  of  loss  ;  ^  the 
mortgagor's  interest  is  the  full  face  of  the  policy  at  the  time 
of  the  loss,  and  not  the  difference  between  such  amount  and 
the  incumbrance  on  the  property.^ 

§  551.  The  Mortgagor  Has  an  Insurable  Interest  After 
Foreclosure  and  Before  the  Extinguishment  of  His 
Redemption. — The  mortgagor  has  an  insurable  interest  so  long 
as  his  redemption  is  not  extinguished.  So  he  may  take  out  an 
insurance  after  the  mortgage  has  been  foreclosed  and  before  his 
redemption  has  ceased.* 

So  where  an  order  confirming  a  sale  made  under  a  decree  of 
foreclosure  to  the  mortgagee  who  is  a  party,  is  at  the  same  time 
vacated,  and  the  sale  set  aside  for  irregularity,  the  insurable 
interest  of  the  mortgagor  in  possession  is  the  same  in  the  prop- 

'  Stearns  v.  Quincy  Mut.  Fire  Ins.  Co.,  124  Mass.  61. 

^Carpenter  v.  Providence  Washington  Ins.  Co.,  16  Pet.  (IT.  S.)  495 ;  Vande- 
graaff  v.  Medlock,  3  Port.  (Ala.)  389  ;  McDonald  v.  Black,  20  Ohio,  185 ;  Plimp- 
ton V.  Ins.  Co.,  43  Vt.  497 ;  Neale  v.  Reid,  3  Dowl.  &  Ry.  156,  158 ;  Powels  v. 
Innes,  11  Mees.  &  Wei.  10 ;  Nichols  v.  Baxter,  5  R.  1. 491 ;  Ames  v.  Richardson, 
29  Minn.  330;  Carter  v.  Rockett,  8  Paige  (N.  Y.),  437;  Ryan  v.  Adamson,  57 
Iowa,  30 ;  Columbia  Ins.  Co.  v.  Lawrence,  10  Pet.  (U.  S.)  507  ;  Wilson  v.  Hill, 
a  Met.  (Mass.)  66 ;  Lynch  v.  Dalzell,  4  Bro.  Pari.  Cas.  431. 

It  has  been  held  that  a  covenant  to  insure,  without  stating  that  it  is  for 
the  benefit  of  the  mortgagee,  does  not  imply  that  the  mortgagor  shall  ap- 
propriate the  insurance  money  either  to  discharge  the  debt  or  to  restore  the 
property  :  Lees  v.  Whiteley,  L.  R.  2  Eq.  143. 

''Nussbaum  v.  Ins.  Co.,  37  Fed.  Rep.  524;  Guest  v.  Ins.  Co.,  66  Mich. 
98 ;  Judge  v.  Ins.  Co.,  132  Mass.  523 ;  Holbrook  v.  Ins.  Co.,  1  Curtis,  C.  C. 
197. 

*  Essex  Savings  Bank  v.  Meriden  Fire  Ins.  Co.,  57  Conn.  335;  Buffalo 
Steam-Engine  Works  v.  Sun  Ins.  Co.,  17  N.  Y.  401 ;  New  England  Ins.  Co.  v. 
Wetmore,  32  III.  221 ;  Waring  v.  Loder,  53  N.  Y.  581 ;  Williams  v.  Roger 
Williams  Ina.  Co.,  107  Mass.  377  ;  9  Am.  Rep.  41. 


INSURABLE    INTERESTS.  583 

erty  as  if  such  sale  and  confirmation  had  not  been  made.^ 
Until  tlie  mortgagor's  equity  of  redemption  is  extinguished,  he 
has  an  insurable  interest/  and  when  the  right  of  redemption  is 
barred,  it  seems  that  he  has  an  insurable  interest  until  the  deed 
is  delivered  in  pursuance  of  the  sale,  when  the  purchaser  has  a 
right  of  possession.^  And  when  a  vendor  conveys  by  absolute 
deed  to  secure  a  debt,  the  transaction  is  an  equitable  mortgage, 
and  he  has  an  insurable  interest.* 

If  the  mortgagor  sells  his  equity  of  redemption,  or  his  grantee 
assumes  the  payment  of  the  mortgage,  he  still  has  an  insurable 
interest,  because  he  is  liable  upon  the  mortgage  note  and  has 
an  interest  in  the  preservation  of  the  property  to  satisfy  the 
debt  and  therefore  pay  the  note.^ 


Article  2. 
The  Mortgagor's  Right  to  Insure  for  the  Mortgagee's  Indemnity. 

§  552.  Covenant  to  Insure.  §  556.  The  Rights  of  the  Mortgagee 
1 553.  Covenant  Running   with    the  Under  Such  Covenant. 

Land.  ^  557.  Invalidating  PoUcy  by  Acts  of 
§  554.  Statutory  Provisions.  the  Mortgagor. 

§555.  The  Mortgagee  May   Acquire 

Equitable  Rights. 

§  552,  Covenant  to  Insure. — The  mortgagor  may  cove- 
nant in  the  mortgage  to  insure  for  the  benefit  of  the  mortagee. 
So  where,  by  his  covenant  or  otherwise,  the  mortgagor  is 
bound  to  insure  the  mortgaged  premises  for  the  benefit  of  the 
mortgagee,  the  latter  has,  to  the  extent  of  his  interest  in  the 
property  destroyed,  an  equitable  lien  upon  the  money  due  on  a 

^  Insurance  Co.  r.  Sampson,  38  Ohio  St.  672. 

'^  Strong  V.  Manufacturers*  Ins.  Co.,  10  Pick.  (Mass.)  40. 

*  Gordon  v.  Mass.  Fire  Ins.  Co.,  2  Pick.  (Mass.)  249 ;  Cheney  v.  Woodruff, 
45N.  Y.  98;  Brown  v.  Frost,  Hoff.  Ch.  (N.  Y.j  41.  Compare  McLaren  v. 
Hartford  Fire  Ins.  Co.,  5  N.  Y.  151. 

*  Hodges  r.  Tenn.  Mar.  &  F.  Ins.  Co.,  8  N.  Y.  416;  Walsh  r.  Phila.  Fire 
Asso'n,  127  Mass.  383. 

5  Waring  v.  Loder,  53  N.  Y.  581 ;  Buck  v.  Phoenix  Ins.  Co.,  76  Me.  586 ; 
Herkimer  v.  Rice,  27  N.  Y.  163. 


584  RELATIVE  RIGHTS  OF  THE  PARTIES  TO  INSURANCE. 

policy  taken  out  by  the  mortgagor  ;  ^  and  this  equity  exists, 
although  the  covenant  provides  that  in  case  of  the  mortgagor's 
failure  to  procure  insurance  and  assign  the  policy,  the  mortgagee 
may  procure  it  at  the  expense  of  the  mortgagor.^  This  equitable 
doctrine  obtains  in  Louisiana.  It  is  derived  from  the  princi- 
ples of  the  civil  law,  which  is  the  basis  of  the  civil  code  of 
that  State.^ 

Such  covenants  create  a  specific  lien  upon  the  insurance- 
money  which  is  valid  against  an  assignee  in  bankruptcy.* 

When  the  mortgagor  is  bound  by  the  mortgage  contract  to 
keep  the  premises  insured  for  the  benefit  of  the  mortgagee, 
and  does  in  fact  keep  them  insured  by  a  policy  which  con- 
tains no  statement,  that  the  mortgagee  has  any  interest  therein, 
the  mortgagee,  nevertheless,  has  an  equitable  interest  in  and  a 
lien  upon  the  proceeds  of  the  policy  which  a  court  of  equity 
will  enforce  for  his  benefit ;  ^  and  a  mortgagor's  assignment  of 
his  claim  under  a  certificate,  after  the  loss,  is  an  assignment  of 
a  debt — a  mere  chose  in  action,  which  the  assignee  takes  sub- 
ject to  all  defenses  and  equities  against  the  mortgagor.^ 

So  when  the  agreement  is  that  the  mortgagor  shall  procure 
insurance  upon  the  mortgaged  j^roperty  payable,  in  case  of 
loss  to  the  mortgagee,  and  the  mortgagor  or  some  one  for  him 
procures  insurance  in  the  mortgagor's  or  a  third  party's  name 
without  making  it  payable  to  the  mortgagee,  though  this  be 
done  without  the  mortgagor's  knowledge  or  without  any  intent 
to  perform  the  agreement,  equity  will  treat  the  insurance  as 

1  Wheeler  v.  Insurance  Co.,  101  U.  S.  439 ;  Thomas  v.  Vonkapff,  6  Gill  &  J. 
(Md.)  372. 

2  Nichols  V.  Baxter,  5  R.  I.  491 ;  Carter  v.  Rockett,  8  Paige  (N.Y.), 437;  Dun- 
lop  V.  Avery,  23  Hun  (N.  Y.),  509. 

^Bank  v.  Dugue,  5  La.  Ann.  12;  Wheeler  v.  Insurance  Co.,  101  U.  S.  439. 

*In  re  Sands,  3  Biss.C.  C.  175. 

5  Thomas  v.  VonkapflF,  6  Gill  &  J.  (Md.)  372;  Carter  v.  Rockett,  8  Paige  (N. 
Y.),  4.3G;  Lazarus  v.  Ins.  Co.,  2  Am.  Lead.  Cas.  834;  Norwich  Fire  Ins.  Co.  v. 
Boomer,  52  111.  442 ;  Bank  v.  Benson,  24  Pick.  (Mich.)  210;  Miltenberger  v. 
Beacom,  9  Pa.  St.  198 ;  King  v.  Ins.  Co.,  7  Cush.  (Mass.)  1 ;  Cromwell  v.  Ins. 
Co.,  44  N.  Y.  42 ;  Miller  v.  Aldrich,  31  Mich.  408. 

*  Archer  v.  Ins.  Co.,  40  Mo.  434  ;  Wilson  v.  Hill,  3  Met.  (Mass.)  66;  Brichta 
t;.  Ins.  Co.,  2  Hall  (N.  Y.),  372 ;  Mellen  v.  Ins.  Co.,  17  N.  Y.,  609 ;  Greene  v. 
Warnick,  64  N.  Y.  220. 


INSURABLE   INTERESTS.  585 

efifected  under  the  agreement,  and  will  give  the  mortgagee  his 
equitable  lien,  who  is  entitled  to  the  proceeds  of  the  first  insur- 
ance paid  on  the  loss/ 

But  this  rule  is  not  accepted  in  Massachusetts,  where  it  is 
held  that  the  mortgagee  cannot  have  a  lien  in  equity,  unless 
the  insurance  was  obtained  by  the  mortgagor  as  the  mortgagee's 
agent,  or  with  intent  to  perform  an  agreement  to  insure.^ 

Where  a  mortgagor  at  the  time  of  executing  the  mortgage 
covenanted  to  keep  the  premises  insured,  and  is  informed  by 
the  mortgagee's  agent  that  the  mortgagee  would  insure  the 
premises,  such  statement  confers  no  right  on  the  mortgagor.^ 

Where  the  loss  is  payable  to  the  mortgagee,  and  occurs 
after  sale  under  foreclosure,  but  before  the  time  of  redemption 
has  expired,  the  mortgagee  is  entitled  to  recover  the  loss,  as  the 
foreclosure  is  no  extinguishment  of  the  debt  until  the  deed  has 
been  made,  and  the  time  of  redemption  has  expired.* 

§  553.  Covenant  Running  with  the  Land. — It  is  held  by 
some  authorities  that  a  covenant  to  insure  runs  with  the  land, 
as  much  so  as  a  covenant  to  repair,  or  to  rebuild,  or  for  another 
term,  because  it  is  a  charge  upon  the  land.^  On  the  other 
hand,  it  is  held  that  a  covenant  to  insure  is  entirely  personal 
in  its  character,  and  does  not  affect  the  land  or  run  with  it, 
and  is  collateral  and  incident  to  the  remaining  covenants  in 
the  mortgage,  and  a  conveyance  of  the  land  by  the  mortgagor 
would  not  make  the  vendee  liable  on  the  covenant.^ 

§  554.  Statutory  Provisions. — In  Maine  the  statute  pro- 
vides that  a  mortgagee  of  any  real  estate  shall  have  a  lien 

'  Ames  V.  Richardson,  29  Minn.  330. 
^  Stearns  v.  Quincy  Ins.  Co.,  124  Mass.  61. 

^  Brant  v.  Gallup,  111  111.  487.  See,  also,  Johnson  v.  Ins.  Co.  (S.  Dak.),  45 
N.  W.  Rep.  799. 

*  National  Bank  v.  Union  Ins.  Co.,  88  Cal.  497. 

*  Vernon  v.  Smith,  5  Barn.  &  Aid.  3;  Spencer's  Case,  1  Smith's  Lead.  Cas. 
137  ;  In  re  Sands,  3  Biss.  C.  C.  175. 

«Dunlop  V.  Avery,  89  N.  Y.  592,  599 ;  Reid  v.  McCrum,  91  N.  Y.  412 ;  Nor- 
man V.  Wells,  17  Wend.  (N.  Y.)  150.  See  Thomas  t;.  VonkapflF,  6  Gill  &  J. 
(Md.)  372;  Giddings  v.  Seevers,  24  Md.  363. 


586         RELATIVE  RIGHTS  OF  THE  PARTIES  TO  INSURANCE. 

upon  any  policy  of  insurance  against  loss  by  fire  procured 
thereon  by  the  mortgagor,  to  take  effect  from  the  time  he  files 
with  the  secretary  of  the  company  a  written  notice  briefly  de- 
scribing the  mortgage,  the  estate  conveyed,  and  the  sum  re- 
maining unpaid  thereon. 

If  this  written  notice  provides  that  the  whole  or  any  part  of 
the  sum  shall  be  applied  to  the  payment  of  the  mortgage,  the 
mortgagee's  receipt  shall  be  a  sufficient  discharge.  If  this 
notice  does  not  so  specify  the  ajjpropriation  of  the  money,  the 
mortgagee  may  at  any  time  within  sixty  days  after  the  loss 
enforce  his  lien  by  a  suit  against  the  mortgagor,  and  the  com- 
pany as  his  trustee.  A  judgment  may  be  rendered  for  wliat 
is  found  due  upon  the  policy,  notwithstanding  the  time  of  pay- 
ment of  the  whole  sum  by  the  mortgagee  has  not  arrived. 

The  amount  recovered  is  first  to  be  applied  to  the  payment 
of  the  costs  of  the  suit  and  then  to  the  payment  of  the  mort- 
gage debt,  and  the  balance,  if  any,  to  the  mortgagor.  Payment 
is  made  to  two  or  more  mortgagees  according  to  the  priority 
of  their  mortgages.  When  a  mortgagee  claims  the  benefit  of 
this  lien,  any  policy  of  insurance  previously  or  subsequently 
procured  by  him  on  his  interest  as  mortgagee  is  void,  unless  it 
is  agreed  to  by  the  company  insuring  the  mortgagor's  interest.^ 

If  the  insurers  settle  in  good  faith  with  the  mortgagor  before 
the  expiration  of  sixty  days  after  loss  and  before  any  notice  of 
the  loss  has  been  filed  with  the  secretary,  the  mortgagee's  lien 
is  divested,  although  such  notice  be  afterward  filed  within  the 
sixty  days." 

The  statute  annuls  all  provisions  of  a  policy  at  variance 
with  it.^ 

In  Massaciiuseics  the  statute  provides  that  in  case  of  loss 
upon  property  hereafter  insured  within  the  terms  of  the  fire 
insurance  policy  thereon,  all  such  insurers  thereof,  upon  the 
proper  presentation  of  proof  by  the  claimants  in  accordance 
with  the  provisions  of  the  policy,  together  with  an  authentic 

1  Rev.  Stat.  1871,  ch.  49,  sects.  32-36. 

^  Burns  v.  Collins,  64  Me.  215. 

'  Emery  v.  Piscataqua  Fire  &  M.  Ins.  Co.,  52  Me.  322. 


INSURABLE    INTERESTS.  587 

Statement  of  the  title,  showing  of  rights  and  interests  of  all 
parties  therein,  shall  pay  all  mortgages  expressly  protected  by 
any  policies  taken  out  in  the  name  of  the  mortgagor,  in  the 
order  of  their  priority,  to  the  extent  of  their  respective  j^olicies 
or  interests  in  their  respective  mortgage  claims,  before  the 
owner  of  the  equity  of  redemption  in  said  property  shall 
receive  anything ;  but  this  provision  does  not  enlarge  the 
amount  which  any  insurance  company  would  otherwise  pay  on 
account  of  any  loss  ;  and  any  payment  so  made  by  any  such 
company  under  its  policy  in  accordance  with  the  provisions  of 
this  act,  whether  to  the  person  named  in  the  policy  or  not, 
shall  be  deemed  and  taken  to  be  in  payment  and  satisfaction 
of  the  liability  of  such  company  under  its  policy  to  the  full 
extent  of  such  payment/ 

In  California  it  is  provided  that  when  a  mortgagor  of  prop- 
erty effects  insurance  in  his  own  name,  providing  that  the 
loss  shall  be  payable  to  the  mortgagee,  or  assigns  a  policy  of 
insurance  to  the  mortgagee,  the  insurance  shall  be  deemed  to 
be  upon  the  interest  of  the  mortgagor,  who  does  not  cease  to 
be  a  party  to  the  original  contract,  and  any  act  of  his  which 
would  otherwise  avoid  the  insurance  will  have  the  same  effect, 
although  the  property  is  in  the  hands  of  the  mortgagee. 

If  an  insurer  assents  to  the  transfer  of  an  insurance  from  a 
mortgagor  to  a  mortgagee,  and  at  the  time  of  his  assent  im- 
poses further  obligations  on  the  assignee,  making  a  new  contract 
with  him,  the  acts  of  the  mortgagor  cannot  affect  his  rights.^ 

§  555.  The  Mortgagee  May  Acquire  Equitable  Rights. — 
The  insurance  may  be  assigned  by  indorsement  on  the  policy. 
Thus,  where  an  owner  of  land  procures  insurance  and  orders 
his  agent  to  indorse  the  policy  to  the  mortgagee,  the  mortgagee 
thereby  becomes  entitled  to  the  insurance,  and  his  right  can- 
not be  affected  by  a  revocation  or  cancellation  of  the  indorse- 
ment made  without  his  knowledge  or  consent.^ 

^     >  Laws  of  1878,  ch.  132,  sect.  2. 

''Civil  Code,  sects.  2541,  2542  ;  Codes  and  Stats.,  1877,  sects.  7541,  7542. 
2Reid  V.  McCruin,  91  N.  Y.  412. 


588         KELATIVE  EIGHTS  OF  THE  PARTIES  TO  IXSUllANCE. 

So  where  the  agreement  to  keep  insurance  to  indemnify  the 
mortgagee  was  merely  verbal,  but  the  mortgagor  had  acted 
U])on  it  by  obtaining  such  insurance,  and  his  grantee  takes 
with  knowledge,  and  subsequently  surrendered  this  polic}^,  and 
took  another,  which  was  not  payable  to  the  mortgagee,  the 
mortgagee  is  entitled  in  equity  to  have  the  insurance  money  ap- 
plied in  payment  of  the  mortgage  debt/ 

So  when  an  insurance  company  approves  the  actions  of  its 
soliciting  agent  in  indorsing  upon  an  insurance  policy  a  clause 
making  it  payable  to  the  mortgagee,  it  thereby  accredits  such 
agent  as  its  agent  to  represent  it,  at  least,  as  to  that  particular 
risk,  and  if  such  agent  afterward  assures  the  parties  that 
nothing  more  need  be  done  to  secure  the  mortgagee,  in  the 
event  of  sale  by  the  mortgagor,  the  company  will  be  estopped 
from  alleging  the  contrary.^ 

When  the  mortgagor,  in  terms,  makes  the  policy,  in  case  of 
loss,  payable  to  the  mortgagee,  it  is  equivalent  to  an  assign- 
ment of  the  policy  to  the  mortgagee,  to  be  held  by  him  as 
collateral  security  for  his  debt,  with  the  consent  of  the  insurers.^ 
Such  covenant  operates  to  give  the  mortgagee  an  interest  in 
the  policy,  and  invests  him  with  the  same  rights  which  he 
would  have  if,  without  such  words  in  the  body  of  the  policy, 
the  mortgagor  had  assigned  it  to  him  with  the  express  consent 
of  the  insurers.*  And  it  is  a  contract  for  the  full  term  for 
which  the  policy  is  issued,  and  the  insurers  under  such  a  stipu- 
lation as  is  in  cpestion,  cannot  terminate  the  contract  of  in- 
surance by  withdrawing  it  before  the  expiration  of  the  term 
specified  in  the  contract  and  without  notice  to  the  mort- 
gagee.^ 

And  the  mortgagee  to  whom  the  policy  of  insurance  is  made 
payable-,  in  case  of  loss,  is  not  bound  by  an  adjustment  of  such 

» Miller  v.  Aldrich,  31  Mich.  408. 

^  Wachter  v.  Phoenix  Assurance  Co.,  132  Pa.  St.  428. 

^  Ennis  v.  Ins.  Co.,  3  Bosw.  (N.  Y.)  516 ;  Luckey  v.  Gannon,  37  How.  Pr. 
(N  Y.)  134,  138. 

*  Grosvenor  v.  Ins.  Co.,  5  Duer  (N.  Y.),  517  ;  Conn.  Mut.  L.  Ins.  Co.  v.  Scam- 
mon,  4  Fed.  Rep.  263. 

^  Lattan  v.  Ins.  Co.,  45  N.  J.  L.  453. 


INSURABLE    INTERESTS.  589 

loss,  made  without  his  knowledge  or  consent,  by  the  assured, 
the  mortgagor,  and  the  insurance  company/ 

§  556.  The  Rights  of  the  Mortgagee  Under  Such 
Covenant. — By  indorsing  over  the  policy  to  the  mortgagee 
does  not  operate  as  a  new  contract  to  insure  the  interests  of 
the  mortgagee,  but  that  he  can  claim  only  what  the  party 
originally  insured  is  entitled  to  recover  under  his  contract.^ 

So  a  covenant  to  pay  to  the  mortgagee  in  case  of  loss  is 
merely  a  contingent  order  or  stipulation,  assented  to  by  the 
insurers,  for  the  payment  of  the  loss  of  the  assured,  if  any, 
to  the  mortgagee.  It  gives  the  mortgagee  the  same  right  to 
recover  that  the  assured  would  have  if  no  such  clause  had  been 
inserted  in  the  policy.  So  any  violation  of  the  conditions  and 
stipulations  of  the  policy  which  would  defeat  the  right  of  the 
assured  to  recover  upon  such  policy  will  defeat  the  right  of 
the  mortgagee.^  Hence,  if  loss  occurs,  but  the  mortgagor  re- 
builds in  the  same  manner  as  the  building  was  at  first,  the  in- 
surance is  payable  to  the  mortgagor  and  not  to  the  mortgagee, 
as  he  has  sustained  no  loss.* 

The  rights  of  the  parties  are  these :  The  undertaking  to 
pay  the  mortgagee  is  an  undertaking  collateral  to  and  de- 
pendent upon  the  principal  undertaking  to  insure  the  mort- 
gagor. It  is  in  effect  that  the  insurance  company  agrees  that 
whenever  any  money  shall  become  due  to  the  mortgagor  upon 
the  contract  of  insurance  it  will,  instead  of  paying  it  to  the 
mortgagor  himself,  pay  it  to  the  mortgagee.  The  mortgagor 
must  sustain  a  loss  for  which  the  insurer  is  liable  before  the 
party  appointed  to  receive  the  money  has  a  right  to  claim  it. 
It  is  the  damage  sustained  by  the  party  insured,  and  not  by 

'  Harrington  v.  Ins.  Co.,  124  Mass.  126. 

^Fogg?;.  Ins.  Co.,  10  Cush.  (Mass.)  337;  Hale  v.  Ins.  Co.,  6  Gray  (Mass), 
169;  Loring  v.  Ins.  Co.,  8  Gray  (Mass.),  28;  Turner  v.  Ins.  Co.,  109  Mass.  568. 

'  Bates  V.  Ins.  Co.,  10  Wall.  (U.  S.)  33 ;  Grosvenor  v.  Ins.  Co.,  17  N.  Y.  391 ; 
State  Mut.  F.  Ins.  Co.  v.  Eoberts,  31  Pa.  St.  438 ;  Smith  v.  Ins.  Co.,  120  Mass. 
90  ;  City  Five  Cents  Savings  Bank  v.  Ins.  Co.,  122  Mass.  165  ;  Brunswick  Sav- 
ings Institution  v.  Ins.  Co.,  68  Me.  313 ;  Fitchburg  Saving  Bank  v.  Ins.  Co., 
125  Mass.  431. 

*In  re  Moore,  6  Daly  (N.  Y.),  541. 


590         RELATIVE  RIGHTS  OF  THE  PARTIES  TO  INSURANCE. 

the  party  appointed  to  receive  payment  that  is  recoverable 
from  the  insurer.' 

§  557.  Invalidating  Policy  by  Acts  of  the  Mortgagor. 
— The  ordinary  policy  contains  a  clause  that  no  sale  or  trans- 
fer shall  be  made  of  the  property  unless  the  company  has 
notice  and  agrees  to  it,  otherwise  the  policy  shall  be  void  if 
this  condition  is  violated.^ 

Such  a  result  is  prevented  by  stipulating  that  no  alienation 
by  the  mortgagor  shall  affect  the  mortgagee's  rights  to  recover.^ 
Without  this  clause  for  the  protection  of  the  mortgagee,  a 
policy  is  forfeited  by  a  transfer  of  the  premises,  although  no 
change  in  or  assignment  of  the  interest  of  the  insured  had 
taken  place  subsequent  to  the  date  of  the  policy.* 

But  the  rights  to  the  policy  are  not  to  be  defeated  or  limited 
by  the  acts  of  a  stranger  for  which  the  parties  are  not  respon- 
sible, and  of  which  they  have  no  knowledge.^ 

So  where  the  policy  stipulates  against  more  insurance,  and 
the  mortgagor  gives  a  second  mortgage  to  another  mortgagee 
who  takes  out  insurance  in  his  own  favor,  it  does  not  avoid  the 
policy,  and  the  first  mortgagee  may  recover  on  his  policy.^ 

To  protect  the  mortgagee  a  special  clause  must  be  inserted 
in  the  mortgage,  stating  that  the  acts  of  the  mortgagor  in 
transferring  the  property  shall  not  invalidate  the  policy.^ 

But  the  mortgagee  must  comply  with  the  provisions  of  this 
clause,  for  it  does  not  protect  the  mortgagee's  interest  in  a  case 
where  he  or  his  agent  is  negligent,  and  his  own  act  or  default 
makes  the  policy  void.^  So  where  the  policy  has  a  clause  making 
it  void  by  an  increase  of  the  hazard,  the  mortgagee  is  affected 
with  notice  of  the  fact  known  to  his  agent,  and  a  failure  by 

^Grosvenor  v.  Ins.  Co.,  17  N.  Y.  391. 
'^Grosvenor  v.  Ins.  Co.,  17  N.  Y.  391. 
3  Macomber  r.  Ins.  Co.,  8  Cush.  (Mass.)  133. 
*  Springfield  F.  &  M.  Ins.  Co.  v.  Allen,  43  N.  Y.  389. 
6  Nichols  V.  Ins.  Co.,  1  Allen  (Mass.),  63. 
«City  Five  Cents  Sav.  Bank  v.  Ins.  Co.,  122  Mass.  165. 
^Hastings  v.  Ins.  Co.,  73  N.  Y.  141 ;  Eliot  Five  Cents  Sav.  Bank  v.  Com.  U. 
Association  Co.,  142  Mass.  142. 
8  Graham  v.  Ins.  Co.,  87  N.  Y.  69. 


II 


INSUEABLE    INTERESTS.  591 

the  agent  to  disclose  to  the  insurers  an  increased  hazard,  places 
the  mortgagee  in  the  same  position  as  if  he  had  actual  knowl- 
edge of  the  increased  hazard.^ 

He  must  inform  the  insurers  of  the  increased  hazard.^ 

If  this  clause  for  the  protection  of  the  mortgagee  is  not  in- 
serted in  the  policy,  then  any  act  of  the  mortgagor  which  will 
avoid  the  policy  as  to  him  will  avoid  it  as  to  the  mortgagee,^ 
such  as  an  increase  of  insurance.*  But  the  acts  of  the  mort- 
gagor that  invalidates  the  policy  are  those  performed  before 
loss,  and  not  after  the  property  is  destroyed.^ 

If  the  mortgagors  take  out  insurance,  and  the  policy  provides 
against  over-insurance,  and  then  one  of  the  partners  takes  out 
more  insurance,  it  avoids  the  policy.^ 

But  after  taking  out  insurance  by  a  partnership  the  partner- 
ship is  dissolved,  and  one  partner  sells  his  interest  to  the  other, 
this  is  not  such  an  alienation  as  to  avoid  the  policy/ 

The  policy  is  void  when  a  pre-existing  mortgage  has  been 
given,  though  not  recorded.^ 

Under  the  condition  that  if  any  change  takes  place  in  the 
title  and  interest  of  the  property,  whether  by  sale,  transfer,  or 
convej^ance,  in  whole  or  in  part,  the  policy  shall  become  void, 
the  execution  of  a  mortgage  avoids  the  policy.^ 

^Dresser  r.  Norwood,  10  Jur.  (N.  S.)  854. 

^Colev.  Ins.  Co.,  99N.Y.  36. 

^Merwin  v.  Ins.  Co.,  7  Hun  (N.  Y.),  659. 

*  Buffalo  Steam-Engine  Works  v.  Ins.  Co.,  17  N.  Y.  401. 

*  Browning  v.  Ins.  Co.,  71  N.  Y.508. 
"Gillett  V.  Ins.  Co.,  73  Wis.  203. 
'Dresser  v.  Ins.  Co.,  45  Hun  (N.  Y.),  298. 

®  Packard  v.  Insurance  Co.,  2  Gray  (Mass.),  334.  See  Manhattan  F.  Ins.  Co. 
V.  Weill,  28  Gratt.  (Va.)  389. 

*Sossaman  v.  Ins.  Co.,  78  N.  Car.  145 ;  Edmands  v.  Ins.  Co.,  1  Allen  (Mass.), 
311 ;  Sherwood  v.  Ins.  Co.,  73  N.  Y.  447  ;  Germond  v.  Ins.  Co.,  2  Hun  (N.  Y.), 
540 ;  East  Texas  F.  Ins.  Co.  v.  Clark,  79  Tex.  23 ;  Dwelling-House  Ins.  Co.  v. 
Butterly,  33  111.  App.  626,  affirmed  in  133  111.  534 ;  Loomis  v.  Ins.  Co.,  77 
Wis.  87. 


592      relative  rights  of  the  parties  to  insurance. 

Article  3. 

Misrepresentation  and  Concealment  by  Mortgagor. 

§558.  Concealment.  §560.    Knowledge    of    the    Agent 

§  559.  Waiver  by  Insurers.  Affects  the  Principal. 

§  561.  Divisibility  of  the  Contract. 

§  558.  Concealment. — Policies  of  insurance  provide  that  if 
the  insured  shall  misrepresent  the  true  condition  of  the  prop- 
erty or  conceal  any  material  fact  as  to  incumbrances,  it  shall 
invalidate  the  polic}^  So  the  existence  of  any  substantial  in- 
cumbrance upon  the  property  is  material,  and  a  misrepresen- 
tation or  concealment  of  the  same  avoids  any  insurance, 
"whether  the  statements  of  the  assured  are  made  warranties  or 
not.^ 

When  the  mortgagor  states  the  incumbrance  as  $1,000  when 
it  is  $5,000,  he  makes  a  material  misrepresentation,  which 
avoids  the  policy.^ 

So  a  statement  that  the  mortgage  is  $6,600  when  it  was  in 
fact  for  $6,684  is  a  misstatement  that  will  invalidate  the  in- 
surance.^ And  a  statement  of  a  mortgage  incumbrance  of 
$1,000  when  it  is  for  $1,400,  is  a  material  misstatement  and 
renders  the  policy  void.*  So  where  the  mortgagors  take  in- 
surance in  favor  of  the  mortgagee  with  the  original  stipulation 
in  the  mortgage  as  to  over-insurance,  and  then  one  of  the 
mortgagors  takes  additional  insurance,  it  avoids  the  mortgage.^ 

Any  material  misrepresentation  as  to  an  incumbrance  on 
the  property,  such  as  the  concealing  the  same,  will  avoid  the 
policy.^  So  the  failure  to  disclose  a  large  amount  of  accumu- 
lated interest  due  on  a  mortgage,  invalidates  the  policy,^  but 

1  .Etna  Ins.  Co.  v.  Resh,  40  Mich.  241. 

•^  Smith  V.  Ins.  Co.,  118  N.  Y.  518.  See,  also.  Brown  v.  Ins.  Co.,  11  Cush. 
(Mass.)  280. 

3  Abbott  r.  Ins.  Co.,  3  Allen  (Mass.),  213. 

*  Falls  V.  Ins.  Co.,  7  Allen  (Mass.),  46. 

5  Gillett  V.  Ins.  Co.,  73  Wis.  203. 

«  Van  Buren  v.  Ins.  Co.,  28  Mich.  .398  ;  Hay  ward  v.  Ins.  Co.,  10  Cush.  (Mass.) 
444 ;  Draper  v.  Ins.  Co.,  2  Allen  (Mass.),  569 ;  Smith  v.  Ins.  Co.,  17  Pa.  St. 
253 ;  Titus  v.  Ins.  Co.,  81  N.  Y.  410 ;  Byers  v.  Ins.  Co.,  35  Ohio  St.  606. 

^Jacobs  V.  Ina.  Co.,  7  Allen  (Mass.),  132. 


INSURABLE    INTERESTS.  593 

if  the  interest  is  not  due  the  rule  is  otherwise.^  If  a  mortgage 
has  been  paid  or  is  fraudulent,  the  failure  to  disclose  it  by  the 
mortgagor  does  not  make  void  the  insurance.^ 

A  policy  is  avoided  by  a  gross  understatement  of  the  amount 
of  the  incumbrance/  but  an  insignificant  misrepresentation 
will  not  avoid  it/ 

In  construing  warranties  contained  in  insurance  policies, 
Chief  Justice  Champlin  says :  "  It  may  be  asserted  that  the 
prime  object  to  be  reached  is  the  intention  of  the  parties,  and, 
if  that  can  be  found,  such  intention  must  control.  The  rules 
in  the  interpretation  of  such  warranties  are  the  same  as  those 
which  apply  to  the  interpretation  of  other  mercantile  contracts. 
All  written  instruments,  where  the  provisions  are  clear  and 
una  mbiguous,  are  entitled  to  a  literal  interpretation,  and  wher- 
ever in  a  policy  of  insurance  there  is  a  clear  breach  of  the 
warranty  contained  -therein,  however  immaterial  it  may  be,  the 
policy  will  be  avoided. 

"  It  may  be  said  that  the  warranties  contained  in  the  policy 
are  somewhat  different  from  representations  made,  in  this : 
That  while  a  representation  may  be  satisfied  with  a  substan- 
tial, or  even  an  equitable,  compliance,  a  warranty  requires  a 
strict  and  literal  fulfillment.  As  it  is  stated  by  Mr.  Arnould 
on  Marine  Insurance : 

"  '  Whatever  the  warranty  avers  must  be  literally  true,  and 
what  it  promises  must  be  actually  performed.' 

"  The  reasons  for  such  literal  construction  appear  to  be  that 
insurance  is  granted  on  the  faith  of  the  accuracy  of  the  state- 
ments made  by  the  assured,  the  information  concerning  which 
is  generally,  and  often  exclusively,  within  the  knowledge  of 
the  assured  ;  and  it  is  only  just  to  the  insurer,  when  he  asks 
for  positive  and  accurate  information,  that  it  should  be  given 
him.     It  is  in  reliance  upon  the  facts  given  that  the  contract 

•  Titus  V.  Ins.  Co.,  81  N.  Y.  410. 

•"  Lycoming  iris.  Co.  r.  Jackson,  83  111.  302. 
■''O'Brien  v.  Home  Ins.  Co.,  79  AVis.  399. 

*  McNamara  v.  Dakota  F.  &  M.  Ins.  Co.  (S.  Dak.),  47  N.  W.  Rep.  288.  See, 
also,  Copeland  r.  Ins.  Co.,  77  Mich.  554 ;  Tubbs  v.  Dwelling-House  Ins.  Co., 
84  Mich.  646 ;  Vankirk  v.  Ins.  Co.,  79  Wis.  627. 

38 


694         RELATIVE  RIGHTS  OF  THE  PARTIES  TO  INSURANCE. 

of  insurance  is  made,  and  the  purpose  of  requiring  a  warranty 
is  to  dispense  with  inquiry,  and  cast  upon  the  insured  the  obh- 
gation  that  the  facts  shall  be  as  he  represents  them."  ^ 

§  559.  Waiver  by  Insurers. — The  insurance  company  by 
its  acts  or  those  of  its  agent  may  waive  the  wrongful  acts  of 
the  mortgagor  in  misstating  or  concealing  facts  which  arc 
material.  Thus,  if  when  an  application  is  made  for  insurance 
in  which  the  premises  are  represented  as  free  from  incum- 
brance, but  the  insurers  know  of  an  incumbrance  upon  the 
property,  they  will  be  deemed  to  have  waived,  as  respects  such 
incumbrance,  a  condition  of  the  policy  that  misrepresentations 
in  that  respect  should  avoid  the  contract." 

If  the  insurer  is  chargeable  with  knowledge  of  the  fact  of 
the  incumbrance  he  will  be  deemed  to  have  waived  the  con- 
ditions of  the  policy  making  the  misstatement  of  such  fact  to 
avoid  the  policy.^  And  so  knowledge  on  the  part  of  the  in- 
surer of  the  existence  of  a  mortgage  may  be  inferred  from  the 
circumstances  of  the  case,  though  not  actually  disclosed  by  the 
mortgagor.*  Hence,  where  the  insurers  place  insurance  on  the 
property  for  the  owner  and  then  for  the  mortgagee  of  the 
property,  and  afterward  renew  the  policy  for  the  mortgagor, 
they  must  know  of  the  mortgage  from  the  surrounding  circum- 
stances.^ 

The  same  rule  holds  as  to  the  mortgagee  when  he  insures 
his  interest  in  the  property,  and  the  concealment  of  the  exist- 
ence of  a  prior  mortgage  by  him  invalidates  his  policy.'' 

However,  if  the  incumbrance  is  not  disclosed  and  is  not 
made  material  by  an  inquiry  in  relation  to  the  incum- 
brance,   the   mortgagor   is    not    bound    to   disclose   it.^     But 

^  Hoose  V.  Ins.  Co.,  84  Mich.  309,  317,  318.  See,  also,  Insurance  Co.  v. 
Huntzinger,  98  Pa.  St.  41. 

2  Wilson  V.  Ins.  Co.,  36  Minn.  112. 

^Shafer  v.  Ins.  Co.,  53  Wis.  361. 

*  Woodward  v.  Ins.  Co.,  32  Hun  (N.  Y.),  365. 

5  State  Ins.  Co.  v.  Todd,  83  Pa.  St.  272. 

« Smith  V.  Ins.  Co.,  17  Pa.  St.  253. 

'  Norwich  Fire  Ins.  Co.  v.  Boomer,  52  111.  442 ;  Lycoming  F.Ins.  Co.  v.  Jack- 
eon,  83  III.  302. 


INSURABLE    INTERESTS.  595 

when  a  concealment  that  is  material  is  made  it  will  avoid  the 
policy.^ 

§  560.  Knowledge  of  the  Agent  Affects  the  Principal. 
— The  knowledge  and  conduct  of  the  agent  bind  the  insurers, 
and  for  misrepresentations  known  to  the  agent,  they  cannot 
avoid  liability  on  the  policy  on  account  of  the  false  statement 
in  the  application,  although  the  policy  provided  that  any  such 
false  statement  should  render  it  void.^  So  the  local  agent  of 
the  insurers  may,  before  contract  of  insurance  has  become 
complete  and  binding,  name  the  conditions  of  the  policy  as  to 
incumbrances  then  existing.^  The  insurers  must  stand  respon- 
sible for  the  knowledge  of  their  agent  as  to  incumbrances.'* 
His  acts  are  those  of  the  insurer,  and  if  he  receives  an  applica- 
tion filled  up  by  him,  stating  that  there  is  no  incumbrance, 
when  he  knew  the  property  was  incumbered,  his  acts  in  this 
respect  will  bind  his  principal,  who  will  be  liable  for  any  loss 
under  such  policy.^  If  the  agent  agrees  to  do  an  act  in  regard 
to  filling  up  an  application,  in  the  scope  of  his  business,  the 
principal  is  responsible.^  So  an  insurance  company  is  bound 
by  a  verbal  statement  made  to  its  agent,  and  upon  which  it 
issues  a  policy  and  receives  the  premium ;  and  it  cannot  repu- 
diate in  such  policy  the  authority  of  the  agent,  or  responsibil- 
ity for  his  acts. 

Thus,  on  making  a  verbal  application  for  insurance,  the 
agent  was  informed  that  the  applicant  held  the  land  on  which 

1  Horsford  v.  Ins.  Co.,  127  U.  S.  399 ;  German  Ins.  Co.  v.  Churchill,  26  111. 
App.  206 ;  Phcenix  Ins.  Co.  v.  Fulton,  80  Ga.  224. 

^Key  V.  Ins.  Co.,  77  Iowa,  174  ;  Lamb  v.  Ins.  Co.,  70  Iowa,  240 :  Carrigan  v. 
Ins.  Co.,  53  Vt.  418 ;  Russell  v.  Ins.  Co.,  78  Iowa,  216 ;  Dwelling  House  Ins. 
Co.  V.  Hoffman,  125  Pa.  St.  626. 

^  Hankins  v.  Ins  Co.,  70  Wis.  1 ;  Renier  v.  Ins.  Co.,  74  Wis.  89 ;  Cannon  v. 
Ins.  Co.,  53  Wis.  585 ;  Hollis  v.  Ins.  Co.,  65  Iowa,  454 ;  Wilson  v.  Ins.  Co.,  36 
Minn.  112 ;  Carrigan  v.  Ins.  Co.,  53  Vt.  418. 

*  Holmes  V.  Drew,  16  Hun  (N.  Y.),  491. 

^Boetcher  v.  Ins.  Co.,  47  Iowa,  253;  Woodward  v.  Ins.  Co.,  .32  Hun  (X.  Y.), 
365 ;  Key  v.  Ins.  Co.,  77  Iowa,  174 ;  Carrigan  r.  Ins.  Co.,  53  Vt.  418  ;  Renier  v. 
Ins.  Co.,  74  Wis.  89  ;  Westchester  Ins.  Co.  v.  Weaver,  70  Md.  536. 

*Copeland  v.  Iris.  Co.,  77  Mich.  554;  Dunbar  v.  Ins.  Co.,  72  Wis.  492;  Con- 
tinental Ins.  Co.  V.  Pearce,  39  Kan.  396. 


596         RELATIVE  RIGHTS  OF  THE  PARTIES  TO  INSURANCE. 

the  building  stood  under  a  land  contract,  and  that  it  was  in- 
cumbered by  a  mortgage.  The  policy  insured  the  applicant 
to  the  amount  of  $1,000  on  a  certain  building  against  loss  or 
damage  by  fire,  not  exceeding  the  interest  of  the  assured  in  the 
property,  which  interest  was  stated.  The  policy  was  to  be 
void,  unless  consent  in  writing  was  indorsed  by  the  company, 
if  the  assured  was  not  the  sole  and  unconditional  owner  of  the 
property ;  or  if  any  building  intended  to  be  insured  stood  on 
ground  not  owned  in  fee-simple  by  the  assured  ;  or  if  the  inter- 
est of  the  assured  in  the  property  was  not  truly  stated ;  or  if 
any  change  took  place  in  the  title,  interest,  location,  or  posses- 
sion of  the  property,  by  sale,  transfer,  or  conveyance,  in  whole 
or  in  part.  In  a  suit  upon  the  policy  the  company  defended 
because  of  the  violation  of  the  foregoing  conditions.  It  was  held 
that,  if  the  company  had  desired  to  know  what  interest  it  was 
insuring,  it  should  have  stated  it  in  that  portion  of  the  policy 
pertaining  to  the  risk  ;  and  that,  to  give  any  reasonable  force 
and  effect  to  the  clause  requiring  the  indorsement  of  its  con- 
sent in  the  cases  stated,  it  must  be  held  to  apply  to  changes  in 
ownership  arising  after  the  delivery  and  acceptance  of  the  pol- 
icy.^ The  knowledge  of  the  agent  estopped  the  company  from 
setting  up  a  breach  of  the  condition.^ 

Notice  to  the  agent  is  notice  to  the  principal.^  However,  a 
mortgage  was  placed  on  insured  property  without  giving  the 
required  notice  to  the  insurance  company,  but  the  agent  of  the 
company  was  informed  of  the  fact.  The  owner  never  inquired 
of  the  company's  agent  what  was  necessary  to  keep  the  policy 
alive,  nor  did  it  appear  that  he  requested  the  agent,  nor  that 
the  agent  undertook  to  do  anything  to  that  end.  It  was  held 
that  the  case  did  not  come  within  the  provisions  of  the  statute,^ 
which  make  mutual  fire  insurance  companies  liable  for  the 
acts  and  negligence  of  their  agents  while  in  the  performance 
of  their  duties  as  agents  of  such  companies.^ 

1  Hoose  V.  Ins.  Co.,  84  Mich.  309. 

^  Insurance  Co.  v.  Hall,  12  Mich.  213 ;  Baker  v.  Ina  Co.,  70  Mich.  199 ;  Cope- 
land  V.  Ins.  Co.,  77  Mich.  554  ;  Crouse  v.  Ins.  Co.,  79  Mich.  249. 
^  Kitchen  v.  Ins.  Co.,  57  Mich.  145 ;  Insurance  Co.  v.  Fay,  22  Mich.  472. 
^  Rev.  Stat.,  sect.  3617. 
^Tarbell  v.  Vermont  Ins.  Co.,  63  Vt.  53. 


■ 


INSURABLE   INTERESTS.  597 

§  561.  Divisibility  of  the  Contract. — Where  a  policy  is 
issued  on  a  gross  premium  for  a  gross  sum,  and  covers  both 
realty  and  personalty,  and  warrants  against  incumbrances 
on  the  realty,  which  fails,  such  failure  of  the  warranty  will 
invalidate  the  policy  as  to  the  realty,  but  not  as  to  the  personalty 
covered  by  it,  when  the  personalty  has  a  separate  valuation.' 

So  where,  by  a  policy  upon  several  separate  and  distinct 
classes  or  species  of  property,  each  of  which  is  separately  valued, 
the  sum  total  of  the  valuation  is  insured  on  payment  of  a  pre- 
mium in  gross,  the  contract  is  severable ;  and  a  breach  of  a 
condition  avoiding  the  policy  as  to  one  of  the  items  does  not 
affect  it  as  to  the  others  ;  at  least  when  there  is  nothing  in  the 
terms,  in  the  nature  of  the  contract  or  of  the  different  subjects 
of  the  insurance,  or  in  the  surrounding  circumstances,  from 
which  it  can  be  inferred  that  the  insurer  would  not  have  been 
likely  to  have  assumed  the  risk  on  one  or  several  of  the  sub- 
jects of  the  insurance,  unless  induced  by  the  profit  or  advan- 
tage of  having  a  risk  upon  all.^ 

So  a  policy  was  written  upon  a  building  and  also  upon  per- 
sonalty, which  articles  had  a  separate  valuation.  No  specific 
personal  property  was  named,  though  it  was  located  on  the 
farm,  and  not  exceeding  a  certain  amount  on  each  class.  The 
policy  also  contained  a  provision  to  the  eff'ect  that  if  any  sub- 
sequent incumbrance  was  placed  on  the  property  insured,  or 
the  title  changed  without  the  written  consent  of  the  secretary  of 
the  insurers,  the  policy  should  be  void.  Prior  to  the  loss  the 
insured  executed  a  mortgage  upon  the  real  estate.  It  was  held 
that  the  execution  of  the  mortgage  would  not  prevent  a  re- 
covery for  the  loss  occasioned  by  the  destruction  of  the  personal 
property.* 

Chief  Justice  Reese  said :  "  Now  it  cannot  be  contended  that 
the  fact  of  mortgaging  the  real  estate  would  in  any  degree  affect 
the  risk  so  far  as  the  personal  property  was  concerned.     It  did 

^  Crook  t;.  Ins.  Co.,  38  Mo.  App.  582. 
V     '^Merrill  y.  Ins.  Co.,  73  N.Y.  452. 

'  State  Ins.  Co.  v.  Schreck,  27  Nebr.  527  ;  German  Ins.  Co.  v.  Fairbank  (Nebr.), 
49  N.  W.  Rep.  711. 


598  RELATIVE  EIGHTS  OF  THE  PARTIES  TO  INSURANCE. 

not  affect  the  title  in  the  assured,  neither  did  it  cause  the  prop- 
erty to  be  any  more  likely  to  be  destroyed  by  fire,  and  it 
seems  to  be  that  the  most  common  principles  of  justice  and  fair 
dealing  are  in  the  line  of  the  large  number  of  authorities 
cited  by  defendant  in  error  holding  that  the  contract  of  insur- 
ance on  personal  property  would  not  be  avoided  by  the  execu- 
tion of  such  mortgage." 

Judge  Folger  says  :  "  It  is  plain  from  the  fact  of  a  separate 
valuation  having  been  put  by  the  parties  upon  the  subjects  of 
the  insurance,  that  they  looked  upon  them  as  distinct  matters 
of  contract.  The  effect  of  the  separate  valuation  was  to  make 
them  so.  No  matter  how  much  value  there  might  have  been 
in  any  one  of  these  subjects,  even  to  the  whole  amount  of  the 
policy,  had  it  been  totally  destroyed  the  defendant  could  not 
have  been  made  liable  to  an  amount  greater  than  that  named 
ill  the  policy  as  the  valuation  of  it.  Thus  it  was,  at  the  incep- 
tion of  the  contract,  distinguished  from  the  other  subjects  of 
insurance  and  the  contract  so  made,  as  to  be  capable  of  appli- 
cation to  it  alone."  ^ 

When  the  valuation  is  placed  upon  the  different  kinds  of 
property,  it  would  seem  that  the  contract  was  divisible,  and  a 
breach  of  its  condition  made  by  the  insured  would  affect  only 
that  class  of  property  which  was  the  immediate  subject  of  the 
act  of  incumbrance.^ 

A  contract  for  insurance  should  receive  a  reasonable  construc- 
tion.    Such  a  contract  is  to  be  sustained  if  possible  to  do  so.* 

1  Merrill  v.  Ins.  Co.,  73  N.  Y.  452,  463. 

2  Clark  V.  Ins.  Co.,  6  Cush.  (INIass.)  342  ;  Commercial  Ins.  Co.  v.  Spankneble, 
52  111.  53 ;  Hailford  Ins.  Co.  v.  Walsh,  54  111.  164  ;  Knight  v.  Ins.  Co.,  26  Ohio  St. 
(KM ;  Lcehner  r.  Ins.  Co.,  17  Mo.  247  ;  Crook  v.  Ins.  Co.,  38  Mo.  App.  582 ;  Koontz 
V.  Ins.  Co.,  42  Mo.  126 ;  Date  v.  Ins.  Co.,  14  U.  C.  C.  P.  549 ;  Phillips  v.  Ins. 
Co.,  46  U.  C.  Q.  B.  334 ;  Goring  v.  Ins.  Co.,  10  Ont.  236 ;  Trench  v.  Ins.  Co.,  7 
Hill  (N.  Y.),  122 ;  Moore  v.  Ins.  Co.,  28  Gratt.  (Va.)  508 ;  Perry  v.  Ins.  Co.,  11 
Fed.  Rep.  478 ;  Quarrier  v.  Ins.  Co.,  10  W.  Va.  507 ;  Phcenix  Ins.  Co.  v.  Law- 
rence, 4  Met.  (Ky.)  9 ;  Schuster  v.  Ins.  Co.,  102  N.  Y.  260 ;  Holmes  v.  Drew, 
16  Hun  (N.  Y.),  491 ;  1  Phillips  on  Ins.  381-2 ;  Wood  on  Ins.,  sect.  350 ;  Flan- 
ders on  Ins.  425. 

'Phoenix  Ins.  Co.  v.  Bamd,  16  Nebr.  90;  Rolker  v.  Ins.  Co.,  4  Abb.  App. 
Dec.  (N.  Y.)  76 ;  Reed  v.  Ins.  Co.,  95  U.  S.  23. 


INSURABLE    INTERESTS.  599 

However,  that  there  is  a  great  conflict  upon  this  question  of 
divisibility  of  the  insurance  contract  cannot  be  disputed. 

It  is  held,  on  the  other  hand,  that  where  several  distinct 
kinds  of  property  are  insured  in  the  same  policy,  and  there  is  a 
false  statement  in  the  application  as  to  some  of  them,  it  avoids 
the  policy  as  to  all,  as  the  policy  is  one  entire  and  indivisible 
contract.^  And  such  contracts  are  generally  considered  one  and 
indivisible,  although  there  is  no  lien,  simply  for  the  reason  that 
the  promise  is  single  and  the  consideration  one  and  entire.^ 

So  where  a  mortgagor  takes  out  insurance  on  personalty  and 
building,  the  building  not  being  his,  upon  a  written  application 
in  which  the  building  was  represented  to  be  his,  the  policy  is 
void  as  to  both  real  estate  and  personal  property.' 

When  the  rules  have  come  to  be  applied  to  a  contract  on 
different  pieces  of  property  there  has  been  a  contrariety  of 
opinion.  It  seems  to  be  conceded  in  general  terms  that  where 
the  contract  is  entire,  a  breach  of  condition  affects  all  the  prop- 
erty at  risk  ;  but  as  to  what  makes  an  entire  contract  there  is 
no  uniformity  of  opinion,  and  herein  comes  the  conflict  which 
cannot  be  reconciled.* 

Article  4. 
The  Right  of  the  Mortgagee  to  Insure  for  his  own  Indemnity. 

?562.  The  Mortgagee  has  an  Insurable    ^563.  TheNatureof  His  Insurance. 
Interest  in  the  Property.  ^  564.  Subrogation  of  Insurer  to  the 

Rights  of  Mortgagee. 

§  562.  The  Mortgagee  has  an  Insurable  Interest  in 
THE  Property. — There  can  be  no  question  that  a  mortgagee 

'  Cuthbertson  v.  Ins.  Co.,  96  N.  Car.  480. 

'  Lee  V.  Ins.  Co.,  3  Gray  (Mass.),  583,  594 ;  Day  v.  Ins.  Co.,  51  Me.  99 ;  Bald- 
win V.  Ins.  Co.,  60  N.  H.  422 ;  Gottsman  v.  Ins.  Co.,  56  Pa.  St.  210 ;  Hinman 
V.  Ins.  Co.,  36  Wis.  159 ;  Bowman  v.  Ins.  Co.,  40  Md.  620 ;  Havens  v.  Ins.  Co., 
Ill  Ind.  90 ;  Garver  v.  Ins.  Co.,  69  Iowa,  202 ;  Plath  v.  Ins.  Co.,  23  Ttlinn.  479  ; 
Schumitsch  v.  Ins.  Co.,  48  Wis.  26 ;  Biggs  v.  Ins.  Co.,  88  N.  Car.  141 ;  Todd  v.  Ins. 
Co.,  11  Phila.  (Pa.)  355 ;  IMcGowan  v.  Ins.  Co.,  54  Vt.  211  ;  ,^tna  Ins.  Co.  v. 
Resh,  44  Mich.  55 ;  Bleakley  v.  Ins.  Co.,  16  Grant's  Ch.  (U.  C.)  198 ;  Russ  v. 
Ins.  Co.,  29  U.  C.  Q.  B.  73. 

'Essex  Sav.  Bank  v.  The  Meriden  Ins.  Co.,  57  Conn.  335. 

*See  Merrill  v.  Ins.  Co.,  73  N.  Y.  452,  459. 


GOO  RELATIVE  RIGHTS  OF  THE  PARTIES  TO  INSURANCE. 

has  an  interest  separate  and  independent  of  any  other  inter- 
est, which  may  be  the  subject  of  insurance  general  or  specific, 
and  in  case  of  loss  the  amount  of  loss  which  his  policy  covers 
will  be  paid  to  him.^  So  a  trustee,  a  reversioner,  factor,  and 
agent  with  the  custody  of  goods,  to  be  sold  upon  commission, 
may  insure  them,  but  with  the  caution  that  the  nature  of  the 
property  be  distinctly  specified,^ 

The  mortgagee  may  insure  as  general  owner,  without  disclos- 
ing his  particular  interest,  unless  he  is  questioned  concern- 
ing it.^ 

Neither  reason,  authority,  nor  contract  of  insurance  requires 
the  mortgagee,  unless  interrogated,  to  state  the  nature  of  his 
interest  in  the  property.* 

But  when  inquiry  is  made  as  to  his  interest,  he  must  dis- 
close it,  or  the  policy  may  be  avoided,  if  his  concealment  is 
material.^ 

A  trustee  in  a  deed  of  trust  in  the  nature  of  a  mortgage  has 
an  insurable  interest  in  the  mortgaged  property  distinct  from 
that  of  the  mortgagor,  and  a  conversance  by  the  mortgagor  of 
his  interest  in  no  way  affects  the  trustee's  right  to  insure  his 
interest.'' 

If  the  mortgagee  obtains  insurance  according  to  agreement 
with  the  mortgagor,  the  mortgagor  paying  the  premiums,  then 
there  is  an  implied  obligation  that  the  insurance  money,  when 
paid,  shall  be  applied  to  the  mortgage  debt.^  An  executory 
contract  by  a  mortgagee  to  convey  or  assign  his  interest  in  a 
mortgage  does  not  deprive  him  of  the  right  to  insure,  nor  limit 

1  Haley  v.  Ins.  Co.,  120  Mass.  292;  Fox  v.  Ins.  Co.,  52  Me.  333;  Kellar  v. 
Ins.  Co.,  7  La.  Ann.  29 ;  Foster  v.  Van  Reed,  70  N.  Y.  19. 

2  Carpenter  v.  Prov.  Washington  Ins.  Co.,  16  Pet.  (U.  S.)  495. 

3  Norwich  F.  Ins.  Co.  v.  Boomer,  52  111.  442. 

*Buck  V.  Ins.  Co.,  76  Me.  586.  See,  also,  Curry  v.  Ins.  Co.,  10  Pick.  (Mass.) 
535,  542. 

*  Richardson  v.  Ins.  Co.,  46  Me.  394 ;  Campbell  v.  Ins.  Co.,  98  Mass.,  381, 403 ; 
Williams  v.  Ins.  Co.,  107  Mass.  379. 

«Dick  V.  Ins.  Co.,  10  Mo.  App.  370,  affirmed  in  81  Mo.  103. 

'  Waring  v.  Loder,  53  N.  Y.  581 ;  Holbrook  v.  Ins.  Co.,  1  Curtis,  C.  C.  193 ; 
Clinton  v.  Ins.  Co.,  45  N.  Y.  454  ;  Honore  v.  Ins.  Co.,  51  111.  409 ;  Stinchfield  v. 
Milliken,  71  Me.  567 ;  Pendleton  v.  Elliott,  67  Mich.  496. 


INSURABLE    INTERESTS.  601 

his  right  of  recovery  to  the  amount  of  the  unpaid  purchase- 
money/  And  when  he  agrees  to  pay  the  premium  if  the  mort- 
gagor does  not,  he  will  be  bound  to  do  it.^ 

§  563.  The  Nature  of  His  Insurance. — In  insuring  the 
mortgagee's  interest,  the  insurer  does  not  insure  the  debt,  but 
the  interest  of  the  mortgagee  in  the  property,  upon  the  safety 
of  which  depends  the  security.^ 

So  the  insurance  of  a  specific  property  to  secure  a  particular 
interest,  covers  a  loss  happening  by  the  destruction  of  such 
property  only  as  so  held  in  that  particular  right,  and  to  the 
extent  only  of  the  injury  to  that  interest.* 

It  is  the  interest  in  the  property  which  gives  the  right  to 
obtain  insurance,  and  the  ownership  of  the  debt,  a  lien  upon 
the  property,  creates  that  interest.* 

The  insurable  interest  of  the  mortgagee  is  measured  by  the 
value  of  his  lien,  if  this  does  not  exceed  the  value  of  the 
property.^ 

He  may  recover  according  to  his  interest  at  the  time  of  the 
loss.'' 

Upon  payment  of  the  mortgage  debt,  his  interest  is  extin- 
guished ;  upon  part  payment  the  interest  is  extinguished  pro 
tanto.^ 

§  564.  Subrogation  of  Insurer  to  the  Rights  of  Mort- 
gagee.— The  interest  of  the  mortgagee  in  an  estate  is  entirely 
separate  as  an  insurable  interest  from  that  of  the  mortgagor ;  ^ 

'  Haley  v.  Ins.  Co.,  120  Mass.  292.     See  32  Cent.  L.  Jour.  506. 

''St.  Paul  Fire  and  Marine  Ins.  Co.  v.  Upton  (N.  Dak.),  50  N.  AV.  Rep.  702. 

'Excelsior  F.  Ins.  Co.  v.  Ins.  Co.,  55  N.  Y.  343. 

*  Smith  V.  Ins.  Co.,  17  Pa.  St.  253.  See,  also,  Kernochan  v.  Ins.  Co.,  17  N. 
Y.  428;  Carpenter  r.  Prov.  Washington  Ins.  Co.,  16  Pet.  (U.  S.)  495,  501. 

*  Excelsior  F.  Ins.  Co.  v.  Ins.  Co.,  55  N.  Y.  343,  357. 

"Sussex  Co.  Mut.  Ins.  Co.  v.  Woodruflf,  26  N.  J.  L.  541 ;  Kernochan  r.  Ins. 
Co.,  5  Duer  (N.  Y.),  1 ;  17  N.  Y.  428;  Tillou  v.  Ins.  Co.,  7  Barb.  (N.  Y.)  570; 
Slocovich  V.  Ins.  Co.,  13  Daly  (N.  Y.),  264. 

^Mix  V.  Ins.  Co.,  9  Hun  (N.  Y.),  397. 

8  Sussex  Co.  M.  Ins.  Co.  v.  Woodruff,  26  N.  J.  L.  541. 

®  Carpenter  r.  Prov.  Washington  Ins.  Co.,  16  Pet.  (U.  S.)  495  ;  Foster  r.  Van 
'  Reed,  70  N.  Y.  19,  overruling  5  Hun  (N.  Y.),  321 ;  Excelsior  Ins.  Co.  v.  Ins  Co., 
55  N.  Y.  359 ;  Cone  v.  Ins.  Co.,  60  N.  Y.  619 ;  Honore  v.  Ins.  Co.,  51  111.  409. 


()02         RELATIVE  RIGHTS  OF  THE  PARTIES  TO  INSURANCE. 

and  in  case  of  loss  the  insurer  in  most  of  the  States  having 
paid  the  mortgagee  the  amount  of  the  debt,  may  be  subrogated 
to  the  rights  of  tlie  mortgagee.  Where  there  is  a  stipulation 
for  such  subrogation  as  one  of  the  conditions  of  the  policy, 
there  can  be  no  question  of  its  validity  in  every  jurisdiction.^ 

This  rule  is  founded  upon  the  analogy  of  the  situation  of 
the  insurer  to  that  of  a  surety.^  The  insurer  is  entitled  to  sub- 
rogation after  paying  the  amount  to  the  mortgagee,  and  may 
then  recover  on  the  note.^ 

However,  when  the  mortgagor  pays  the  premium  or  agrees 
to  pay,  and  this  agreement  is  known  by  the  insurer,  he  is  not 
entitled  to  subrogation  in  the  place  of  the  mortgagee,  as  a 
mere  matter  of  equity,  in  the  absence  of  a  stipulation  therefor 
in  the  policy.* 

It  appears,  however,  that  if  the  mortgagee  agrees  to  allow 
the  amount  thus  received  to  be  applied  to  the  mortgage  debt, 
the  equitable  liability  of  the  mortgagee  to  the  mortgagor  for 
the  money  received  is  a  sufficient  consideration,  and  an  action 
may  be  maintained  on  such  promise.^ 

The  same  law  governs  a  trustee  as  to  subrogation  in  this  re- 
spect as  applies  to  a  mortgagee.  Hence,  when  a  trustee  insures 
his  ow^n  interest  in  the  mortgaged  property,  and  the  policy  of 
insurance  stipulates  that  he  shall,  in  case  of  loss,  assign  to  the 

» Excelsior  Ins.  Co.  v.  Ins.  Co.,  55  N.  Y.  359  ;  Cone  v.  Ins.  Co.,  60  N.  Y.  624 ; 
^tna  Ins.  Co.  v.  Tyler,  16  Wend.  (N.  Y.)  385 ;  Springfield  Ins.  Co.  v.  Allen, 
43  N.  Y.  392 ;  Hastings  v.  Ins.  Co.,  73  N.  Y.,  141 ;  Croft  v.  Moore,  9  Watts 
(Pa.),  451 ;  Eddy  v.  Traver,  6  Paige  (N.  Y),  521 ;  Hart  v.  Western  Railroad 
Co.,  13  Met.  (Mass.)  99 ;  Thornton  v.  Ins.  Co.,  71  Pa.  St.  2.34,  236 ;  Sussex  Co. 
Ins.  Co.  V.  Woodrulf,  26  N.  J.  L.  541 ;  Hall  r.  Railroad  Co.,  13  Wall.  (U.  S.) 
367 ;  McDonald  v.  Black,  20  Ohio,  185 ;  Honore  r.  Ins.  Co.,  51  111.  409. 

^Honorct).  Ins.  Co.,  51  111.  409;  Norwich  F.  Ins.  Co.  ?•.  Boomer,  52  111. 
442 ;  Dick  v.  Ins.  Co.,  81  Mo.  103  ;  Bound  Brook  Mut.  Ins.  Co.  v.  Nelson,  41 
N.  J.  Eq.  485 ;  Sussex  Co.  Mut.  Ins.  Co.  v.  Woodruff,  26  N.  J.  L.  541,  555. 

^Excelsior  Fire  Ins.  Co.  v.  Ins.  Co.,  55  N.  Y.  343;  Kernochan  v.  Ins.  Co., 
17  N.  Y.  428  ;  /Etna  Ins.  Co.  v.  Tyler,  16  Wend.  (N.  Y.)  385,  397 ;  Foster,  v. 
Van  Reed,  70  N.  Y.  19;  De  Wolf  v.  Ins.  Co.,  16  Hun  (N.  Y.),  116;  Concord 
Mut.  Fire  Ins.  Co.  v.  Woodbury,  45  Me.  447 ;  Callahan  v.  Linthicum,  43 
Md.  97. 

*  Kernochan  v.  Ins  Co.,  17  N.  Y.  428, 441 ;  Cone  v.  Ins.  Co.,  60  N.  Y.  619,  624. 

*  Callahan  v.  Linthicum,  43  Md.  97. 


I 


INSURABLE    INTERESTS.  603 

insurer  an  interest  in  the  deed  of  trust  equal  to  the  amount  of 
loss  paid,  provided  such  assignment  shall  in  no  way  prejudice 
the  beneficiary's  claim  in  the  trust  to  recover  the  full  amount 
of  his  loan  and  proper  charges,  the  trustee  cannot  recover  for  a 
loss  until  he  shall  have  performed  his  agreement  to  assign, 
and  that  in  such  case  the  subrogation  clause  is  material,  and 
there  can  be  no  recovery  against  the  insurer  till  this  condition 
is  complied  with,  even  though  the  mortgaged  property  is  not 
worth  the  amount  of  the  debt  secured  less  the  amount  the  in- 
sured is  liable  to  pay.^ 

In  Massachusetts  the  mortgagee  is  entitled,  in  case  of  loss, 
before  payment  of  the  mortgage,  to  recover  the  amount  of  the 
loss  of  the  insurance  to  his  own  use  without  his  assigning  his 
mortgage  or  any  part  thereof  to  the  insurer.^ 

On  payment  to  the  mortgagee,  according  to  stipulation,  the 
insurance  company  does  not  become  subrogated  to  his  rights 
unless  it  is  in  fact  not  liable  on  the  policy  as  against  the 
mortgagor.^  To  entitle  the  insurance  company  to  an  assign- 
ment and  subrogation,  it  must  claim  such  right  in  good  faith, 
and  its  claim  based  upon  a  state  of  facts  which,  under  the  con- 
tract of  insurance,  would  entitle  it  to  exemption  from  liability. 
The  rights  of  a  party  insured  cannot  be  made  to  depend  upon 
the  arbitrary  claim  of  the  insurer.* 

^  Dick  V.  Ins.  Co.,  81  Mo.  103,  opinion  by  Norton,  J. 

'^Kingr.  State,  7  Cash.  (Mass.)  1.  See,  also,  Graves  v.  Ins.  Co.,  10  Allen 
(Mass.),  281. 

3 Traders'  Ins.  Co.  v.  Race  (111.),  31  N.  E.  Rep.  392,  affirming  29  N.  E. 
Rep.  846. 

*  Van  Arman  v.  Byington,  38  111.  433 ;  Furlong  v.  Cox,  77  111.  293  ;  Daven- 
port V.  Ledger,  80  111.  574. 


604       relative  rights  of  the  parties  to  insurance. 

Article  5. 
Enforcement  of  Contract  in  Case  of  Loss. 

§  565.  Parties.  §  572.  Condition  Against  Other  Insur- 

g  566.  Right  of  Mortgagor  to  Have  ance. 

tiie  Money  Applied  on  His  §  573.  Waiver  by  the  Insurer. 

Debt.  §  574.  The  Mortgagee   Must  Pay  the 

§  567.  Subrogating    the    Insurer  to  Premium  of  Insurance  on  His 

the  Rights  of  the  Mortgagee  Own  Account. 

by  Agreement.  §  575.  Statutory    Provisions  tliat  the 

§  568.  Independent  Contract  to  Pro-  Mortgagee    shall    have     Pre- 

tect  the  Mortgagee  Against  miums     Paid    by    Him    Ee- 

Actsof  Mortgagor.  funded. 

^  569.  The   Mortgagee   May  Assign  §  576.  Under  Condition. 

His    Insurance    to  the  In-  §  577.  The    Mortgagee    May   Become 

surer.  an  Insurer. 

§  670.  Application  of  Money  When  §  578.  Rebates    on    Account    of    the 

the  Debt  is  Not  Due.  Premature  Termination  of  the 

i  571.  Protection       of      Mortgagee  Risks. 

Against       Alienation       by 

Mortgagor. 

§  565.  Parties. — A  contract  of  insurance  is  one  of  in- 
demnity, which  requires  an  insurable  interest  in  the  property 
to  give  it  vahdity. 

The  mortgagor  who  obtains  the  insurance,  pays  the  premium, 
and  takes  a  policy  in  his  own  name,  is  the  party  insured, 
although,  in  case  of  a  loss,  payment  is  to  be  made  to  the  mort- 
gagee.^ The  contract,  nevertheless,  is  with  the  owner,  for  the 
insurance  of  the  property,  and  not  with  the  mortgagee,  for  the 
insurance  of  his  interest.^ 

The  direction  to  pay  the  sum  in  which  the  insurance  was 
effected  to  the  mortgagee,  in  case  of  loss,  is  collateral  to  the 
principal  contract,  and  is  not  an  assignment  of  the  policy. 

The  legal  effect  of  such  a  clause  in  favor  of  a  third  person 
in  a  policy,  in  terms  between  the  insurer  and  the  owner,  is 
that  of  a  direction  in  advance  as  to  the  mode  of  payment, 
which,  when  made,  is  performance  of  the  contract  in  the  man- 
ner assented  to  by  the  insured,  and  discharges  the  obligation 

1  Sanford  v.  Ins.  Co.,  12  Cush.  (Mass.)  5-41. 

»  Grosvenor  v.  Ins.  Co.,  17  N.  Y.  391 ;  Bidwell  v.  Ins.  Co.,  19  N.  Y.  179. 


INSURABLE    INTERESTS.  605 

pro  tanto}  Judge  Depue  says :  "  Under  such  a  direction,  if 
assented  to  by  the  insurer,  the  person  in  whose  faver  the  ap- 
pointment is  made  acquires  equitable  rights,  which  the  in- 
surer is  bound  to  regard,  but  the  contract  with  the  insured  is 
not  thereby  merged  or  extinguished.  If  the  appointment  be 
in  favor  of  a  mortgagee,  it  will  not  operate  pro  tanto  as  an  ex- 
tinguishment of  the  mortgage  debt.  The  mortgagee  may  be 
content  with  the  security  of  the  remaining  property  in  his  mort- 
gage, or  with  his  remedy  on  the  bond.  The  interest  of  the 
owner  in  the  property,  and  in  having  the  mortgage  debt  satis- 
fied, remains,  notwithstanding  the  direction  in  the  policy,  to  pay 
the  insurance  to  the  mortgagee  in  case  of  a  loss.  The  interest 
so  remaining  in  the  owner  is  an  insurable  interest  for  the  protec- 
tion of  which  he  may  resort  to  his  contract  with  the  insurer."  ^ 

So  the  owner  who  insures  his  property  by  a  policy  payable 
to  a  mortgagee  in  case  of  loss,  may  maintain  an  action  on  the 
policy  in  his  own  name,  by  the  consent  of  the  mortgagee,  and 
such  consent  may  be  shown  at  the  trial,  or  even  before  judg- 
ment is  entered.'^  And  an  action  may  be  maintained  in  the 
name  of  the  party  with  whom  the  contract  was  made,  with  or 
without  the  consent  of  the  person  in  whose  favor  the  appoint- 
ment is  made,  in  all  cases  where  an  insurable  interest  remains 
in  such  party.* 

There  are  cases  in  conflict  with  this  doctrine,  but,  in  the 
main,  they  are  cases  where  the  insured  had  parted  with  his 
insurable  interest,  or  made  a  regular  assignment  of  the  policy, 
which  had  been  ratified  by  the  insurer,  under  its  charter  or 
by-laws,  or  the  question  has  been  as  to  the  right  of  the  person 
to  whom  the  insurance  money  is  appointed  to  be  paid  to  sue  in 
his  own  name. 

'  Fogg  r.  Ins.  Co.,  10  Cush.  (Mass.)  346  ;  Hale  v.  Ins.  Co.,  6  Gray  (Mass.),  169 ; 
Turner  v.  Ins.  Co.,  109  Mass.  573  ;  Grosvenor  v.  Ins.  Co.,  17  N.  Y.  394. 
'  INIartin  v.  Ins.  Co.,  .38  N.  J.  L.  140, 143. 

*  Jackson  v.  Ins.  Co.,  5  Gray  (Mass.),  52  ;  Farrow  v.  Ins.  Co.,  18  Pick.  (Mass.) 
53  ;  Turner  v.  Ins.  Co.,  109  Mass.  508  ;  Martin  v.  Ins.  Co.,  38  N.  J.  L.  140. 

*  :srartin  r.  Ins.  Co.,  .38  N.  J.  L.  140,  143.  See,  also,  Davis  v.  Boardman,  12 
Mass.  80;  Ward  ?-.  Wood,  13  Mass.  5.39;  Rider  v.  Ins.  Co.,  20  Pick.  (Mass.) 
259;  Ketcham  v.  Ins.  Co.,  1  Allen  (N.  Bruns.),  136. 


606  RELATIVE  RIGHTS  OF  THE  PARTIES  TO  INSURANCE. 

The  mortgagor  can,  as  held  by  all  the  courts,  with  the  consent 
of  the  mortgagee,  sue  on  the  policy  in  his  own  name.^ 

If  the  policy  has  been  taken  by  the  mortgagee,  he  is  the 
party  to  bring  suit ;  ^  but  the  amount  of  his  insurance  must  not 
exceed  his  interest.^  So  if  the  policy  has  been  assigned  to 
him.* 

Under  the  code  of  some  of  the  States,  the  mortgagee  may 
maintain  the  suit  in  his  own  name,  as  he  is  the  real  party  in 
interest.^  But  this  is  not  the  rule  when  the  code  practice 
does  not  prevail." 

At  common  law  the  assignee  of  the  policy  cannot  maintain 
an  action  upon  it  in  his  own  name,  unless  authorized  so  to  do 
by  general  law,  or  by  the  act  of  incorporation  of  the  insurance 
company  ;  the  suit  must  be  brought  in  the  name  of  the  insured 
for  the  use  of  the  assignee.^ 

If,  however,  the  mortgagee  is  recognized  as  a  distinct  party 
in  interest,  and  not  a  mere  appointment  to  pay  the  loss  to  him, 
he  may  sue  in  his  own  name.^ 

If  a  mortgagee  takes  out  a  policy  in  favor  of  the  mortgagor, 
with  an  agreement  that,  in  case  of  loss,  the  amount  may  be 
applied  on  the  mortgage  debt,  the  mortgagor  must  bring  the 
suit.^ 

If  the  policy  taken  out  by  the  mortgagor  for  the  benefit  of 
the  mortgagee,  covers  property  in  part  not  subject  to  the  mort- 

1  Patterson  v.  Ins.  Co.,  64  Me.  500 ;  Continental  Ins.  Co.  v.  Hulman,  92  111. 
145 ;  IMeriden  Sav.  Bank  v.  Ins.  Co.,  50  Conn.  396. 

2  Chamberlain  v.  Ins.  Co.,  55  N.  H.  249 ;  Westchester  Ins.  Co.  v.  Foster,  90 
111.  121. 

» Hopkins  ]\Ianuf.  Co.  v.  Ins.  Co.,  48  Mich.  148 ;  Hartford  Fire  Ins.  Co.  v. 
Davenport,  37  Mich.  609. 

*  Hadley  v.  Ins.  Co.,  55  N.  H.  110. 

*Hammcl  v.  Ins.  Co.,  50  Wis.  240;  Strohn  v.  Ins.  Co.,  33  Wis.  648. 

«  Fire  Ins.  Co.  v.  Felrath,  77  Ala.  194. 

'  New  England  Fire  &  M.  Ins.  Co.  v.  Wetmore,  32  111.  221 ;  111.  Fire  Ins. 
Co.  V.  Stanton,  57  111.  354 ;  Norwich  Fire  Ins.  Co.  v.  Boomer,  52  111.  442 ;  Con- 
cord Union  Mut.  Ins.  Co.  v.  Woodbury,  45  Me.  447. 

8  Hartford  Fire  Ins.  Co.  r.  Olcott,  97  111.  439 ;  Hastings  v.  Ins.  Co.,  73  N.  Y. 
141 ;  Westchester  F.  Ins.  Co.  v.  Foster,  90  111.  121 ;  Meriden  Sav.  Bank  v.  Ins. 
Co.,  50  Conn.  396. 

9^tna  Ins.  Co.  v.  Baker,  71  Ind.  102. 


INSURABLE   INTERESTS.  607 

gage,  no  one  but  the  mortgagor  can  sue  upon  it.^  Under 
the  code  practice,  however,  in  some  of  the  States,  persons 
having  several  interests  in  such  a  contract  may  join  in  the 
suit.^ 

In  some  poUcies  a  provision  is  made  that  the  insurer  may 
rebuild  or  pay  the  loss.  Under  such  a  policy,  after  the  insurer 
has  elected  to  rebuild,  but  fails  so  to  do,  the  mortgagor  may  in 
his  own  name  enforce  specific  performance.  The  action  is  upon 
the  contract  to  rebuild,  and  not  strictly  upon  the  policy,  and 
the  cause  of  action  is  then  in  the  mortgagor,  and  not  in  the 
mortgagee.^ 

Generally  under  the  code  practice,  the  mortgagee  may  sue 
alone  where  his  claims  exceed  the  amount  of  the  insurance,* 
and  if  the  mortgagor  claims  any  part  of  the  insurance  money, 
the  insurer  may  protect  itself  by  interpleader.  But  the  better 
practice  is  for  the  mortgagor  and  the  mortgagee  both  to  sue.'"' 

Whore  the  statute  declares  that  the  real  party  in  interest 
may  sue,  in  such  policies  the  mortgagee  may  bring  the  suit 
alone.  Thus,  a  policy  w^hich  contains  this  clause,  "  loss,  if  any, 
payable  to  mortgagees  as  their  interests  may  appear,"  author- 
izes the  mortgagee  to  bring  suit  alone  in  his  own  name.^ 

§  566.  Right  of  Mortgagor  to  Have  the  Money  Applied 
ON  His  Debt. — When  the  mortgagor  takes  a  policy  on  the 
property  payable  to  the  mortgagee,  in  case  of  loss,  an  inf[3lied 
obligation  arises  therefrom  that  the  insurance  money,  when 
paid  to  the  mortgagee,  shall  apply  on  the  mortgage  debt ;  '^  and 

'  Stearns  v.  Ins.  Co.,  124  Mass.  61. 
^Strohn  v.  Ins.  Co.,  33  Wis.  648. 

*  Heilmann  v.  Ins.  Co.,  75  N.  Y.  7. 

♦  Hammel  v.  Ins.  Co.,  50  Wis.  240 ;  Cone  v.  Ins.  Co.,  60  N.  Y.  619  ;  Martin  w. 
Ins.  Co.,  38  N.  J.  L.  140  ;  Coates  v.  Ins.  Co.,  58  Md.  172 ;  Travelers'  Ins.  Co.  v. 
Ins.  Co.,  1  N.  Dak.  151. 

^SeeWinne  v.  Ins.  Co.,  91  N.  Y.  185;  Appleton  Iron  Co.  r.  Ins.  Co.,  46 
Wis.  23. 

«Bartlett  v.  Ins.  Co.,  77  Iowa,  86.  See,  also,  Hall  v.  Ins.  Co.,  64  N.  H.  405. 
^  '  Waring  v.  Loder,  53  N.  Y.  581 ;  Concord  Union  Mat.  Fire  Ins.  Co.  v. 
Woodbury,  45  Me.  447 ;  Clark  v.  Wilson,  103  Mass.  219,  221 ;  King  v.  Ins. 
Co.,  7  Cush.  (Mass.)  1. 


I 


608         RELATIVE  RIGHTS  OF  THE  PARTIES  TO  INSURANCE. 

even  if  the  mortgagee  procures  insurance  for  the  benefit  of  both 
parties,  he  must  apply  it  to  the  debt.* 

However,  when  the  mortgagee  insures  his  own  interest  with- 
out any  agreement  between  him  and  the  mortgagor  therefor, 
and  a  loss  accrues,  the  mortgagor  is  not  entitled  to  the  allow- 
ance of  the  insurance  paid  upon  such  loss,  to  be  applied  to 
the  reduction  or  discharge  of  his  mortgage  debt,  but  the  mort- 
gagee may  recover  th^  whole  amount  due.^ 

But  when  the  mortgagor  insures  the  property  for  the  benefit 
of  the  mortgagee,  or  the  policy  provides  that  the  mortgagee 
may  insure  for  his  own  benefit,  at  the  expense  of  the  mort- 
gagor, then  the  insurance  money  must  be  applied  to  the  debt.* 

In  the  absence  of  any  such  contract  the  mortgagee  can 
insure  only  his  own  interest,  and  for  his  own  benefit.* 

§  5 07.  Subrogating  the  Insurer  to  the  Rights  of  the 
Mortgagee  by  Agreement. — In  policies  where  the  mortgagor 
insures  for  the  benefit  of  the  mortgagee,  a  stipulation  may  be 
inserted  subrogating  the  insurer,  after  payment  of  loss,  to  the 
rights  of  the  mortgagee.  Thus,  where  the  policy  provides  that 
the  amount  due  for  a  loss  after  a  forfeiture  shall  not  be  a  fund 
for  the  payment  of  the  mortgage  debt,  but  that,  upon  payment 
of  the  loss,  the  mortgage  shall  be  a  fund  for  tlie  reimbursement 
of -the  insurer,  it  is  valid  ;  the  contract  is,  that  after  a  forfeiture 
the  insurance  shall  be  exclusively  for  the  benefit  of  the  mort- 
gagee ;  that  the  mortgagor  and  those  claiming  under  him  shall 
have  no  beneficial  interest  in  the  policy,  and  that  the  payment 
to  the  mortgagee  shall  not  discharge  the  mortgage,  but  subro- 
gate the  insurer  to  the  mortgagee's  rights  in  it,^  and  the  owner 

1  Buflalo  Steam-Engine  Works  v.  Ins.  Co.,  17  N.  Y.  406  ;  Clinton  r.  Ins.  Co., 
45  N.  Y.  467. 

2  White  V.  Brown,  2  Cush.  (Mass.)  413  ;  King  v.  Ins.  Co.,  7  Cash.  (Mass.)  1 ; 
Clashing  v.  Thompson,  34  Me.  496. 

nVilcoxr.  Allen,  36  Mich.  160;  Fowley  v.  Palmer,  5  Gray  (Mass.),  549; 
Mix  V.  Hotchkiss,  14  Conn.  32. 

*  King  r.  Ins.  Co.,  7  Cush.  (Mass.)  1 ;  Dobson  v.  Land,  8  Hare,  216 ;  Bellamy 
V.  Briokenden,  2  Johns  &  H.  137  ;  Russell  r.  Southard,  12  How.  (U.  S.)  139, 
157  ;  Ely  i:  Ely,  80  111.  532 ;  Clark  v.  Wilson,  103  Mass.  219,  221. 

*  Davis  V.  Ins.  Co.,  10  Allen  (Mass.),  113:  Springfield  Ins.  Co.  v.  Allen,  43 


INSURABLE    INTERESTS.  609 

of  redemption  cannot  redeem  without  paying  the  full  amount 
of  the  debt  to  the  insurer.^ 

If  the  policy  stipulates  that  the  mortgagee  shall  assign  the 
mortgage  to  insurers,  after  payment  of  loss,  he  must  comply 
with  this  condition  before  he  can  recover.^  Such  a  policy  in- 
suring the  interest  of  the  mortgagee  is  an  absolute  and  inde- 
pendent coijtract  inuring  to  his  sole  benefit,  and  he  is  free  from 
liability  to  account  in  respect  of  it  to  tke  mortgagor  or  his 
assigns,^  and,  under  the  stipulation  in  the  policy  the  insurer  is 
entitled  to  be  subrogated  to  his  rights  and  interest  after  pay- 
ment of  the  loss/ 

No  arrangement,  agreement,  or  statement  by  the  insured 
could  change  the  meaning  and  force  of  the  stipulation.^  It  is 
settled  that  when  a  mortgagee  is  insured  at  his  own  expense, 
upon  his  motion,  and  for  his  sole  benefit,  and  a  loss  happens  to 
the  property,  the  insurer  in  making  compensation  is  entitled 
to  an  assignment  of  the  insured — that  is,  the  insurer  may  be 
subrogated  to  the  right  of  the  mortgagee.^ 

But  in  Massachusetts,  where  there  is  no  express  stipulation 
for  subrogation,  the  insurer  is  not  entitled  to  subrogation  from 
a  mortgagee  who  had  insured  as  such  at  his  own  expense  and 
for  his  own  benefit/ 

The  insurers  upon  paying  a  loss  upon  a  policy  taken  out  by 
the  mortgagor  payable  to  the  mortgagee,  or  assigned  to  him, 
have  no  right  to  be  subrogated  to  the  rights  of  the  mortgagee.® 

N.  Y.  389 ;  Fos^ter  v.  Van  Reed,  70  N.  Y.  19 ;  Thornton  v.  Ins.  Co..  71  Pa.  St. 
234 ;  Honore  v.  Ins.  Co.,  51  111.  409 ;  Ulster  County  Savings  Institution  v. 
Leake,  73  N.  Y.  161. 
'  Allen  V.  Ins.  Co.,  132  Mass.  480. 

*  Dick  r.  Ins.  Co.,  10  Mo.  App.  376 ;  Foster  v.  Van  Reed,  70  N.  Y.  19. 
nvilljams  v.  Ins.  Co.,  107  Mass.  377  ;  Smith  v.  Ins.  Co.,  17  Pa.  St.  253 ;  Car- 
penter V.  Providence  Washington  Ins.  Co.,  16  Pet.  (U.  S.)  495. 

*  .Etna  Ins.  Co.  v.  Tyler,  16  Wend.  (N.  Y.)  385 ;  Norwich  Ins.  Co.  v.  Boomer, 
52  111.  442 ;  Cone  v.  Ins.  Co.,  60  N.  Y.  619,  624. 

^Clinton  v.  Ins.  Co.,  45  N.  Y.  461 ;  ^tna  Fire  Ins.  Co.  v.  Tyler,  16  Wend. 
(N.  Y.)  385. 

«  Excelsior  Fire  Ins.  Co.  v.  Ins.  Co.,  55  N.  Y.  359 ;  Cone  v.  Ins.  Co.,  60  N.  Y. 
624. 

'  King  V.  Ins.  Co.,  7  Cush.  (Mass.)  1 ;  Graves  v.  Ins.  Co.,  10  Allen  (:Mass.),  281. 

«Cone  V.  Ins.  Co.,  60  N.  Y.  619, 624 ;  Mercantile  Mut.  Ins.  Co.  v.  Calebs,  20  N. 
39 


610       relative  rights  of  the  parties  to  insurance. 

§  568.  Independent  Contract  to  Protect  the  Mortgagee 
Against  Acts  of  Mortgagor. — Whether  the  mortgagee  can 
make  an  independent  contract  to  protect  himself  against  the 
acts  of  the  mortgagor  is  not  decided  the  same  way  by  all  the 
courts. 

In  New  York  the  mortgagee  may  make  a  contract  with  the 
insurer,  that  the  loss  shall  be  payable  to  the  mortgagee,  and 
annex  to  the  polic}^  a  clause  agreeing  that  the  insurance  as  to 
the  interest  therein  of  the  mortgagee  only  shall  not  be  invali- 
dated by  any  act  or  neglect  of  the  mortgagor  or  owner,  and  that 
whenever  the  insurer  shall  pay  the  mortgagee  any  sum  for  loss, 
claiming  that  as  to  the  mortgagor  or  owner  no  liability  existed 
therefor,  the  insurer  shall  be  subrogated  to  all  the  rights  of  the 
mortgagee  in  any  securities  held  for  the  mortgage  debt,  not 
affecting,  however,  the  right  of  the  mortgagee  to  recover  the 
whole  of  the  claim  ;  such  agreement  operates  as  an  independent 
insurance  of  the  mortgagee's  interest,  and  gives  him  the  same 
benefit  as  if  he  had  taken  out  a  separate  policy.^ 

In  Connecticut  such  an  agreement  is  regarded  as  a  contract 
relating  to  an  existing  policy,  by  which  certain  conditions  are 
dispensed  with  and  certain  privileges  are  secured  to  the  insurers 
which  they  would  not  otherwise  have,  and  the  mortgagee  is 
made  a  party  to  the  contract  of  insurance.^ 

In  Massachusetts  the  view  of  the  New  York  courts  is  repudi- 
ated and  the  mortgagee  cannot  maintain  an  action  against  the 
insurer.  The  New  York  doctrine  that  the  stipulation  for  sub- 
rogation to  the  legal  rights  of  the  mortgagee,  upon  payment 
to  him  to  the  extent  of  such  payment  is  a  consideration,  is  not 
concurred  in  by  the  Massachusetts  courts.^ 

But  if  there  be  no  stipulation  for  the  mortgagee's  protection 
the  mortgagor  may  so  violate  the  provisions  of  the  policy  as 

Y.  173 ;  Kernochan  r.  Iuf.  Co.,  17  N.  Y.  428.  See  Niagara  F.  Ins.  Co.  v. 
Scammon  (111.),  28  N.  E.  Rep.  919. 

'  Hastings  v.  Ins.  Co.,  73  N.  Y.  141  ;  Ulster  County  Savings  Inst.  v.  Leake, 
73  N.  Y.  161. 

2  Meriden  Sav.  Bank  v.  Ins.  Co.,  50  Conn.  396. 

^  Davis  V.  Ins.  Co.,  135  Mass.  251. 


INSURABLE   INTERESTS.  611 

to  vitiate  the  insurance  as  to  himself  and  to  the  mortgagee.' 
If  the  pohcy  be  assigned  to  the  mortgagee  and  he  makes  a 
new  contract  of  insurance,  such  as  giving  a  deposit  note  and 
becoming  Kable  to  assessments,  then  he  is  protected  against 
the  acts  of  the  mortgagor.^ 

§  509.  The  Mortgagee  May  Assign  His  Insurance  to  the 
Insurer. — If  the  mortgagee  takes  a  pohcy  of  insurance  upon 
his  interest,  stipulating  that,  in  case  of  loss,  he  will  assign  to 
the  insurer  an  interest  in  the  mortgage  equal  to  the  amount  of 
loss  -paid,  the  insurer  is  entitled  to  the  subrogation  according 
to  the  agreement.  The  consent  of  the  mortgagor  is  not  essen- 
tial to  the  validity  of  such  a  provision  of  subrogation.  Hence, 
when  such  a  policy  has  been  issued  by  the  insurer,  and  loss 
having  occurred,  the  insurer  pays  to  the  mortgagee  the  amount 
thereof,  together  with  the  premiums  paid,  and  takes  an  assign- 
ment of  the  mortgage,  in  an  action  to  foreclose  the  mortgage, 
the  mortgagor  or  his  grantee  cannot  claim  an  application  of 
the  amount  of  the  insurance  as  payment  upon  the  mortgage.^ 

Such  contract  embraces  both  mortgage  and  bond,  though  the 
bond  is  not  expressly  named,  because  in  the  assignment  of  the 
mortgage  it  is  evident  that  the  parties  meant  to  include  the 
bond.*  Such  contract  of  insurance  is  paramount  to,  and  inde- 
pendent of,  the  contract,  between  the  mortgagor  and  mortgagee, 
and  the  rights  of  the  insurer  cannot  be  thereby  affected.'^ 

§  570.  Application  of  Money  When  the  Debt  Is  Not 
Due. — The  money  paid  to  a  mortgagee  by  the  insurer  in  pur- 
suance to  an  agreement  with  the  mortgagor  cannot  be  applied 
by  him  to  the  payment  of  the  debt  secured  by  the  mortgagee 
if  it  be  not  due,  without  consent  of  the  mortgagor.  So  where 
the  mortgaged  premises  are  injured  by  fire  and  the  amount  of 

'  Van  Buren  v.  Ins.  Co.,  28  Mich.  398  ;  Franklin  Savings  Inst.  v.  Ins.  Co.,  119 
Mass.  240;  Loring  v.  Ins.  Co.,  8  Gray  (Mass.),  28;  Fogg  v.  Ins.  Co.,  10  Cush. 
(Mass.)  337. 

2  Foster  v.  Ins.  Co.,  2  Gray  (Mass.),  216. 

'  Foster  v.  Van  Reed,  70  N.  Y.  19. 

*  Springfield  F.  &  M.  Ins.  Co.  v.  Allen,  43  N.  Y.  .394. 

5  Waring  v.  Loder,  53  N.  Y.  581 ;  Thornton  v.  Ins.  Co.,  71  Pa.  St.  234. 


612  RELATIVE  RIGHTS  OF  THE  PARTIES  TO  INSURANCE. 

loss  is  paid  by  the  insurer  in  pursuance  of  such  agreement  to 
a  first  mortgagee,  who  pays  the  amount  to  the  mortgagor  to  be 
aj^phed  in  repairing  the  premises  so  as  to  make  them  as  valu- 
able as  before  the  loss,  and  he  so  applies  it,  a  holder  of  a  sec- 
ond mortgage  on  the  premises  has  no  equity  to  have  the 
amount  received  applied  in  reduction  of  the  debt  secured  by 
the  mortgage.^ 

§  571.  Protection  of  Mortgagee  Against  Alienation 
■BY  Mortgagor. — One  of  the  conditions  of  most  policies  is  that 
in  case  of  any  change  or  transfer  of  title  in  the  property  in- 
sured the  property  shall  be  void  and  cease.  But  when  the  in- 
surance is  for  the  benefit  of  the  mortgagee,  he  may  be  pro- 
tected from  this  condition  by  stipulation.  So  when  the  mort- 
gaged premises  are  sold  prior  to  their  injury  by  fire,  and  the 
amount  of  the  insurance  money  paid  to  the  mortgagee  by  the 
insurer,  it  cannot  be  considered  a  payment  on  the  mortgage.^ 

Where  a  special  interest,  rather  than  the  general  property,  is 
the  subject  of  insurance,  no  such  condition  is  necessary  to  the 
protection  of  the  insurer,  for  the  reason  that  with  a  loss  of 
interest  the  insurance  ceases,^  and  an  interest  in  the  policy 
does  not  pass  by  a  transfer  of  the  interest  insured.* 

When  a  special  interest  is  insured,  as  in  favor  of  a  mort- 
gagee, and  it  is  designed  to  save  the  policy  from  the  effect  of 
a  breach  of  the  condition  forbidding  a  change  of  title,  it  is 
done  by  a  special  clause  of  exception.^ 

The  object  of  such  special  stipulation  to  protect  the  mort- 
gagee's interest  is  to  secure  the  insurance  of  his  interest  as 
mortgagee,  and  to  avoid  his  defeat  by  any  sale  or  transfer  of 
the  property ;  and  by  a  fair  interpretation  of  the  contract  it 
means  that  his  right  to  recover  shall  not  be  vitiated  by  any  of 
the  natural  consequences  or  incidents  of  a  sale  and  transfer.^ 

1  Gordon  v.  Bank,  115  Mass.  588. 

2  Springfield  F.  &  M.  Ins.  Co.  v.  Allen,  43  N.  Y.  389.     Compare  King  v.  State, 
7  Cush.  (Mass.)  1. 

3  Carpenter  v.  AVashin^on  Prov.  Ins.  Co.,  16  Pet.  (U.  S.)  495. 
*  Columbia  Ins.  Co.  v.  Lawrence,  10  Pet.  (U.  S.)  507. 

^Graves  v.  Ins.  Co.,  10' Allen  (Mass.),  281.    See,  also,  Grosvener  v.  Ins.  Co., 
17  N.  Y.  391 :  Jackson  v.  Ins.  Co.,  23  Pick.  (Mass.)  418. 
«City  Five  Cents  Savings  Baiik  v.  Ins.  Co.,  122  Mass.  165,  167. 


I 


INSURABLE    INTERESTS.  613 

The  mortgaging  of  insured  property,  even  to  secure  a  debt 
not  due,  is  an  increase  of  the  risk  and  avoids  the  policy  under 
the  condition,  and  it  makes  no  difference  tliat  a  right  of  action 
had  not  accrued  upon  the  mortgage.^ 

Where  the  mortgaged  property  is  insured  while  involved  in 
litigation,  after  the  commencement  of  foreclosure  proceedings 
for  the  benefit  of  the  mortgagee  and  his  assigns,  a  loss  occur- 
ring after  the  foreclosure  sale,  the  insurer  cannot  defend  on  the 
ground  of  change  of  interest  or  ownership  of  the  property,  ^ 
because  such  proceedings  and  sale  must  have  been  contem- 
plated wdien  the  policy  was  issued  for  the  benefit  of  the  mort- 
gagee, and  because  the  insurer,  cognizant  of  the  situation,  did 
not  cancel  the  policy,  and  retained  the  unearned  premium,  and 
is  therefore  estopped  to  deny  his  liability.^ 

§  572.  Condition  Against  Other  Insurance. — An  insur- 
ance by  the  mortgagee  does  not  afiect  the  mortgagor's  rights. 
A  condition  "  if  the  assured  now  has,  or  shall  hereafter  make, 
any  other  insurance  on  the  property  hereby  insured,  or  any 
part  thereof,  whether  valid  or  not,  without  the  consent  of  the 
company  written  hereon,"  this  policy  shall  be  void,  does  not 
avoid  a  policy  taken  out  by  the  mortgagor,  because  the  mort- 
gagee had  an  insurance  on  his  interest  in  the  same  property ; 
because  the  mortgagee  acted  for  himself  and  not  in  any  way 
as  the  agent  of  the  mortgagor.* 

A  policy  of  insurance  was  issued  to  the  mortgagor,  made 
payable  in  case  of  loss  to  the  mortgagee.  The  policy  provided 
that  if  the  mortgagor  should  procure  any  further  insur- 
ance, without  the  written  consent  of  the  insurer,  the  jDolicy 
should  be  null  and  void,  and  that  in  case  of  such  further  in- 
surance the  assured  should  recover  only  a  pro  rata  proportion 
of  the  actual  loss.  The  mortgagor,  after  the  issue  of  the  policy, 
made  a  second  mortgage  on  the  property,  without  the  consent 

^  Lee  V.  Ins.  Co.,  79  Iowa,  379. 
=  German  Ins.  Co.  v.  Churchill,  26  IlL  App.  206. 

^  Reaper  City  Ins.  Co.  v.  Jones,  62  111.  458 ;  Williamsburg  Ins.  Co.  v.  Gary, 
'83  111.  453  ;  Hollis  v.  Ins.  Co.,  65  Iowa,  454. 
*  Titus  V.  Ins.  Co.,  81  N.  Y.  410. 


614         RELATIVE  RIGHTS  OF  THE  PARTIES  TO  INSURANCE. 

of  the  company,  to  one  who  afterward  entered  to  foreclose,  and 
who  procured  additional  insurance  in  another  company  on  the 
same,  also  without  such  consent.  Subsequently  the  property 
was  injured  by  fire,  and  the  amount  of  the  loss  was  adjusted 
and  found  to  be  less  than  the  first  mortgage.  The  mort- 
gagor in  the  proofs  of  loss  stated  that  there  was  other  in- 
surance on  the  property,  referring  to  the  secpnd  policy.  It  was 
held,  in  an  action  by  the  first  mortgagee,  that  he  was  entitled 
to  recover  for  the  full  loss ;  and  that  the  statement  in  the 
proofs  of  loss  did  not  defeat  such  right.^ 

This  is  upon  the  ground  that  the  second  mortgagee  was  a 
stranger  as  to  the  rights  of  the  parties  to  the  first  policy  ;  the 
rights  of  the  parties  to  the  first  policy  are  not  to  be  defeated  or 
limited  by  the  acts  of  strangers,  for  which  they  are  not  re- 
sponsible, and  of  which  they  have  no  knowledge."^ 

Where  a  mortgagee  insures  his  interest  in  the  property  with- 
out the  consent  of  one  of  the  mortgagors,  who  was  a  joint 
owner  of  the  property,  and  who  on  the  next  day  insured  his 
interest  in  another  company,  being  still  ignorant  of  the  prior 
insurance,  the  insurance  company  cannot  avoid  the  policy 
because  of  existing  or  after-acquired  insurance,  which  was 
against  the  stipulation  in  the  policy  ;  the  assured  did  not  make 
any  other  contract  of  insurance.^  And  it  is  the  general  rule 
that  a  policy  made  by  a  mortgagor,  to  cover  the  interest  of  the 
mortgagee  (which  the  latter  had  already  insured)  without  his 
knowledge  or  consent,  is  not  other  insurance.*  And  when  the 
mortgagee  acts  for  himself  and  in  his  own  interest,  his  procur- 
ing additional  insurance  cannot  be  regarded  as  the  acts  of  the 
mortgagor  so  as  to  violate  the  clause  of  his  policy.  Such  is 
not  other  insurance  within  the  meaning  of  the  policy.^ 

1  City  Five  Cents  Sav.  Bank  v.  Ins.  Co.,  122  Mass.  165 ;  Niagara  F.  Ins.  Co. 
t'.  Scammon  (111.),  28  N.  E.  Rep.  919. 

2  Nichols  V.  Ins.  Co.,  1  Allen  (Mass.),  6.3. 

^  Carpenter  v.  Ins.  Co.,  61  Mich.  635.    See,  also,  Weiss'  Appeal,  13.3  Pa.  St.  84. 

*  Johnson  v.  Ins.  Co.,  1  Holmes,  C.  C.  117.  See,  also,  Phillips  v  Carpenter, 
79  Iowa,  600. 

5  Titus  V.  Ins.  Co.,  81  N.  Y.  415,  416.  See,  also.  Fox  r.  Ins.  Co.,  52  Me.  3.33 ; 
Williams  v.  Ins.  Co.,  15  La.  Ann.  651 ;  Norwich  Ins.  Co.  v.  Boomer,  52  111.  442; 


INSURABLE    INTERESTS.  615 

When  it  is  stipulated  that  the  mortgagor  shall  procure  insur- 
ance in  favor  of  the  mortgagee,  the  mortgagee  will  then  have 
an  equitable  lien  on  other  insurance  taken  out  by  the  mort- 
gagor in  favor  of  third  parties/ 

§  573.  Waiver  by  the  Insurer. — The  insurer  can  waive 
any  of  the  conditions  in  the  policy.  Where  there  has  been  a 
breach  of  a  condition  in  an  insurance  policy,  the  insurance 
company  may  not  take  advantage  of  such  breach  and  claim  a 
forfeiture,  if  in  any  negotiation  or  transaction  with  the  insured, 
after  knowledge  of  the  forfeiture,  the  insurer  recognizes  the 
continued  validity  of  the  policy  or  does  acts  based  thereon,  or 
requires  the  insured  by  virtue  thereof  to  do  some  act  or  incur 
some  trouble  or  expense,  the  forfeiture  is  as  matter  of  law 
waived.  Such  a  waiver  need  not  be  based  upon  any  new 
agreement  or  an  estoppel.^  Thus,  the  policy  contained  a  con- 
dition declaring  it  void  in  case  foreclosure  proceedings  were 
commenced  against  the  insured  property.  Such  proceedings 
having  been  commenced,  the  policy  was  avoided,  but  the  in- 
surers, after  a  loss  and  after  they  had  notice  of  the  proceed- 
ings, required  the  insured  to  appear  and  be  examined,  and  as 
they  had  the  right  to  make  such  examination  only  by  virtue 
of  the  policy,  this  was  a  recognition  of  its  validity,  and  was  a 
waiver  of  the  forfeiture.^ 

§  574.  The  Mortgagee  Must  Pay  the  Premium  of  Insur- 
ance ON  His  Own  Account. — If  a  mortgagee  obtains  insurance 

Tyler  v.  Ins.  Co.,  12  Wend.  (N.  Y.)  507 ;  Nichols  v.  Ins.  Co.,  1  Allen  (Mass.), 
63;  Burbank  v.  Ins.  Co.,  2-4  N.  H.  550  ;  Burton  r.  Ins.  Co.,  12  Grant  {U.  C), 
150 ;  .Etna  Fire  Ins.  Co.  v.  Tyler,  16  Wend.  (X.  Y.)  380 ;  Carpenter  v.  Ins.  Co., 
61  Mich.  635. 

» Wilson  V.  Hakes,  36  111.  App.  539. 

^  Allen  w.Ins.  Co.,  12  Vt.  360;  Webster  v.  Ins.  Co.,  36  Wis.  07  ;  Cans  v.  Ins. 
Co.,  43  Wis.  109 ;  Insurance  Co.  v.  Norton,  96  U.  S.  234 ;  Goodwin  v.  Ins.  Co., 
73  N.  Y.  480,  493 ;  Prentice  v.  Ins.  Co.,  77  N.  Y.  483 ;  Brinks.  Ins.  Co.,  80  X.  Y. 
108  ;  Titus  v.  Ins.  Co.,  81  X.  Y.  410,  419.  See,  also,  Lloyd  v.  Crispe,  5  Taunt. 
249  ;  Doe  v.  Miller,  2  Car.  &  P.  348. 

3  Titus  V.  Ins.  Co.,  81  X.  Y.  410.  See,  also,  Gans  r.  Ins.  Co.,  43  Wis.  109; 
Lasher  v.  Ins.  Co.,  55  How.  Pr.  (X.  Y.)  318  ;  Sherman  r.  Ins.  Co.,  46  X.  Y.  526 ; 
vVan  Schoick  v.  Ins.  Co.,  68  X.  Y.  4.39  ;  Pennsylvania  Fire  Ins.  Co.  v.  Kittle,  39 
Mich.  51 ;  Lyon  v.  Ins.  Co.,  55  Mich.  141 ;  Carpenter  v.  Ins.  Co.,  61  Mich.  635. 


616  RELATIVE  RIGHTS  OF  THE  PARTIES  TO  INSURANCE. 

on  his  own  account,  without  any  stipulation  that  the  mortgagor 
shall  pay  the  premium,  he  cannot  charge  it  to  the  mortgagor/ 
So,  if  the  premium  of  such  insurance  is  not  to  be  charged  to 
the  mortgagor,  the  mortgagee  cannot  claim  the  benefit  of  a 
payment  of  the  insurance.^ 

When  the  mortgage  stipulates  that,  upon  the  failure  of  the 
mortgagor  to  keep  up  the  insurance  for  the  benefit  of  the  mort- 
gagee, the  mortgagee  may  insure,  upon  failure  of  the  mortgagor 
to  insure,  the  mortgagee  may  take  out  a  policy  on  the  property 
and  charge  the  same  to  the  mortgagor ;  ^  but  he  cannot  charge 
for  a  larger  amount  than  is  stated  in  the  condition.* 

Whatever  insurance  the  mortgagee  takes  out  upon  his  own 
account,  with  no  agreement  with  the  mortgagor,  nor  stipula- 
tion in  the  mortgage  that  the  mortgagor  shall  pay  the  premium, 
he  must  pay  it  himself.^ 

If,  however,  the  policy  contains  no  stipulation  for  subroga- 
tion in  case  of  payment  to  the  mortgagee,  and  there  is  any 
arrangement  between  the  mortgagor  and  mortgagee,  either 
verbal  or  written,  by  which  the  mortgagor  becomes  liable  to 
pay  for  the  insurance,  he  is  entitled  to  the  benefit  thereof,  and 
to  have  the  insurance  applied  in  liquidation  of  the  mortgage 
debt  2oro  tanfo  in  case  of  loss.  His  right  in  this  respect  does 
not  depend  upon  the  fact  that  he  has  paid  for  the  insurance, 
nor  whether  the  mortgagee  procured  the  insurance,  intending 
to  look  to  the  mortgagor  for  reimbursement  of  the  premium, 
but  it  depends  upon  whether  he  is  liable  to  the  mortgagee 
therefor  under  any  agreement,  express  or  implied.^ 

^Dobson  V.  Land,  8  Hare,  216;  Nordyke  r.  Gery.  112  Ind.  535  ;  Saunders  v. 
Frost,  5  Pick.  (Mass.)  259^ 

2  Pendleton  v.  Elli(itt,  (37  Mich.  490 ;  Insurance  Co.  v.  Woodbury,  45  Me. 
447;  White  v.  Brown,  2  Cush.  (Mass.)  412;  Stinchfleld  ?'.  Milliken,  71  Me. 
567. 

'Overby  v.  Build.  &  Loan  Asso.,  81  N.  Car.  56;  Fowley  v.  Palmer,  5  Gray 
(Mass.),  549;  Barthell  v.  Syverson,  54  Iowa,  160. 

*  Conover  v.  Grover,  31  N.  J.  Eq.  539. 

5  Pierce  v.  Faunce,  53  Me.  351 ;  Clark  v.  Smith,  Saxt.  (N.J.  Eq.)  121 ;  Faure 
V.  Winans,  Hopk.  (N.  Y.)  283. 

« Pendleton  v.  Elliott,  67  Mich.  496 ;  Cone  v.  Ins.  Co.,  60  N.  Y.  619,  624 ; 
Kernochan  v.  Ins.  Co.,  17  N.  Y.  428,  441. 


insurable  interests.  617 

§  575.  Statutory  Provisions  that  the  Mortgagee  shall 
HAVE  Premiums  Paid  by  Him  Refunded. — In  Connecticut  it 
is  provided  by  statute  that  premiums  paid  on  insurance  of  any 
property  by  the  mortgagee,  for  insuring  his  interest  therein 
against  loss  by  fire,  shall  be  deemed  to  be  a  part  of  the  mort- 
gage debt,  and  shall  be  refunded  by  him  before  he  can  be  re- 
quired to  release  his  mortgage.^ 

So  in  England  a  statute  provides  that  the  premiums  paid  by 
the  mortgagee,  which,  by  the  terms  of  the  deed  should  be  paid 
by  the  mortgagor  on  the  insurance,  shall  be  added  to  the  prin- 
cipal sum  secured  by  the  mortgage.^ 

§  576.  Under  Condition. — The  mortgagee  has  no  right  to 
add  the  cost  of  insurance  of  his  interest  to  the  debt,  where  there 
is  no  condition,  and  no  direct  covenant,  that  the  mortgagor 
shall  keep  the  premises  insured  for  the  benefit  of  the  mort- 
gagee, and  in  case  of  default  the  latter  may  insure  at  the 
former's  expense.  The  rule  is  the  same  under  a  condition  as 
under  a  direct  covenant.^  Neither  has  the  mortgagee  any 
right  to  add  the  cost  of  repairs  to  the  mortgage  debt,  unless  a 
stipulation  so  declares.* 

§577.  The  Mortgagee  May  Become  AN  Insurer. — Where 
the  mortgagee  charges  the  mortgagor  with  premiums  for  an 
insurance  for  a  certain  time  as  part  of  the  loan,  and  includes 
the  amount  in  the  mortgage  as  a  part  of  the  principal,  he  is 
bound  to  keep  the  policies  alive ;  if  in  consequence  of  his  neg- 
lect to  pay  the  premiums  the  policies  become  extinguished,  he 
is  liable  as  an  insurer.  If  the  mortgagee  be  a  bank  and  it  is 
claimed  that  therefore  it  cannot  be  an  insurer  for  want  of 
power,  then  it  may  be  held  liable  for  its  neglect  in  not  keeping 
the  insurance  in  force.^ 

If  the  mortgagee  sees  fit  for  the  purpose  of  gain  to  take  the 
place  of  the  insurer,  he  can  make  no  change  in  the  liability.® 

>  Gen.  Stat.  L875,  p.  358. 
*  23  &  24  Vict.,  ch.  145,  sects.  11.  12. 
,     'Nichols  c.  Baxter,  5  R.I.  491. 
*Barthell  v.  Syverson,  54  Iowa,  160. 
*Soule  r.  Bank,  45  Barb.  (N.  Y.)  111. 
*Ex  parte  Andrews,  2  Rose,  410 ;  Morland  v.  Isaac,  20  Beav.  389. 


618      relative  rights  op  the  parties  to  insurance. 

§  578.  Rebates  on  Account  of  the  Premature  Termina- 
tion OF  the  Risks. — Insurance  companies,  in  case  of  a 
premature  termination  of  the  risks,  give  a  rebate  to  the  in- 
sured, in  which  case  the  company  retains  the  customary  short 
rates  for  the  time  the  poHcy  has  been  in  force.  But  in  order 
to  avail  one's  self  of  this  rebate  he  must  comply  with  the  con- 
ditions of  the  insurance. 

If  the  mortgagor  sells  the  property,  and  the  policy  has  a 
condition  that  such  sale  will  avoid  the  insurance,  he  cannot 
then  ask  for  the  rebate.  In  order  to  avail  himself  of  the  re- 
bate, he  should  have  surrendered  the  policy  innnediatoly  be- 
fore the  sale,  with  the  consent  of  the  insurer,  or  he  should 
have  sold  the  policy  to  the  purchaser,  and  obtained  the  con- 
sent of  the  insurer  to  the  assignment.  If  he  does  neither,  he 
has  no  right  to  a  rebate,  as  the  policy,  after  sale  of  the  property, 
is  null  and  void.^ 

If,  however,  the  mortgagee  enters  and  forecloses  and  sells 
the  property  under  a  power  contained  in  the  mortgage,  and 
cancels  the  policy  which  was  assigned  to  him  by  the  mortga- 
gor as  collateral  security,  and  receives  a  rebate,  the  amount  re- 
ceived belongs  to  the  mortgagor — that  is,  the  mortgagee  would 
have  to  account  for  it  to  the  mortgagor.^ 

Where  a  policy  of  insurance  is  assigned  to  a  mortgagee  as 
collateral  security  for  the  mortgage  debt,  he  is  entitled  to  the 
deposit  premiums,  if  upon  sale  of  the  mortgaged  premises  upon 
a  foreclosure  there  is  not  enough  realized  to  satisfy  the  debt.^ 

It  is  clear  that  an  assignment  to  the  mortgagee  of  the  policy 
does  not  alter  the  effect  or  nature  of  it,  which  remains  as  it 
was  at  first,  an  insurance  of  the  mortgagor's  estate  as  the  equit- 
able owner  of  the  premises,  and  that  what  the  mortgagee  ac- 
quires is  not  an  interest  in  the  insurance  as  such,  but  a  right 
to  appropriate  the  amount  which  may  become  due  under  the 
contract  to  the  payment  of  the  mortgage  debt.* 

1  Parker  v.  Ins.  Co.,  127  Mass.  499,  501. 

"^  Felton  V.  Brooks,  4  Gush.  (Mass.)  203  ;  Merrifield  v.  Baker,  9  Allen  (Mass.), 
29. 

^Rafsnyder's  Appeal,  88  Pa.  St.  436. 

*See  State  Ins.  Co.  v.  Roberts,  31  Pa.  St.  438;  Carpenter  t'.  Washington 


insurable  interests.  619 

Article  6. 
Alienation  of  Mortgaged  Property. 

§  579.  Stipulation  Against  Alienation.  I  584.  Entry  to  Foreclose. 

§  580.  Expiration  of  the  Right  to  Re-  |  585.  Alteration  of  Ownership. 

deem.  §  586.  Sale  of  Premises  After  Assign- 

§  581.  Provisions   In   Policy  Against  ment  of  Policy  to  Mortgagee. 

Incumbrance.  §  587.  A  Conveyance  by  the  Owner 

§  582.  Deeds  Absolute    Given    as    a  with  a  Mortgage  Back. 

Mortgage.  §  588.  Parol  Evidence. 

I  583.  Change  of  Title  by  Foreclos- 
ure. 

§  579.  Stipulation  Against  Alienation. — Insurance  poli- 
cies generally  stipulate  that  the  owner  shall  not  alienate  the 
insured  property,  and  that  in  case  he  does  the  policy  shall  be 
void.  The  question  often  arises  whether  a  mortgage  of  the 
property  insured  is  an  alienation.  The  answer  is  in  the  neg- 
ative. The  term  alienation  has  a  legal  technical  meaning,  and 
any  transfer  of  real  estate,  short  of  a  conveyance  of  title,  is  not 
an  alienation  of  the  estate,  no  matter  in  what  form  the  sale 
may  be  made ;  unless  the  title  is  conveyed  to  the  purchaser 
the  estate  is  not  alienated.^ 

So  a  mortgage  of  the  insured  property  is  not  an  alienation 
or  change  of  title,  whether  executed  before  or  after  the  insur- 
ance ;  there  can  be  no  alienation  until  the  mortgagor's  title  is 
divested  by  foreclosure.^ 

Providence  Ins.  Co.,  16  Pet.  (U.  S.)  495,  512 ;  Conover  v.  Ins.  Co.,  17  N.  Y. 
391 ;  Macomber  v.  Ins.  Co.,  8  Cush.  (Mass.)  133 ;  Hale  v.  Ins.  Co.,  6  Gray 
(Mass.),  169. 

1  Niagara  F.  Ins.  Co.  v.  Scammon  (111.),  28  N.  E.  Rep.  919,  affirming  35  111. 
App.  582 ;  Commercial  Union  Assn.  Co.  v.  Scammon,  126  111.  355 ;  ^Masters  v. 
Ins.  Co.,  11  Barb.  (N.  Y.)  624 ;  Allen  v.  Ins.  Co.,  19  Barb.  (N.  Y.)  445 ;  Tillou 
V.  Ins.  Co.,  5  N.  Y.  405 ;  Folsom  v.  Ins.  Co.,  9  N.  H.  355 ;  Lazarus  v.  Ins.  Co.,  5 
Pick.  (Mass.)  76 ;  Jackson  v.  Ins.  Co.,  23  Pick.  (Mass.)  418 ;  Adams  v.  Ins.  Co., 
29  Me.  294. 

2  Friezen  v.  Ins.  Co.,  .30  Fed.  352 ;  Aurora  F.  Ins.  Co.  v.  Eddy,  55  111.  213  ; 
Hartford  Ins.  Co.  v.  Walsh,  54  111.  164 ;  Com.  Ins.  Co.  v.  Spankneble,  52  111. 
53  ;  Hanover  F.  Ins.  Co.  v.  Connor,  20  111.  App.  297  ;  Kronk  v.  Ins.  Co.,  91  Pa. 
St.  300 ;  Conover  v.  Ins.  Co.,  3  Denio  (N.  Y.),  2.54  ;  1  N.  Y.  290;  Shepherd  v. 
Ins.  Co.,  38  N.  H.  232 ;  Smith  v.  Ins.  Co.,  50  Me.  96 ;  Powers  v.  Ins.  Co.,  136 
Mass.  108;  Indiana  Mut.  F.  Ins.  Co.  v.  Coquillard,  2  Ind.  645.  Compare 
M'Culloch  V.  Ins.  Co.,  8  Blackf.  (Ind.)  50 


620         RELATIVE  RIGHTS  OF  THE  PARTIES  TO  INSURANCE. 

So  a  policy  is  not  void  by  a  mortgage  given  upon  the  prop- 
erty after  the  insurance  is  obtained  by  the  mortgagor,  and  the 
foreclosure  of  such  mortgage  by  sale  of  the  property  does  not 
avoid  the  policy  if  the  period  of  redemption  has  not  expired, 
and  no  change  has  taken  place  in  the  possession.^ 

A  mortgage  does  not  effect  a  change  in  the  title  within  the 
meaning  of  the  clause  "  change  ...  by  sale,  transfer,  or 
conveyance."  ^ 

But  a  sale  of  an  interest  in  the  property,  with  a  mortgage 
back  to  secure  the  purchase-money,  effects  a  change  in  the 
title,  and  is  therefore  an  alienation  which  avoids  the  policy.^ 
But  a  policy  upon  farm  stock  and  implements  covers  the 
Ijroperty  on  hand  at  the  place  mentioned  when  the  loss  occurs, 
even  though  no  one  of  the  identical  articles  destroyed  was 
there  when  the  policy  issued,  and  a  sale  or  incumbrance  of  any 
such  property  avoids  the  policy  only  as  to  the  specific 
articles  themselves.*  Without  the  words  "  or  any  part  thereof," 
a  sale  of  a  part  does  not  affect  the  remainder.^ 

§  580.  Expiration  of  the  Right  to  Redeem. — If  the  fore- 
closure has  been  complete,  and  the  right  to  redeem  has  expired, 
there  has  been  an  alienation.^  But  so  long  as  the  period  of 
redemption  has  not  expired,  a  foreclosure  sale  is  not  an  alien- 
ation.'' And  when  the  sale  is  complete  but  invalid,  there  has 
been  no  alienation.* 

1  IjOJ  v.  Ins.  Co.,  24  Minn.  315  ;  Com.  Ins.  Co.  v.  Spankneble,  52  111.  53 ; 
Aurora  F.  Ins.  Co.  v.  Eddy,  55  111.  213 ;  Byers  v.  Ins.  Co.,  35  Ohio  St.  606 ; 
Smith  V.  Ins.  Co.,  50  Me.  96  ;  Judge  v.  Ins.  Co.,  132  Mass.  521. 

2  Ayres  v.  Ins.  Co.,  17  Iowa,  176 ;  Judge  v.  Ins.  Co.,  132  Mass.  521 ;  Shep- 
herd V.  Ins.  Co.,  38  N.  H.  232  ;  Howard  Ins.  Co.  v.  Bruner,  23  Pa.  St.  50 ;  Pol- 
lard V.  Ins.  Co.,  42  Me.  221 ;  Byers  v.  Ins.  Co.,  35  Ohio  St.  606:  Aurora  Fire 
Ins.  Co.  V.  Eddy,  55  111.  213. 

3  Home  Mut.  F.  Ins.  Co.  v.  Hauslein,  60  111.  521. 

*Dwelling-House  Ins.  Co.  v.  Butterly,  33  111.  App.  626;  American  Ins.  Co. 
V.  Kothchild,  82  III.  166 ;  City  Fire  Ins.  Co.  v.  Mark,  45  111.  482. 

^Dacey  v.  Ins.  Co.,  21  Hun  (N.  Y.),  83;  Merrill  v.  Ins.  Co.,  73  N.  Y.  452; 
Com.  Ins.  Co.  v.  Spankneble,  52  111.  53.  See,  also,  Loy  v.  Ins.  Co.,  24  Minn. 
315  ;  Judge  v.  Ins.  Co.,  132  Mass.  522 ;  Shepherd  v.  Ins.  Co.,  38  N.  H.  240. 

« Loy  V.  Ins.  Co.,  24  Minn.  315. 

'Hopkins  Manuf.  Co.  v.  Ins.  Co.,  48  Mich.  148. 

^  Scammon  v.  Ins.  Co.,  20  111.  App.  500 ;  Insurance  Co.  v.  Sampson,  38  Ohio 
St.  672. 


INSURABLE    INTERESTS.  621 

So  when  a  sale  and  foreclosure  had  been  entered,  but  no  deed 
had  been  delivered,  it  was  held  there  had  been  no  alienation/ 
And  if  the  policy  was  issued  during  foreclosure  proceedings, 
and  a  loss  happens  after  sale,  the  insurer  is  liable.^ 

§  581.  Provisions  in  Policy  Against  Incumbrance. — Some 
policies  provide  against  incumbering  the  property  insured. 
Where  there  is  such  a  provision  a  mortgage  of  the  property  after 
insurance  will  avoid  the  policy.  The  policy  often  provides 
against  incumbrance  at  the  time  it  is  issued.  Under  such  a 
provision,  a  concealed  mortgage  existing  at  the  time  of  the 
insurance  or  one  taken  after  will  avoid  the  policy.^ 

§  582.  Deeds  Absolute  Given  as  a  Mortgage. — Many 
courts  hold  that  a  conveyance  by  a  deed  absolute,  though  in 
the  nature  of  a  mortgage  and  meant  for  a  mortgage  is  an 
alienation  within  the  terms  of  the  policy,  and  therefore  invali- 
dates the  policy.* 

If  a  defeasance  be  executed  at  the  time  of  the  conveyance, 
if  not  recorded  with  the  deed,  it  makes  no  difference,  and  the 
policy  will  be  avoided.^ 

But  this  is  not  the  general  rule  and  is  not  with  the  current 
of  authority.  If  the  deed  absolute  was  not  to  convey  an  abso- 
lute estate,  but  to  give  security  for  the  performance  of  a  duty 
by  the  mortgagor,  such  a  transaction  is  a  mortgage,  although 
the  bond  to  reconvey  is  not  recorded.'' 

The  rights  of  the  parties  under  a  contract  of  insurance  are 
to  be  settled  according  to  the  relations  which  are  in  fact 
created  between  the  parties  to  the  conveyance,  and  hence,  such 
a  conveyance  is  onl}^  a  mortgage  and  not  an  alienation.^ 

1  Marts  V.  Ins.  Co.,  44  N.  J.  L.  478. 

2  German  Ins.  Co.  v.  Churchill,  26  111.  App.  206. 

^  Mallory  v.  Ins.  Co.,  65  Iowa,  450 ;  Schumitsch  v.  Ins.  Co.,  48  Wis.  26 ;  Ellis 
V.  Ins.  Co.,  GS  Iowa,  578. 

*  Western  INIass.  Ins.  Co.  v.  Riker,  10  Mich.  279;  Dreher  v.  Ins.  Co.,  18 
Mo.  128  ;  Dix  V.  Ins.  Co.,  22  111.  272. 

^Tomlinson  ?-.  Ins.  Co.,  47  Me.  2.32. 
.     6]\Iun3hy  V.  Calley,  1  Allen  (Mass.),  107  ;  Foote  v.  Ins.  Co.,  119  Mass.  259 ; 
Walsh  V.  Ins.  Co.,  127  Mass.  38.3. 

'Walsh  V.  Ins.  Co.,  127  Mass.  383. 


u 


622         KELATIVE  RIGHTS  OF  THE  PARTIES  TO  INSURANCE. 

Chief  Justice  Morton  says  that  the  vendor  is  in  the  position 
of  one  who,  after  a  policy  is  issued  to  him,  mortgages  the 
property  insured,  and  the  question  is  whether  such  mortgage 
avoids  a  policy  under  the  provision  that  it  shall  be  void  "  if 
the  said  property  shall  be  sold  "  without  the  written  assent  of 
the  insurer.  This  would  not  be  the  effect  of  a  mortgage,  and 
as  such  a  sale  is  only  a  mortgage,  and,  hence,  it  cannot  avoid 
the  policy. 

Alienation  is  a  broader  term  than  sale.  A  mortgage  is  not 
a  sale,  and  it  cannot  fairly  be  contended  that  a  policy  on  such 
property  is  avoided  by  absolute  sale  with  a  bond  to  reconvey 
which  was  never  recorded,^ 

And,  generally,  a  conveyance  which  equity  treats  as  a  mort- 
gage does  not  avoid  the  policy.^ 

§  583.  Change  op  Title  by  Foreclosure. — When  a  mort- 
gagee, whose  interest  has  been  insured,  forecloses  and  acquires 
a  complete  title  to  the  property,  his  interest  is  not  diminished 
and  the  policy  is  not  avoided  by  a  provision  in  it  providing 
that  when  all  interest  on  the  part  of  the  assured  has  ceased  the 
policy  shall  terminate.^ 

And  when  a  policy  provides  that  it  shall  be  void  in  case  of 
transfer  or  change  of  title  of  the  property  insured,  or  foreclos- 
ure of  mortgage  thereon,  the  execution  of  a  trust  deed  on  the 
property  after  the  insurance  was  made,  but  no  sale  had  been 
made  at  the  time  of  the  loss  will  not  avoid  the  policy.* 

But  when  foreclosure  has  taken  place  and  the  sale  has  been 
made  and  the  time  of  redemption  has  expired,  then  a  change 
of  title  has  occurred  which  is  an  alienation  within  the  terms  of 
the  policy.^ 

However,  w^hen  there  is  a  right  of  redemption  after  sale,  and 

^  Bryan  v.  Ins.  Co.,  145  Mass.  389. 

''Hodges  V.  Ins.  Co.,  8  N.  Y.  416;  Holbrook  v.  Ins.  Co.,  1  Curtis,  C.  C.  193; 
Smith  V.  Ins.  Co.,  58  Me.  96.    See,  also,  Tittemore  v.  Ins.  Co.,  20  Vt.  546 

»Esch.  V.  Ins.  Co.,  78  Iowa,  334 ;  Bragg  v.  Ins.  Co.,  25  N.  H.  289. 

*Nease  r.  Ins.  Co.,  32  W.  Va.  283. 

^Macomber  v.  Ins.  Co.,  8  Cush.  (Mass.)  133;  McKissick  i).  Ins.  Co.,  50  Iowa, 
116 ;  Mt.  Vernon  Manuf.  Co.  v.  Ins.  Co.,  10  Ohio  St.  347 ;  Georgia  Home  Ins. 
Co.  V.  Kinnier,  28  Gratt.  (Va.)  88 ;  McLaren  v.  Ins.  Co.,  5  N.  Y.  151. 


INSURABLE    INTERESTS.  623 

the  possession  remains  the  same  until  the  time  of  redemj)tion 
expires,  there  has  been  no  change  of  title  within  the  meaning 
of  the  provision  of  the  policy/ 

A  foreclosure  of  a  mortgage  is  such  a  transfer  or  sale  of  the 
property  as  will  violate  a  condition  "  if  any  change  shall  take 
place  in  the  title  or  possession  of  the  property,"  or  "  if  the 
property  is  disposed  of,  so  that  all  interest  on  the  j^art  of  the 
assured  has  ceased,"  and  render  the  policy  void.^ 

§  584,  Entry  to  Foreclose. — In  many  policies  a  con- 
dition is  inserted  avoiding  a  policy  if  entry  is  made  to  fore- 
close.    In  such  case  an  entry  will  avoid  the  policy.^ 

Such  entry  avoids  the  policy  without  any  further  formality 
or  process  on  the  part  of  the  mortgagee,  and  it  will  deprive  the 
assured  of  all  right  and  title  under  the  policy.*  So  when  fore- 
closure proceedings,  under  this  condition,  are  commenced  upon 
a  mortgage  covering  the  property  insured,  it  avoids  the  policy.^ 
So  where  the  proceedings  are  commenced  and  the  sale  of  the 
property  advertised.^ 

A  condition  in  a  policy  that  the  entry  to  foreclose  the 
mortgage  shall  be  deemed  an  alienation  of  the  property  and 
avoid  the  policy,  does  not  act  when  the  sale  and  decree  are  set 
aside  by  the  court.^ 

§585.  Alteration  of  Ownership. — A  mortgage  is  a 
material  alteration  in  the  ownership  of  property  insured  ;  and, 
under  a  by-law  of  an  insurance  company  which  provides  that 
"  all  alienation  and  alterations  in  the  ownershij),  situation,  or 
state  of  the  property  insured  by  this  company,  in  any  material 
particular,  shall  make  void  any  policy  covering  such  property, 
unless  consented  to  or  approved   by  the  directors  in  writing 

'  Loy  r.  Ins.  Co.,  24  Minn.  315  ;  Brunswick  Savings  Inst.  v.  Ins.  Co.,  68  Me. 
31.3 ;  Campbell  v.  Ins.  Co.,  51  Me.  69. 
^  Bishop  r.  Ins.  Co.,  45  Conn.  4.30. 
'Armstrong  v.  Ins.  Co.,  56  Hun  (N.  Y.),  399. 
*McIntire  v.  Ins.  Co.,  102  Mass.  230. 

*  Meadows  v.  Ins.  Co.,  62  Iowa,  387 ;  Titus  v.  Ins.  Co.,  81  N.  Y.  410. 
«  Titus  V.  Ins.  Co.,  81  N.  Y.  410. 
^  Georgia  Home  Ins.  Co.  v.  Kinnier,  28  Gratt.  (Va.)  88. 


624         RELATIVE  RIGHTS  OF  THE  PARTIES  TO  INSURANCE. 

within  thirty  days,"  a  mortgage  will  avoid  a  policy  issued 
"  under  tlie  conditions  and  limitations  expressed  in  the  by- 
laws," unless  so  consented  to  or  approved.^ 

A  mortgage  is  an  alteration  in  the  ownership.  It  alters  a 
legal  to  an  equitable  ownership.  It  introduces  a  new  owner, 
to  the  extent  of  the  sum  secured  by  the  mortgage,  and  to  the 
same  extent  it  takes  away  the  direct  interest  of  the  assured. 

It  is  not  necessary  that  the  mortgage  should  affect  the  lien 
of  the  insurers  in  order  to  make  it  material.^ 

So  a  mortgage  is  a  violation  of  a  condition  against  an  aliena- 
tion "  in  whole  or  in  part,"  and  avoids  such  policy.^ 

An  undischarged  mortgage  in  some  States  is  held  to  be  an 
incumbrance,  though  wholly  paid,  and  may  avoid  the  policy 
where  incumbrances  are  stipulated  against  by  the  insurers.* 
But  the  doctrine  generally  is  that,  if  the  mortgage  debt  has 
been  paid,  the  undischarged  mortgage  is  not  an  incumbrance, 
and  will  not,  therefore,  avoid  the  policy.® 

When  the  condition  is  that  the  insurance  shall  be  null  and 
void  "  if  the  property  shall  hereafter  become  mortgaged  or  in- 
cumbered," a  part  may  be  mortgaged  without  invalidating  the 
policy.® 

§  586.  Sale  of  Premises  after  Assignment  of  Policy  to 
Mortgagee. — An  absolute  assignment  or  sale  of  insured  prop- 
erty after  insurance  is  effected,  takes  away  the  insurable  interest 
of  the  vendor,  and  creates  a  bar  to  the  right  of  action  on  the 
policy,  unless  by  some  means  its  existence  has  been  preserved 
for  the  benefit  of  the  assignee. 

However,  after  the  assignment  of  the  policy  of  insurance, 

lEdmands  v.  Ins.  Co.,  1  Allen  (Mass.),  311. 

^  Davenport  v.  Ins.  Co.,  6  Cush.  (Mass.)  340 ;  Packard  v.  Ins.  Co.,  2  Gray 
(Mass.),  3.34. 

3  Abbott  r.  Ins.  Co.,  30  Me.  414 ;  Bates  v.  Ins.  Co.,  2  Cin.  Sup.  Ct.  (Ohio)  195 ; 
Gould  r.  Ins.  Co.,  16  Hun  (N.  Y.),  538. 

*  Warner  v.  Middlesex  Mut.  Asso.  Co.,  21  Conn.  444 ;  Muma  v.  Ins.  Co.,  22 
Up.  Can.  Q.  B.  214. 

5  Murrill  v.  Ins.  Co.,  73  N.  Y.  452 ;  Hawkes  v.  Ins.  Co.,  11  Wis.  188 ;  Smith 
V.  Ins.  Co.,  60  Vt.  682. 

6  Phoenix  Ins.  Co.  v.  Lorenz  (Ind.),  29  N.  E.  Rep.  604. 


INSURABLE    INTERESTS.  625 

with  the  consent  of  the  insurer,  the  assured  can  do  no  act 
affecting  the  rights  of  the  assignee  without  the  privity  of  the 
latter/ 

Thus,  if  a  mortgagor  has  assigned  the  policy  to  the  mort- 
gagee, with  consent  of  the  insurers,  and  then  sells  the  property, 
this  violation  of  the  condition  does  not  affect  this  assignee,  the 
mortgagee.^ 

After  the  assured  has  parted  with  all  his  interest  in  the 
property  insured,  he  stands  as  though  he  never  had  any  right 
in  the  subject  of  insurance,  and  therefore  cannot  effect  a  valid 
policy  upon  it.  The  contract  of  insurance  is  one  of  indemnity, 
and  nobody  can  recover  in  respect  to  the  loss  who  is  not  really 
interested.^ 

§  587.  A  Conveyance  by  the  Owner  with  a  Mortgage 
Back. — Notwithstanding  a  conveyance  of  the  insured  property, 
if  it  be  in  the  nature  of  a  mortgage  or  in  trust,  with  a  resulting 
trust  to  the  insured,  so  that  he  has  an  insurable  interest  in  the 
property,  he  may,  nevertheless,  recover  to  the  extent  of  his 
actual  loss,  provided  it  does  not  exceed  the  sum  insured.  The 
transfer  of  the  property  will  onl}'^  prevent  a  recovery  on  his 
policy  by  the  assignor  so  far  as  it  deprives  him  of  his  insurable 
interest,  without  regard  to  the  inquiry  whether  the  interest 
which  remains  after  assignment  be  of  the  same  nature  and 
character  as  that  which  existed  before  it  was  made.  Hence, 
the  owner  of  real  estate,  which  he  has  sold  after  insurance,  who 
retains  the  legal  title  as  a  security  for  the  purchase-money,  may 
maintain  an  action  for  a  loss  after  the  contract  of  sale.* 

So  where  the  owner  of  insured  property  sold  it  to  a  party 
who  simultaneously  reconveyed  it  to  a  trustee  to  secure  the 
owner  for  the  purcbase-money,  the  owner  has  an  insurable  in- 
terest, and  may  recover,  in  case  of  loss,  not  to  exceed  the  sum 

'  Boynton  v.  Ins.  Co.,  If)  Barb.  (N.  Y.)  254 ;   Traders'  Ins.  Co.  v.  Robert,  9 
Wond.  (N.  Y.)  404 ;  Conover  ?■.  Ins.  Co.,  1  N.  Y.  290. 

'Foster  v.  Ins.  Co.,  2  Gray  (Mass.),  216;  Bragg  v.  Ins.  Co.,  25  N.  H.  289; 
Eogg  r.  Ins.  Co.,  10  Cu.*.  (Mass.)  337. 

^  Morrison  v.  Ins.  Co.,  IS  Mo.  262. 

*  Trumbull  v.  Ins.  Co.,  12  Ohio,  305 ;  Stetson  v.  Ins.  Co.,  4  Mass.  330. 
40 


626         RELATIVE  RIGHTS  OF  THE  PARTIES  TO  INSURANCE. 

insured.^  So  if  the  transaction  be  a  mere  conditional  sale,  it 
will  not  avoid  the  policy.  Thus,  where  the  holder  of  the 
property  executed  a  warranty  deed  of  the  premises,  and  at  the 
same  time  received  back  a  deed  of  the  same  premises,  with  a 
condition  annexed  that  if  the  grantor  in  that  deed  should 
pay  to  the  grantee  the  sum  of  $2,000  within  three  years,  and 
should  allow  the  grantee  in  that  deed  to  retain  possession  of 
the  premises  until  that  sum  should  be  paid,  then  the  second 
deed  should  be  void,  otherwise  in  force,  and  it  appeaued  that 
the  grantor  in  the  second  deed  never,  in  any  form,  agreed  to 
pay  the  sum  mentioned,  but  it  was  wholly  optional  with  him 
whether  to  do  so  or  not,  it  was  held,  that  this  amounted  merely 
to  a  conditional  sale,  and  was  not  such  an  alienation  as  would 
avoid  the  policy.^  But  when  the  policy  has  a  clause  avoiding 
it,  provided  the  property  is  alienated  "by  sale  or  otherwise," 
tlien  if  the  vendor  sells  it,  and  takes  back  a  mortgage  to  secure 
the  purchase-money,  the  policy  is  invalidated,  though  the 
vendor  retains  possession  until  the  purchase-money  is  paid.^ 
And  when  the  whole  transaction  is  not  a  mortgage  in  fact,  the 
policy  is  invalidated.^  But  a  conveyance  and  reconveyance, 
when  simultaneous,  do  not  divest  the  title  of  the  vendor  at  all, 
and  hence  no  alienation  which  could  vitiate  the  policy.^ 

So  a  deed  of  conveyance  and  a  mortgage  back  constituting 
one  contract,  when  contemporaneous,  is  not  an  alienation,* 
When  the  owner  retains  the  legal  title  as  a  security  for  the 
purchase-money,  he  may  maintain  an  action  for  a  loss,  after 
the  contract  of  sale7 

§  588.  Parol  Evidence. — Parol  evidence  is  admissible  to 
show  what  the  agreement  was  between  the  mortgagor  and  the 

J  Morrison  v.  Ins.  Co.,  18  Mo.  262. 

'Tittemore  v.  Ins.  Co.,  20  Vt.  546. 

^Tittemore  v.  Ins.  Co.,  20  Vt.  546.  See,  also,  Moulthrop  v.  Ins.  Co.,  52  Vt, 
123;  German-American  Bank  v.  Ins.  Co.,  8  Mo.  App.  401. 

*  Porter  v.  Nelson,  4  N.  H.  130. 

^Tittemore  v.  Ins.  Co.,  20  Vt.  546,  553. 

*Bi<j:elow  V.  Kinney,  3Vt.  353;  Lovering  v.  Fogg,  18  Pick.  (Mass.)  540; 
Stetson  V.  Ins.  Co.,  4  Mass.  330 ;  Conover  v.  Ins.  Co.,  3  Denio  (N.  Y.),  254, 

'  Trumbull  v.  Ins.  Co.,  12  Ohio,  305 ;  Stetson  v.  Ins.  Co.,  4  Mass.  330. 


INSURABLE    INTERESTS.  627 

mortgagee  as  to  the  insurance  on  the  property.  And  proof  of 
a  parol  agreement  that  the  mortgagee  should  keep  the  prem- 
ises insured,  and  the  mortgagor  should  pay  the  premiums  does 
not  conflict  with  the  rule  excluding  parol  evidence  to  vary  or 
explain  a  written  contract.  The  contract  between  the  insurer 
and  the  mortgagee  is  unaffected  by  it.  Such  evidence  is 
material  as  showing  the  mortgagor's  right  to  have  the  avails  of 
the  policy,  in  case  of  loss,  applied  to  the  payment  of  the  debt, 
and  that,  therefore,  the  insurer  has  no  right  to  subrogation 
in  respect  to  the  mortgage,  after  paying  the  loss.^ 

^  Kernochan  v.  Ins.  Co.,  17  N.  Y.  428. 


PART  III. 

REGISTRATIOIlir  OF  THE  INSTRUMENT. 


CHAPTER  XVI. 


REGISTRATION. 

Article  1. 

Statutory  Provisions. 

I  589.  Ancient  Registration. 

I  616.  Missouri. 

§  590.  In  General. 

I  617.  Montana. 

I  591.  Alabama. 

I  618.  Nebraska. 

I  592.  Alaska  Territory. 

§  619.  Nevada. 

I  593.  Arizona  Territory. 

§  620.  New  Hampshire. 

I  594.  Arkansas. 

§  621.  New  Jersey. 

1  595.  California. 

I  622.  New  Mexico  Territory 

§  596.  Colorado. 

§  623.  New  York. 

§  597.  Connecticut. 

I  624.  North  Carolina. 

?  598.  Delaware. 

§  625.  North  Dakota. 

I  599.  District  of  Columbia. 

§  626.  Ohio. 

I  600.  Florida. 

\  627.  Oklahoma  Territory. 

I  601.  Georgia. 

\  628.  Oregon. 

I  602.  Idaho. 

§  629.  Pennsylvania. 

\  603.  Illinois. 

\  630.  Rhode  Island. 

§  604.  Indiana. 

I  631.  South  Carolina. 

1  605.  Indian  Territory. 

§  632.  South  Dakota. 

§  606.  Iowa. 

§  633.  Tennessee. 

I  607.  Kansas. 

§  634.  Texas. 

§  608.  Kentucky. 

^  635.  Utah  Territory. 

§  609.  Louisiana. 

\  636.  Vermont. 

§  610.  Maine. 

I  637.  Virginia. 

§611.  Maryland. 

§  638.  Washington. 

§  612.  Massachusetts. 

i  639.  West  Virginia. 

§  613.  Michigan. 

1  640.  Wisconsin. 

§  614.  Minnesota.. 

§  641.  Wyoming. 

§  615.  Mississippi. 

628 

I 


REGISTRATION.  629 

§589.  Ancient  Registration. — The  Saxon  law  ran  in 
parallel  ways  with  the  civil  law,  even  to  the  registration  of  the 
instrument  in  the  county  court  or  in  a  monastery.^ 

In  feudal  times  the  pledgee  might  leave  the  pledgor  in  pos- 
session, and  still  be  secure,  by  recording  a  written  contract  of 
pledge  in  the  King's  Court.^ 

The  law  of  Attica,  in  a  remote  antiquity,  indicated  a  pledge 
without  possession  by  the  pledgor  by  a  pillar  or  tablet  set  up 
on  the  land,  inscribed  with  the  creditor's  name  and  the  amount 
of  the  debt.  The  law  of  Solon  extinguishing  mortgage  debts 
was  characterized  as  having  removed  the  pillars  from  Attica.'' 

The  Roman  law  provided  that  if  the  pledgee  took  possession, 
the  transaction  was  a  pawn ;  if  not,  it  was  an  hypothecation. 
When  the  pledgor  retained  possession,  to  make  the  hypotheca- 
tion effective,  some  notorious  act,  recognized  by  law,  must  be 
done  or  the  instrument  must  be  registered  in  a  public  office, 
where  the  parties  resided.* 

This  system  of  notice  of  an  hypothecation  by  some  notorious 
act,  recognized  by  law  or  by  registration,  was  common  to  the 
Indo-European  stock,  and  is  fully  elaborated  in  the  early  law 
of  India.* 

Under  Justinian  an  hypothecation  contract  must  be  registered 
in  a  public  office ;  under  the  Saxon  laws,  in  a  county  court  or 
a  monastery. 

'  2  Bl.  Com.  342-3. 

*  Glanv.  Lib.  X,  c.  8  :  "  Quandoque  vero  convenit  inter  deUtorem  el  creditorem  de 
re  aUqud  iyivadiatd,  acceptd  a  debitore  re  mutuatd,  si  non  sequaiur  ipsiu.t  vadii 
tradito,  quomodo  confuletur  ipsi  creditori  in  tali  cctsu,  maxim,e  cum  posait  eadem  res 
pluribus  aliis  credUoribus,  turn  prius  turn  posterius,  invadiari  f  Super  hoc  notan- 
dum  est,  quod  Curia,  domini  Regis  hujusmodi  privatas  conventionis  de  rebus  dandis 
vel  accipiendis  in  vadium,  vcl  alias  hujusmodi,  extra  Curiam  sive  etiam  in  aliis 
Curiis  quam  in  Curia  domini  Regis  facias,  lueri  non  sold  nee  warrantizare ;  et 
idea  si  non  fuerint  seruatx,  Curia  domini  Regis  se  inde  non  intromitlet,  cw  per  hoc 
dejure  diverforum  creditorum  priorum  vel  posteriorum,  aui  de  privilegio  eorum, 
non  toietur  respondere." 

Blackstone,  in  quoting  from  this  passage,  omits  "  extra  Curiam  .  .  .  fadas," 
thereby  reversing  the  sense. 
'3  Grotc's  His.  of  Greece,  part  11,  ch.  XI. 
*Sandars'  Just.  Tnst.  22;  Cod.  1,  VIII,  tit.  18,  sect.  11. 

*  Hamilton's  Hedaya,  book  XLVIII,  ch.  II. 


630  REGISTRATION   OF    THE   IMSTRUMENT. 

In  an  ancient  paper  is  found  a  mortgage  for  registration, 
dated  in  the  thirteenth  year  of  Trajan,  A.  D.  110,  from  a  bank 
called  the  Broad  Bank  of  Sarapion,  which  belonged  to  some 
Syrians  and  an  Egyptian.  It  was  executed  and  left  for  registra- 
tion to  reaffirm  an  old  mortgage  which  had  not  been  witnessed 
as  the  law  required. 

§  590.  In  General. — The  registration  of  a  mortgage  oper- 
ates as  a  constructive  notice  upon  all  subsequent  purchasers  of 
any  estate,  legal  or  equitable,  of  the  same  property.^ 

But  in  order  to  have  this  effect  the  instrument  must  be  such 
as  is  authorized  to  be  recorded,  and  the  registry  must  be  made 
in  compliance  with  the  law,  otherwise  the  registry  is  to  be 
treated  as  a  mere  nullity,  and  it  will  not  affect  a  subsequent 
incumbrancer  or  purchaser,  unless  he  has  such  actual  notice  as 
would  amount  to  fraud.^ 

Subsequent  mortgages  duly  registered  take  effect,  and  avail 
as  security  in  favor  of  their  successive  holders,  according  to 
their  priority  of  registration.^ 

Every  subsequent  purchaser  is  bound  to  take  notice  of  a 
mortgage  previously  recorded,  although  he  has  no  actual  notice 
of  it ;  and  although  he  may  in  such  cases  be  an  innocent  pur- 
chaser in  fact,  he  is  not  so  in  law.* 

The  laws  of  registration  of  the  several  States  and  Territories 
will  be  given  in  order  that  the  application  of  them  may  be 
well  understood.     England  has  several  registry  acts.^ 

The  Irish  registry  ^  acts  are  different  from  the  English,  as 
the  record  gives  absolute  priority,  and  the  doctrine  of  notice  is 
not  accepted  ;  ^  in  England,  under  the  local  registry  acts,  no- 

'  Parkist  v.  Alexander,  1  Johns.  Ch.  (N.  Y.)  394. 

"Frost  V.  Beekman,  1  Johns.  Ch.  (N.  Y.)  288 ;  Work  v.  Hooper,  24  Misg.  517. 
'Johnson  v.  Stagg,  2  Johns.  (N.  Y.)  510;   Parker  v.  Wood,  1  Dall.  (Pa.) 
436 ;  Connoly  v.  Stewart,  2  Bay  (S.  Car.),  509. 

*  Buchanan  v.  International  Bank,  78  111.  500. 

*  West  Riding  of  Yorkshire,  5  Anne,  ch.  IS ;  East  Riding  of  Yorkshire, 
and  Kingston-on-HuU,  6  Anne,  ch.  35;  Middlesex,  7  Anne.  ch.  20;  North 
Riding  of  Yorkshire,  8  Geo.  2,  ch.  6. 

*  6  Anne,  ch.  2. 

'  Bushell  V.  Bushell,  1  Sch.  &  Lef.  90,  98. 


REGISTRATION.  631 

tice  of  a  prior  unrecorded  deed  supersedes  the  effect  of  a  prior 
registry. 

The  doctrine  of  notice  as  affecting  priority  is  adopted  in  this 
country  by  all  the  States  except  Louisiana,  Ohio,  and  North 
Carolina. 

§  591.  Alabama. — Conveyances  of  unconditional  estates  and 
mortgages,  or  instruments  in  the  nature  of  a  mortgage  of  real 
property,  to  secure  any  debt  created  at  the  date  thereof,  are 
void  as  to  purchasers  for  a  valuable  consideration,  mortgagees 
and  judgment  creditors  having  no  notice  thereof,  unless  re- 
corded within  three  months  from  their  date  in  the  office  of  the 
judge  of  probate  for  the  county. 

All  other  conveyances,  mortgages,  or  deeds  of  trust,  to  se- 
cure any  debts  other  than  specified  above,  are  inoperative  and 
void  as  to  purchasers  for  a  valuable  consideration,  mortgagees 
and  judgment  creditors  without  notice,  unless  the  same  have 
been  recorded  before  the  accrual  of  the  right  of  such  pur- 
chasers, mortgagees,  or  judgment  creditors.^ 

A  written  instrument  given  as  security  for  a  debt,  contain- 
ing the  words  of  conveyance  in  prsesenti,  and  operative  only  as 
an  equitable  mortgage,  is  an  instrument  in  the  nature  of  a 
mortgage,^  and,  duly  registered,  is  constructive  notice  to  subse- 
quent purchasers.^ 

The  due  registration  of  a  mortgage  of  growing  crops  in  the 
county  in  which  the  land  lies  is  constructive  notice  of  its  ex- 
istence to  purchasers.* 

An  unrecorded  mortgage  is  valid  and  operative,  notwith- 
standing the  want  of  registration  as  against  a  judgment  cred- 
itor who  has  actual  notice  of  it  before  he  acquires  the  lien.' 
The  record  of  the  mortgage  is  not   essential    as  against  the 

'  Rev.  Code  of  1886,  sects.  1810-1812 ;  Steiner  v.  Clisby,  10  South  Rep.  240. 

''Code  of  1886,  sect.  1810. 

'  O'Neall  ('.  Seixas,  85  Ala.  80,  overruling  the  dictum  of  Bailey  v.  Timbcrlake, 
74  Ala.  221. 

*  Hudmon  v.  Du  Bose,  85  Ala.  446 ;  Mayer  v.  Taylor,  GO  Ala.  403 ;  44  Am.  Rep. 
^  522;  Marks  v.  Robinson,  82  Ala.  69. 

HVyatt  V.  Stewart,  34  Ala.  716;  Rowland  v.  Ladiga,  2^  Ala.  9 ;  Dill  v.  Camp, 
22  Ala.  244;  Boyd  v.  Beck,  29  Ala.  703. 


$32  KEGISTKATION    OF    THE    INSTRUMENT. 

piortgagor,'  or  as  against  his  creditors  other  than  judgment 
creditors.^  The  registration  of  a  mortgage  operates  as  notice 
from  the  time  it  is  left  in  the  office  of  the  probate  judge  for 
registration.^ 

§  592.  Alaska  Territory. — The  laws  of  Oregon  in  force 
May  17,  1884,  apply  to  real  estate  mortgages  unless  in  con- 
flict with  the  laws  of  the  United  States.  Every  conveyance 
must  be  recorded  in  the  county  where  the  land  lies  within  five 
days  to  be  valid  as  against  subsequent  purchasers  in  good  faith 
and  for  a  valuable  consideration.* 

§  593.  Arizona  Territory. — All  mortgages  and  deeds  of 
trust  of  lands  must  be  recorded  in  the  office  of  the  recorder  of 
the  county  in  which  the  real  estate  lies,  in  order  to  be  valid  as 
to  all  creditors  and  subsequent  purchasers.  Between  the  parties 
they  are  valid  without  record.  Every  conveyance  duly  re- 
corded takes  effect  as  to  all  subsequent  purchasers  in  good  faith 
and  for  a  valuable  consideration,  without  notice,  and  as  to  all 
creditors,  from  the  time  such  instrument  is  delivered  to  the 
recorder  for  record.^ 

§  594.  Arkansas. — Mortgages  are  acknowledged  the  same 
as  deeds,  and  are  not  liens  until  filed  for  record,  though  good 
between  the  parties.  They  must  be  filed  for  record  in  the  re- 
corder's office  for  the  county  where  the  land  is  situated.^  After 
a  deed  or  mortgage  is  filed  for  record  it  is  notice  to  all  the 
world,  but  recording  it  is  not  compulsory.^ 

Under  the  act  of  March  12,  1883,  dividing  Carroll  county 
into  two  districts,  each  district  stands  as  a  separate  county  ; 
and  a  mortgage  in  one  district  on  property  situated  in  another, 

1  Smith  V.  Bank,  21  Ala.  125. 

^  Ohio  Life  Insurance  &  Trust  Co.  v.  Ledyard,  8  Ala.  866 ;  Center  v.  Bank, 
22  Ala.  866. 

*  Leslie  v.  Hinson,  83  Ala.  266. 

*  See  section  29. 

*Rev.  Stat.  1887,  sects.  2601,  2602. 
6  Dig.  of  Stat.,  1884,  sects.  4742,  4744. 
'Mansf.  Dig.,ch.  27. 


REGISTRATION.  633 

is  not  a  lien  as  against  subsequent  mortgagees  residing  in  the 
district  in  which  the  property  is  located/ 

The  registration  of  a  mortgage  defectively  acknowledged 
conveys  no  notice,  and  the  mortgage  is  absolutely  void  as 
against  all  the  world,  save  the  parties,  even  with  actual  notice.^ 
The  acknowledgment  must  show  that  the  mortgage  was  exe- 
cuted for  the  "  consideration  "  expressed  in  it,  or  it  will  be  void 
as  to  all  persons  except  the  parties  to  it,  though  they  have 
actual  notice  of  its  existence.^ 

The  acknowledgment  of  the  execution  of  a  mortgage  for 
the  uses  and  purposes  therein  specified  is  insufl&cient  to  author- 
ize its  registration. 

The  word  "  uses  "  is  not  the  same  or  of  similar  import  as  the 
word  "  consideration,"  required  by  the  statute.  Such  a  mort- 
gage, though  recorded  is  not  a  lien  upon  the  property  except 
between  the  parties.* 

§  595.  California. — Mortgages  are  executed  and  acknowl- 
edged in  the  same  manner  as  deeds.  An  instrument  so 
acknowledged  and  proved  may  be  recorded  in  the  office  of  the 
recorder  of  the  county  wherein  the  land  lies,  and  the  record  is 
constructive  notice  of  the  contents  thereof  to  subsequent  pur- 
chasers and  mortgagees.  Though  not  recorded  they  are  valid 
between  the  parties  thereto,  and  as  to  all  persons  having  actual 
notice  of  the  same  ;  but  are  void  as  against  any  subsequent 
purchaser  or  mortgagee  of  the  same  property,  or  any  part 
thereof,  in  good  faith  and  for  a  valuable  consideration,  whose 
conveyance  is  first  duly  recorded.  An  attaching  creditor  is 
not  protected  against  such  unrecorded  deed,  if  the  deed  be 
recorded  before  any  sale  under  the  judgment  in  such  action.* 

A  mortgage  executed  by  a  married  woman  upon  her  separate 

'  Beaver  v.  Frick  Co.,  53  Ark.  18. 

*  Main  v.  Alexander,  9  Ark.  112. 
"Wright  V.  Graham,  42  Ark.  140. 

♦Martin  v.  O'Bannon,  35  Ark.  62 ;  Conner  v.  Abbott,  35  Ark.  365.  See  Dig. 
of  Stat.,  1884,  sect.  &56. 

Section  4742,  Mansf.  Dig.  providing  where  mortgages  of  non-residents  shall 
be  recorded  was  amended  in  1891 :  Act  of  Feb.  5,  1891 ;  Acts  1891,  No.  7,  p.  6. 

*  Civil  Code  1885,  sects.  1169-1177,  1214,  2950,  2952. 


634  REGISTRATION    OF    THE   INSTRUMENT. 

real  estate  is  an  "  instrument  "  and  "  conveyance  "  within  the 
meaning  of  those  words  as  used  in  the  civil  code/  and  unless 
acknowledged  by  her  after  the  examination  separate  and  apart 
from  her  husband  as  provided  by  the  code,  it  is  void ;  ^  the 
certificate  of  acknowledgment  is  as  much  an  essential  part  of 
the  execution  of  the  deed  or  mortgage  as  her  signature.^ 

A  mortgage  of  real  estate  is  void  as  against  subsequent 
mortgages  of  the  same  property  which  is  first  recorded,  and  is 
taken  in  good  faitli  and  for  a  valuable  consideration,  and  with 
actual  notice  of  the  preceding  mortgage.  This  rule  is  not 
affected  by  the  provisions  of  the  code,  repealed  in  1874,  which 
prescribed  that  the  mortgagee  is  allowed  one  day  for  every 
twenty  miles  between  his  residence  and  the  recorder's  office,  for 
recording  his  deed  or  mortgage.''  A  mortgage  can  be  renewed 
or  extended  only  with  the  same  formalities  by  which  it  can 
be  created. 

Under  the  statute  in  force  April,  1853,  which  provides  that 
every  conveyance  of  real  estate  which  shall  not  be  duly 
recorded,  shall  be  void  against  subsequent  purchasers  or  mort- 
gagees for  value,  in  good  faith,  whose  conveyance  or  mortgage 
shall  be  first  duly  recorded,  a  mortgage  executed,  after  a  deed 
to  another  person  but  recorded  before  the  deed,  has  priority.' 

§  596.  Colorado. — Trust  deeds  with  power  of  sale  to  the  trus- 
tee are  generally  used.  Deeds  and  other  instruments  relating 
to  real  estate,  are  notice  from  tlie  time  of  filing  of  the  same  for 
record  in  the  office  of  the  recorder  of  the  county  where  the  land 
is  situated,  and  take  effect  from  that  time,  as  to  subsequent 
bona  fide  purchasers  and  incumbrancers.  Such  instruments  are 
deemed  to  be  notice  from  the  time  of  filing  for  record,  though  not 
acknov\dedged  or  proven  according  to  law.  To  be  offered  in  evi- 
dence, they  must  be  acknowledged  and  proved  according  to  law. 

1  Sects.  1186,  1187. 
^Tolman  v.  Smith,  74  Cat.  345. 

»Leonis  v.  Lazzarovich,  55  Cal.  52  ;  Wedel  v.  Herman,  59  Cal.  507  ;  Joseph 
V.  Dougherty,  60  Cal.  358. 

*Odd  Fellows'  Savings  Bank  v.  Banton,  46  Cal.  603. 
*Emeric  v.  Alvarado,  90  Cal.  444. 


J 


REGISTRATION.  635 

The  cestui  que  trust  may  buy  in  at  the  foreclosure  sale,  and 
the  purchaser  is  not  required  to  see  to  the  application  of  the 
purchase-money.  The  statute  does  not  require  deeds  and 
other  instruments  to  be  recorded,  but  unless  recorded,  creditors 
and  subsequent  Durchasers  without  notice  cannot  be  affected 
thereby.^ 

Under  the  system  of  registration,  if  the  mechanic  or  mate- 
rialman fails  to  inform  himself,  the  law  will  not  relieve  him 
against  the  consequences  of  his  own  neglect.^ 

§  597.  Connecticut. — All  deeds  and  mortgages  of  land 
must  be  recorded  at  length  within  a  reasonable  time,  by  the 
town  clerk  of  the  town  where  such  lands  are  situated,  and  no 
deed  will  hold  such  lands  against  any  but  the  grantor  and  his 
heirs,  unless  so  recorded.  The  land  records  are  kept  in  each 
town,  under  care  of  the  town  clerk.  The  record  of  an  unac- 
knowledged deed,  or  of  any  instrument  creating  an  equitable  in- 
terest in  land,  is  notice  to  all  the  world  of  an  equitable  interest.^ 

An  error  made  in  the  record  of  a  deed  cannot  affect  the 
grantee  in  the  deed.  His  title  is  secure  from  the  time  the 
deed  was  left  for  record,  and  cannot  be  affected  by  anything 
that  occurs  afterward  without  his  fault.  So  where  the  record 
of  a  mortgage  is  such  as  to  suggest  a  probable  mistake  in  the 
recording,  it  puts  a  party  on  inquiry,  and  charges  him  with 
notice  of  what  the  deed  contains.^ 

§  598.  Delaware. — Mortgages  are  executed  and  acknowl- 
edged in  the  same  manner  as  deeds,  and  are  usually  accom- 
panied by  a  bond,  and  take  priority  according  to  date  of  re- 
cording in  the  proper  office,  and  become  liens  only  from  date 
of  recording.  The  lien  of  a  purchase-money  mortgage  re- 
corded within  thirty  days  after  mortgage  is  made  has  prefer- 
ence over  any  judgment  against  the  mortgagor  or  other  lien  of 
a  date  prior  to  the  mortgage.^ 

»Gen.  Stat.  1883,  ch.  18,  sects.  215-217. 
"  Tritch  V.  Norton,  10  Colo.  337. 
^  »Gen.  Stat.  1888,  sects.  2961,  2966. 
*  Lewis  r.  Hinman,  56  Conn.  55. 
SRev.Stat.,  ch.  108. 


636  REGISTRATION    OF    THE    INSTRUMENT. 

A  deed  must  be  recorded  within  three  months  after  the  seal- 
ing and  delivery  of  the  instrument.  If  it  is  not  so  recorded  it 
shall  not  avail  against  a  subsequent  bona  fide  creditor,  nor 
against  a  mortgagee  or  purchaser  for  valuable  consideration 
without  notice  of  said  deed. 

Whenever  there  is  a  conveyance  absolute  and  a  separate  de- 
feasance, the  vendee  must  cause  to  be  indorsed  thereon  and 
recorded  therewith  a  note  stating  that  there  is  such  a  defea- 
sance or  contract,  and  the  general  purport  of  it,  or  the  record- 
ing of  such  conveyance  is  of  no  effect ;  and  such  defeasance  or 
contract  must  be  duly  acknowledged  or  proved,  and  recorded 
in  the  recorder's  office  for  the  county  within  sixty  days  after 
the  day  of  making  the  same,  or  it  will  not  avail  against 
a  fair  creditor,  mortgagee,  or  purchaser  for  a  valuable  con- 
sideration to  whom  the  conveyance  is  made ;  unless  it  appear 
that  such  creditor  when  giving  the  credit,  or  such  mortgagee 
or  purchaser  when  advancing  the  consideration,  had  notice  of 
such  defeasance  or  contract.' 

§  599.  District  of  Columbia. — All  deeds,  deeds  of  trust, 
mortgages,  conveyances,  covenants,  or  any  instrument  of  writ- 
ing which  by  law  is  entitled  to  be  recorded  in  the  office  of  the 
recorder  of  deeds,  shall  take  effect  and  be  valid  as  to  creditors 
and  as  to  subsequent  purchasers  for  a  valuable  consideration 
without  notice  from  the  time  when  such  deed,  deed  of  trust, 
mortgage,  conveyance,  agreement,  or  instrument  in  writing 
shall,  after  having  been  acknowledged,  proved,  or  certified,  as 
the  case  may  be,  be  delivered  to  the  recorder  of  deeds  for 
record,  and  from  that  time  only,  and  the  recorder  of  deeds 
shall  note  on  each  deed  or  other  instrument  of  writing  required 
by  law  to  be  recorded  the  day  and  hour  of  delivery  of  the  same 
to  him  to  be  recorded. 

With  hardly  an  exception  deeds  of  trust  are  taken  as  se- 
curity for  debts  or  loans.  No  bill  of  sale,  deed  of  trust,  or 
mortgage  for  property  exempt  by  law  from  execution  is  bind- 
ing unless  signed  by  wife  of  debtor.  It  must  be  recorded 
within  twenty  days  after  execution.^ 

1  Rev.  Code,  1874,  p.  50-1. 

'Act  of  Congress,  April  29,  1878  ;  20  Stat,  at  Large,  39. 


REGISTRATION.  637 

§  600.  Florida. — Mortgages  must  be  proved  or  acknowl- 
edged in  the  same  manner  as  deeds.  They  must  be  recorded 
in  the  county  in  which  the  land  is  situated,  in  order  to  be 
effectual  in  law  or  equity  against  creditors  or  subsequent 
purchasers  for  a  valuable  consideration  without  notice. 

In  order  to  procure  the  recording  of  a  mortgage,  the  execu- 
tion of  the  mortgage  must  be  acknowledged  by  the  mortgagor, 
or  it  must  be  proved  by,  at  least,  one  of  the  subscribing  wit- 
nesses thereto,  before  an  officer  authorized  by  law  to  take  such 
acknowledgment  or  proof.^ 

All  deeds  of  conveyance,  bills  of  sale,  or  other  instruments 
of  writing,  conveying  or  selling  property,  either  real,  personal, 
or  mixed,  for  the  purpose  or  with  the  intention  of  securing  the 
payment  of  money,  whether  such  deed,  bill  of  sale,  or  other 
instrument,  be  the  same  from  the  debtor  to  the  creditor  or 
from  the  debtor  to  some  third  person  in  trust  for  the  creditor, 
shall  be  deemed  and  held  as  mortgages. 

By  the  act  of  1885,  all  deeds  of  conveyance,  bills  of  sale, 
mortgages,  or  other  transfers  of  property,  either  real  or  personal, 
within  the  limits  of  the  State,  which  are  required  for  any  pur- 
pose to  be  recorded,  shall  be  deemed  to  have  been  recorded 
from  the  date  the  same  is  presented  and  filed  with  the  officer 
required  to  record  the  same. 

Proof  by  the  subscribing  witness  before  a  notary  public  that 
he  saw  the  mortgagor  sign  the  mortgage,  and  acknowledged 
that  he  did  so,  is  not  a  sufficient  proof  of  the  mortgagee's  exe- 
cution to  authorize  its  admission  to  record.  There  must  be 
proof  of  delivery  as  well  as  of  signing.  A  purchaser  at  the  sale 
of  a  foreclosure  of  a  subsequent  recorded  mortgage  is  not 
affected  by  such  invalid  mortgage.^ 

The  record  of  the  mortgage  is  only  notice  to  subsequent  pur- 
chasers and  creditors.^ 

§  601.  Georgia. — Mortgages  must  be  executed  in  the  presence 
of,  and  attested  by,  or  proved  before  a  notary  public,  or  a  jus- 

^»  McClellan's  Dig.,  p.  215,  sect.  6. 
*  Edwards  v.  Thom,  25  Fla.  222. 
'  Bright  V.  Buckman,  .39  Fed.  Rep.  243. 


II 


638  REGISTRATION   OF    THE    INSTRUMENT. 

tice  of  the  peace,  or  any  clerk  of  the  Superior  Court,  and  a 
mortgage  upon  realty  must  be  executed  in  presence  of  one 
other  witness,  who  need  not  be  an  officer,  and  recorded  in  the 
office  of  the  clerk  of  the  Superior  Court,  and  if  on  realty,  in 
the  county  where  the  land  lies.  Mortgages  not  so  recorded 
remain  valid  as  against  the  mortgagor,  but  are  postponed  to 
all  other  liens  created  or  obtained,  or  purchases  made,  prior  to 
the  actual  record  of  the  instrument.  If,  however,  the  junior 
lien  is  created  by  contract,  and  the  party  receiving  it  has 
notice  of  the  prior  unrecorded  mortgage,  or  a  purchaser  has 
like  notice,  then  the  lien  of  the  senior  mortgage  shall  be  held 
good  against  the  others.^ 

By  act  of  October  1,  1889,  deeds,  mortgages,  and  liens  of  all 
kinds  take  effect  only  from  the  time  they  are  filed  for  record  in 
the  clerk's  office,  as  against  all  third  persons  acting  in  good  faith 
and  without  notice.  The  clerk  is  required  to  note  on  the  instru- 
ment to  be  recorded  the  day  and  hour  in  which  it  is  filed  for 
record.- 

Where  a  mortgage  is  admitted  to  record  and  the  affidavit  of 
one  of  the  witnesses  thereto,  stating  only  that  he  saw  the  mort- 
gagor sign  the  instrument ;  that  he,  himself,  signed  it  as  a 
witness  ;  and  that  he  saw  the  other  witness  sign  it,  such  pro- 
bate being  insufficient,  the  mortgage  is  not  recorded  within  the 
statute,^  declaring  that  mortgages  not  recorded  within  the 
time  required  by  law  are  postponed  to  all  liens  created  prior 
to  the  actual  record  of  the  mortgage  ;  and,  hence,  the  lien  of  a 
judgment  rendered  since  such  improper  record  is  prior  to  that 
of  the  mortgage.* 

Though  the  mortgage  is  not  recorded  in  the  required  time 
provided  by  the  statute,^  it  is  valid  against  the  mortgagor  ;  and 
where  the  mortgagee  acquires  a  subsequent  judgment  against 
the  mortgagor  he  can  apply  the  proceeds  of  the  sale  under  exe- 
cution to  the  satisfaction  of  the  mortgage  or  the  judgment.^ 

1  Rev.  Code,  sects.  1955-1959. 

^  Rev.  Code,  sect.  ^(i7,  subsect.  15. 

3  Rev.  Code,  sect.  1957. 

*  New  England  Mut.  Security  Co.  v.  Ober,  84  Ga.  294. 

5  Rev.  Code,  sect.  1957. 

®  Janes  r.  Penny,  76  Ga.  796. 


( 


REGISTEATION.  639 

A  judgment  rendered  before  a  mortgage  is  recorded  has  a 
superior  lien  upon  the  property  ;  ^  and  when  not  recorded  in 
time  it  is  postponed  to  a  purchase  made  subsequent  to  its  date 
and  before  actual  record  and  without  notice  of  its  existence.^ 

In  order  for  a  junior  mortgage  to  take  precedence  of  an  un- 
recorded senior  mortgage,  the  junior  must  be  duly  recorded 
within  the  time  prescribed  by  law.^ 

An  attestation  made  by  an  employe  of  a  corporation  and  one 
other  witness  is  sufficient  proof  of  its  execution  to  admit  it  to 
record,  though  the  mortgage  be  in  favor  of  the  said  corporation,* 

§  602.  Idaho. — Mortgages  of  real  property  must  be  ac- 
knowledged as  deeds  and  recorded  in  the  county  where  the 
land  is  situate,  in  the  office  of  the  auditor  and  recorder,  and  be 
witnessed  by  at  least  one  witness.  Every  conveyance  is  void 
as  against  any  subsequent  purchaser  or  mortgagee  of  the  same 
property,  or  any  part  thereof,  in  good  faith  and  for  a  valuable 
consideration,  whose  conveyance  is  duly  recorded.  An  unre- 
corded instrument  is  valid  as  between  the  parties  thereto  and 
those  who  have  notice  thereof.^ 

§  603.  Illinois. — Deeds,  mortgages,  powers  of  attorney,  and 
other  instruments  relating  to  or  affecting  the  title  to  real  estate 
shall  be  recorded  in  the  county  in  which  such  real  estate  is 
situated,  but  if  such  county  is  not  organized,  then  in  the 
county  to  which  such  unorganized  county  is  attached  for  judi- 
cial purposes. 

When  land  is  in  different  counties  then  the  deed  or  mort- 
gage may  be  recorded  in  one  of  the  counties  and  a  certified 
copy  in  the  others  in  the  same  manner  as  the  filing  and  re- 
cording of  the  original. 

Such  instruments  shall  take  effect  and  be  in  force  from  and 
after  the  time  of  filing  the  same  for  record,   and  not  before,  as 

'  Richards  r.  Myers,  63  Ga.  762. 
^  McGuire  v.  Barker,  61  Ga.  339. 
« Myers  v.  Picqnet,  61  Ga.  260. 
^  *  CV)nlcy  V.  Campbell  Printing  Press  Co.,  78  Ga.  569. 

*  Rev.  Stat.  1887,  sects.  2997-3004.  Trust  deeds  are  not  controlled  by  statu- 
tory provisions. 


640  REGISTRATION    OF    THE    INSTRUMENT, 

to  all  creditors  and  subsequent  purchasers  without  notice,  and 
all  such  deeds  and  title  papers  shall  be  adjudged  void  as  to  all 
creditors  and  subsequent  purchasers  without  notice  until  the 
same  shall  be  filed  for  record.^ 

The  record  of  a  mortgage  is  notice,  although  the  description 
is  wrong.^  The  omission  of  the  mortgagee  to  restore  destroyed 
record  of  mortgage  does  not  invalidate  constructive  notice 
afforded  by  original  recording  of  mortgage.^  So  the  destruction 
of  record  of  a  trust  deed  does  not  affect  constructive  notice 
created  by  recording  it.*  "  Subsequent,"  as  used  in  the  record- 
ing act,  refers  to  date  of  recording,  not  to  date  of  instrument.^ 
And  a  "  creditor  "  is  one  who  without  notice,  actual  or  con- 
structive, of  prior  conveyance  or  incumbrance,  and  before 
record  thereof,  acquires  a  lien  on  the  land,  whether  debt  be 
prior  or  subsequent  to  such  conveyance  or  incumbrance,  and 
whether  the  vendor,  at  the  time  of  conveying  or  incumbering, 
had  other  property  sufficient  to  pay  the  debt  or  not.^  "  Credit- 
ors and  subsequent  purchasers "  mean  creditors  of  and  pur- 
chasers from  the  grantor  and  his  heirs  and  devisees.'^ 

And  subsequent  purchaser  is  presumed  a  bona  fide  purchaser 
for  valuable  consideration,  until  the  contrary  is  shown.^ 

The  record  of  a  mortgage  by  equitable  owner,  holding  merely 
an  unrecorded  bond  for  a  deed  is  not  notice  to  a  purchaser  of 
a  legal  and  recorded  title  from  one  in  possession.^  The  pur- 
chaser is  not  chargeable  with  notice  of  all  recorded  instruments 
affecting  his  title  by  whomsoever  made,  but  only  of  such  as  lie 
in  the  apparent  chain  of  title,  and  such  as  are  made  by  some 
one  connected  with  the  property,  in  a  way  of  which  the  pur- 
chaser has  notice.'" 

^Eev.  Stat.,  chap.  30,  sects.  29-31. 

*  Partridge  v.  Smith,  2  Bias.  C.  C.  183. 

3  Shannon  v.  Hall,  72  111.  354. 

■•Steele  v.  Boone,  75  111.  457. 

^ Doyle  V.  Teas,  4  Scam.- (111.)  202. 

«  Martin  v.  Dryden,  1  Gilm.  (111.)  187. 

^  Kennedy  v.  Northup,  15  111.  148. 

« Ryder  v.  Rush,  102  111.  338. 

nrisht;.  Sharp,  89  111.  261. 

»» Carbine  v.  Pringle,  90  111.  302. 


1 


REGISTRATION.  641 

Deeds,  mortgages,  and  other  instruments  of  writing  relating 
to  real  estate  shall  be  deemed,  from  the  time  of  being  filed  for 
record,  notice  to  subsequent  purchasers  and  creditors,  though 
not  acknowledged  or  proven  according  to  law  ;  but  the  same 
shall  not  be  read  as  evidence,  unless  their  execution  be  proven 
in  manner  required  by  the  rules  of  evidence  applicable  to  such 
writing,  so  as  to  supply  the  defects  of  such  acknowledgment  or 
proof.^ 

Proof  of  such  instruments  may  be  made  as  at  common  law.^ 

But  such  record  is  constructive  notice  only  of  what  appears 
on  the  face  of  the  instrument  as  recorded.^ 

A  record  of  a  deed  imperfectly  acknowledged  is  notice  under 
the  statute.* 

A  deed  merely  filed  for  record  and  withdrawn  is  not  notice 
under  section  30,'  and  section  31  has  no  application  to  forged 
document,  and  a  bona  fide  purchaser  under  a  recorded  forged 
deed  without  notice  of  forgery  does  not  get  a  good  title." 

The  registry  of  a  subsequent  deed  or  mortgage  is  not  notice 
to  a  prior  mortgagee,  nor  is  he  required  to  search  for  subse- 
quent incumbrances.  The  junior  incumbrancer  desiring  to 
protect  himself  must  give  the  prior  mortgagee  actual  notice  of 
his  equities.'' 

§  604.  Indiana. — Deeds  and  mortgages  of  real  estate  are 
required  to  be  recorded  in  the  office  of  the  recorder  of  the 
county  where  the  land  lies  within  forty-five  days  from  their 
execution  and  delivery,  to  be  valid  against  any  other  person 
than  the  grantor  or  mortgagor,  his  heirs,  or  persons  having 
notice  thereof.  As  between  the  parties  thereto,  they  are  good 
at  all  times,  without  record.  Recording  is  not  compulsory  as 
between  the  original  parties  to  the  instrument. 

>  Rev.  Stat.,  ch.  30,  sect.  32. 
"^  Reed  v.  Kemp,  16  111.  445. 
^  Battenhausen  v.  Bullock,  11  111.  App.  265. 
*Stebbins  v.  Duncan,  108  U.  S.  32. 
MVorcester  Bank  v.  Cheney,  87  111.  602. 
'  «  Pry  V.  Pry,  109  111.  466. 
^  Boone  v.  Clark,  129  111.  466. 
41 


642  REGISTRATION    OF    THE    INSTRUMENT. 

Mortgages  must  be  executed  and  acknowledged  in  the  same 
manner  as  deeds. 

A  mortgage  for  purchase-money  has  preference  over  a  prior 
judgment  against  the  purchaser/ 

The  indorsement  by  the  recorder  of  deeds  on  a  mortgage  in 
the  usual  form,  though  not  expressly  authorized  by  the  statute, 
is  admissible  in  the  absence  of  better  evidence,  over  objection, 
to  show  that  the  mortgage  was  recorded,  there  being  also  evi- 
dence presenting  reasonable  inference  that  the  mortgagee  took 
the  land  with  actual  knowledge  of  the  existence  of  the  mort- 
gage.' 

Where  two  mortgages  are  fully  executed  on  the  same  day,  but 
at  different  hours,  the  one  first  executed  in  point  of  time  is  en- 
titled to  priority  of  payment ;  ^  and  when  executed  to  different 
parties  on  the  same  day,  the  one  first  executed  and  delivered 
will  have  priority.*  And  a  mortgage  recorded  after  the  time 
limited  in  the  statute  is  constructive  notice  to  all  persons  who 
subsequently  purchase  the  property.^ 

Whore  two  notes  identical  in  date,  amount,  and  time  of 
maturity,  but  made  to  two  different  persons,  are  secured  by  the 
same  mortgage,  it  is  proper  in  decreeing  foreclosure  to  give 
priority  to  neither.^ 

§  605.  Indian  Territory. — The  title  to  all  real  estate  in  this 
Territory  is  in  the  United  States,  and  the  Indians  hold  their 
reservations  in  common.  Citizens  of  the  United  States  cannot 
hold  land  in  this  Territory,  but  can  only  occupy  their  homes 
as  tenants  of  some  Indian  landlord. 

As  to  mortgages  of  chattels,  the  laws  of  Arkansas  apply .^ 

§  606.  Iowa. — Deeds  and  mortgages  must  be  acknowledged, 

and  recorded  in  the  office  of  the  county  recorder  at  any  time, 

»Rev.  Stat.,  1888,  sects.  2931,  2932. 
^  Moore  v.  Glover,  115  Ind.  367. 
^Wood  V.  Lordier,  115  Ind.  519. 

*  Gibson  v.  Keyes,  112  Ind.  568,  distinguishing  Cain  v.  Hanna,  63  Ind.  408, 
and  Moffitt  v.  Roche,  76  Ind.  75. 

*  Gilchrist  v.  Gough,  63  Ind.  576;  Wyman  v.  Russell,  4  Biss.  C.  C.  307. 
«  Chaplin  v.  Sullivan,  128  Ind.  50. 

'See  Mansfield,  Dig.  of  Arkansas,  ch.  110. 


REGISTRATION.  643 

but  no  instrument  affecting  real  estate  is  of  any  validity 
against  subsequent  purchasers  for  a  valuable  consideration 
without  notice,  unless  recorded  in  the  office  of  the  recorder  of 
deeds  in  the  county  in  which  the  land  lies.  It  shall  not  be 
deemed  lawfully  recorded  unless  it  has  been  previously  ac- 
knowledged or  proved  as  provided  by  law.^ 

The  record  of  two  mortgages  does  not  constitute  notice  of 
the  superior  equity  of  the  junior  mortgage,  unless  there  is 
something  in  the  record  which  indicates  that  the  junior  mort- 
gage was  intended  as  the  senior  lien.^ 

The  delivery  by  the  mortgagor  of  two  mortgages  in  the  re- 
corder's office  by  handing  the  register  first  one  and  immedi- 
ately afterward  the  other,  is  substantially  one  and  the  same 
act,  and  neither  mortgage  in  the  absence  of  notice  to  the 
respective  mortgagees  has  priority  over  the  other,  although  at 
the  time  the  mortgagor  filed  them  for  record  he  wished  and 
meant,  but  did  not  say  so,  to  give  priority  to  the  one  first  de- 
livered. 

It  is  immaterial  which  was  first  executed  when  both  were  de- 
livered by  the  mortgagor  simultaneously.  And  a  mistake  in 
one  of  two  mortgages,  both  simultaneously  delivered  and  re- 
corded, in  the  description  of  the  land  is  immaterial  as  affecting 
the  lien  on  the  property  of  the  person  secured  by  the  other 
mortgage. 

As  between  two  mortgages  simultaneously  delivered  and  re- 
corded, one  for  the  unpaid  purchase-money,  and  one  for  money 
borrowed  by  the  mortgagor  to  make  the  cash  payment,  the 
fact  that  the  vendor  surrendered  his  lien  accepting  the  mort- 
gage, does  not  give  the  first  mortgage  any  superior  equities 
over  the  second.^ 

§  607.  Kansas. — A  mortgage  of  real  estate  to  be  valid  as 
against  subsequent  bona  fide  purchasers  must  be  acknowledged 
and  recorded  in  the  office  of  the  register  of  deeds  of  the  county 
where  the  land  lies,  and  from  the  time  of  filing  the  same  for 

I  Rev.  Code,  sects.  1941,  1942. 

"  Powers  V.  Lafler,  73  Iowa,  283. 

'  Koevenig  v.  Schmitz,  71  Iowa,  175. 


644  REGISTRATION    OF    THE    INSTRUMENT. 

record  imports  notice  to  all  persons  of  the  contents  thereof,  and 
subsequent  purchasers  and  mortgagees  shall  be  deemed  to  pur- 
chase with  notice.  It  is  not  valid  except  between  the  parties 
thereto,  and  such  as  have  actual  notice  thereof,  until  de- 
posited for  record.^ 

The  recording  of  an  unacknowledged  assignment  of  a  mort- 
gage will  not  import  constructive  notice  of  such  assignment. 
It  is  not  an  instrument  authorized  to  be  recorded  under  the 
statute,  although  made  on  the  back  of  the  mortgage  which  had 
been  duly  acknowledged,  certified,  and  recorded.^ 

A  mortgage  duly  executed  but  not  recorded  is  not  void.  It 
is  valid  as  between  the  parties  thereto,  and  as  to  others  who 
have  actual  notice.^  The  effect  of  the  recording  acts  is  to 
give  priority  of  lien  to  a  recorded  mortgage  to  secure  a  pre- 
existing indebtedness  over  an  unrecorded  mortgage  given  to 
secure  the  payment  of  machinery  furnished  in  the  construction 
of  a  mill,  of  which  a  mortgagee  of  the  recorded  mortgage  had 
no  notice.* 

§  608.  Kentucky. — Mortgages  are  executed  and  acknowl- 
edged in  the  same  manner  as  deeds.  No  deed  of  trust  or 
mortgage  conveying  any  title  to  or  interest  in  land,  shall  be 
valid  against  a  purchaser  for  a  valuable  consideration  without 
notice,  or  any  creditor,  until  such  deed  shall  be  acknowledged 
or  proved  according  to  law,  and  lodged  for  record.  The  record 
is  made  in  the  clerk's  office  of  the  county  in  which  the  property 
or  a  greater  part  of  it  is  situated.^ 

An  unrecorded  deed  of  trust  or  mortgage  will  prevail  against 
a  creditor  who  has  notice  thereof,  before  he  acquires  a  legal 
title." 

But  mortgages  and  deeds  of  trust  not  recorded  are  not  valid 

1  Comp.  Laws,  ch.  22,  sects.  3,  11,  19,  21-24 ;  Taylor's  Comp.  L.,  sects,  1128- 
1130. 
'^  Fisher  v.  Cowles,  41  Kan.  418. 
3  Northwestern  Ford.  Co.  v.  Mahaffy,  36  Kan.  152. 

*  Hayner  /).  Eberhardt,  37  Kan.  308. 

*  Gen.  Stat.,  ch.  24,  sect.  10. 
«  Forepaugh  v.  Appold,  17  B.  Mon.  (Ky.)  625. 


EEGISTRATIOX.  645 

at  law  against  creditors,  nor  against  any  legal  right  to  the 
property,  which  creditors  acquire  in  good  faith.^ 

If  executed  by  an  attorney  under  a  power,  the  record  of  the 
mortgage  is  not  constructive  notice  unless  the  power  of  attorney 
is  also  recorded.^ 

Unless  the  mortgage  of  a  homestead  be  recorded  or  lodged 
for  record,  it  is  ineffectual  to  convey  the  interest  of  either  hus- 
band or  wife.^ 

§  609.  Louisiana. — Deeds,  conveyances,  mortgages,  privi- 
leges, or  pledges  must  be  recorded  in  order  to  be  effective 
against  third  parties.  They  take  effect  from  the  date  of  their 
inscription  in  the  office  of  the  parish  recorder,  in  the  parish 
where  the  property  is  situated.  If  in  New  Orleans,  record 
must  be  made  in  the  office  of  the  recorder  of  conveyances  and 
mortgages.  Judgments  recorded  in  this  office  of  parish  re- 
corder, operate  as  mortgages  upon  all  real  estate  of  the  debtor 
from  the  date  of  the  record.^ 

The  lien  of  a  mortgage  expires  for  failure  to  renew  the  in- 
scription thereof  under  the  code,  which  provides  that  the 
registry  preserves  the  evidence  of  the  mortgages  and  privi- 
leges during  ten  years,  reckoning  from  the  day  of  its  date,  and 
its  effect  ceases  if  the  inscriptions  have  not  been  renewed 
before  the  expiration  of  this  time  in  the  manner  in  which  they 
were  first  made.^ 

A  judicial  mortgage  to  be  effective  as  to  third  persons — that 
is,  persons  who  are  not  parties  to  the  act  or  judgment  on  which 
the  mortgage  was  founded — must  be  inscribed  with  the  recorder 
of  mortgages,  and  no  lien  arises  until  it  is  so  registered.*'  A 
judicial  mortgage  takes  effect  from  the  date  of  the  recordation 
of  the  judgment  in  the  mortgage  book  of  the  parish  where 
the  immovables  of  the  debtor  are  situated,  and  this  rule  ap- 

*  Swigert  v.  Bank,  17  B.  Mon.  (Ky.)  268. 
=*  Graves  v.  Ward,  2  Duv.  (Ky.)  301. 
'  Hensey  v.  Hensey  (Ky.),  17  S.  W.  Rep.  333. 
*Rev.  Laws,  1884,  sect.  2388. 
'  *  Civil  Code,  art.  3369. 
^Lovell  V.  Cragin,  136  U.  S.  130. 


646  REGISTRATION    OF    THE    INSTRUMENT. 

plies  to  cases  where  the  judgments  are  rendered  in  a  country 
parish  at  the  same  term  of  court.  Article  555,  Code  of  Practice, 
has  no  bearing  on  the  question,  and  it  is  not  in  conflict  with 
the  articles  of  the  civil  code  on  the  subject  of  judicial  mort- 
gages.^ An  unrecorded  mortgage  has  no  effect  as  to  third  per- 
sons, not  parties  to  the  act  of  mortgage  or  judgment,  even 
though  they  had  full  knowledge  of  it.^ 

The  right  of  the  mortgage  creditor  is  lost  by  a  failure  to 
reinscribe  within  ten  years,  although  previous  to  the  expira- 
tion of  that  delay  the  mortgagor  had  died.  But  no  reinscrip- 
tion  is  necessary  when  the  mortgage  property  is  sold  within 
ten  years.^ 

Notice  is  not  equivalent  to  registry.*  A  new  act  of  mort- 
gage does  away  with  the  necessity  of  reinscription.^ 

In  1808  the  first  code  was  adopted,  and  in  the  section  relat- 
ing to  registering  of  mortgages,  it  was  declared  that  to  protect 
the  good  faith  of  third  persons  ignorant  of  the  existence  of 
mortgages,  and  to  prevent  fraud,  conventional  and  judicial 
mortgages  should  be  recorded  in  a  public  book  kept  for  that 
purpose  within  six  days  from  their  date,  when  made  in  New 
Orleans,  and  one  day  more  for  every  two  leagues'  distance 
therefrom  ;  and  that  if  such  recording  was  made  within 
that  time,  it  should  have  effect  against  third  persons  from 
the  date  of  the  mortgage  ;  but  if  not,  the  mortgage  should  have 
effect  against  third  persons,  being  bona  fide,  only  from  the  day 
of  such  recording.® 

The  effect  of  this  article  was  to  dispense  with  inscription  as 
against  third  persons  having  notice  of  the  mortgage ;  because 
they  could  not  take  in  good  faith  a  subsequent  incumbrance 
antagonistic  to  the  mortgage.  On  March  24,  1810,  an  act 
was  passed  providing  that  no  mortgage,  and  no  notarial  act 
concerning  immovable  property,  should  have  any  effect  against 

1  Chaffee  v.  Walker,  39  La.  Ann.  35. 

2  Ridinjjs  v.  Johnson,  128  U.  S.  212. 

'  Succession  of  Gagneux,  40  La.  Ann.  701. 
*  Boyer  v.  Joffrion,  40  La.  Ann.  657. 
*Hart  V.  Caflfery,  39  La.  Ann.  894. 
6  Code  of  1808,  p.  464,  art.  52. 


I 


REGISTRATION.  647 

third  persons  until  recorded  in  the  office  of  the  judge  of  the 
parish.^ 

Then  the  code  of  1825  ^  declared  that  mortgages  are  only- 
allowed  to  prejudice  third  persons  when  they  have  been  pub- 
lich^  inscribed  on  records  kept  for  that  purpose ;  that  the 
words  "  third  persons  "  are  to  be  understood  all  who  are  not 
parties  to  the  act  or  judgment  on  which  the  mortgage  is 
founded,  and  who  have  dealt  with  the  debtor  either  in  igno- 
rance of  the  right  or  before  its  existence.  On  March  20, 
1827,  an  act  was  passed  relating  to  conveyances  in  New  Or- 
leans, declaring  that,  whether  executed  before  a  notary  or  by 
private  act,  they  should  have  no  effect  against  third  persons 
but  from  the  day  of  their  being  registered.^ 

In  1855  an  act  w^as  passed  declaring  that  no  notarial  act 
concerning  immovable  property  should  have  any  effect  against 
third  persons  until  the  same  should  have  been  recorded  in  the 
office  of  the  parish  recorder  or  register  of  deeds  of  convey- 
ances of  the  parish  where  the  property  was  situated ;  and 
that  all  sales,  contracts,  and  judgments  not  so  recorded 
should  be  utterly  null  and  void  except  between  the  parties 
thereto ;  and  that  the  recording  might  be  made  any  time, 
but  should  only  affect  third  persons  from  the  time  of  the 
recording/ 

On  the  revision  of  the  code  of  1870,  the  last  clause  of  article 
3315 — now  3343 — which  made  the  ignorance  of  third  persons 
a  factor  in  the  requirement  of  registry,  was  omitted,  and  the 
provisions  of  the  act  of  1855  were  inserted  as  new  articles  in 
the  code  under  the  numbers  2264,  2265,  2266. 

Under  these  varying  and  inconstant  conditions  of  the 
statutes,  the  decisions  of  the  Louisiana  courts  were  often  con- 
flicting with  dissenting  opinions,  but  sustained  the  doctrine 
that  actual  knowledge  of  a  prior  unrecorded  title  or  mortgage 
is  equivalent  to  the  registry  of  it,  or  to  notice  resulting  from 

^  3  Martin's  Dig.  138 ;  2  Moreau-Lislet,  285. 
.'Articles  3314,  3315. 
'  2  Moreau-Lislet,  303. 
*  Acts  of  1855,  p.  335 ;  Rev.  Stat.  1870,  p.  617. 


648  REGISTRATION    OF    THE    INSTRUMENT. 

such  registry,  so  far  as  the  person  having  such  knowledge  is 
concerned.^ 

In  Swan  v.  Moore,^  Chief  Justice  Merrick  dissented,  and 
held  to  the  literal  interpretation  of  the  statute  of  1855,  as 
"  the  last  expression  of  the  legislation  upon  the  subject." 

The  United  States  Supreme  Court  followed  these  Louisiana 
decisions  in  the  interpretation  of  the  laws  in  that  State  upon 
this  subject.^ 

In  1869  the  dissenting  opinion  of  Chief  Justice  Merrick  was 
accepted  by  the  Louisiana  Supreme  Court  and  held  to  the 
strict  construction  of  the  law — that  is,  that  an  unrecorded  mort- 
gage was  void  as  against  third  persons  even  though  they  knew 
of  such  mortgage.* 

In  all  these  cases  the  prior  mortgages  were  actually  recited 
in  the  subsequent  ones,  and  yet  lost  their  rank  as  against  sub- 
sequent mortgages  by  reason  of  not  being  reinscribed  in  proper 
time.  These  decisions  have  been  followed  by  others  of  the 
same  purport.^ 

Since  the  passage  of  the  law  of  1855  an  unrecorded  mort- 
gage has  no  effect  as  to  third  persons  not  parties  to  the  act  of 
mortgage  or  judgment,  even  though  they  had  full  knowledge 
of  it.  And  this  doctrine  is  consonant  with  the  French  jurists',^ 
which  declares  that  "  between  creditors,  a  mortgage,  whether 
legal,  judicial,  or  conventional,  has  no  rank  except  from  its 
inscription  by  the  creditor  on  the  records  of  the  custodian,  in 
the  form  and  manner  prescribed  by  law." 

^  Swan  r.  Moore,  l-t  La.  Ann.  833,  decided  in  1859  ;  Smith  ?'.  Lambeth,  15 
La.  Ann.  5fi6,  decided  in  1860.  See  Hennen's  Dig.  (ed.  1861)  tit.  Registry 
III  (a),  (1),  D,  for  other  cases. 

2 14  La.  Ann.  833. 

» Patterson  v.  De  La  Ronde,  8  Wall.  (U.  S.)  292. 

*  Britton  v.  Jannej^  21  La.  Ann.  204 ;  Harang  v.  Plattsmier,  21  La.  Ann. 
426.    See,  also,  Rochereau  v.  Dupasseur,  22  La.  Ann.  402. 

*  Levy  V.  Mentz,  23  La.  Ann.  2(51  ;  Succession  of  Simon,  23  La.  Ann.  533, 
534 ;  Gaiennie  v.  Gaiennie,  24  La.  Ann.  79 ;  Rochereau  v.  De  la  Croix,  26  La. 
Ann.  584;  Villavaso  i'.  Walker,  28  La.  Ann.  775;  Adams  v.  Daunis,  29  La. 
Ann.  315;  Watson  v.  Bondurant,  30  La.  Ann.  1,  11. 

^Code  Napoleon,  art.  2134.  See,  also,  Paul  Pont,  Privileges  et  Hypothe- 
ques,  arts.  727,  728. 


i 


i 


REGISTRATION.  649 

Privileges  affecting  immovable  property  have  undergone 
much  the  same  legislative  restrictions  as  that  imposed  upon 
mortgages.  The  law  now  declares  that  no  privilege  shall  con- 
fer a  preference  over  creditors  who  have  acquired  a  mortgage 
unless  recorded  on  the  day  the  contract  was  made.' 

All  these  laws  have  been  interpreted  and  administered  by 
the  courts  of  Louisiana  so  as  to  give  them  their  full  literal 
effect.=^ 

The  vendor's  lien  or  privilege  must  be  recorded  within  the 
time  allowed  by  law — that  is,  within  six  days  from  date — prior 
to  1870;  and  on  the  day  of  the  date,  since  1870,  in  order  to 
give  it  priority  over  a  mortgage  recorded  before  it ;  this  rule 
applies  to  mortgages  given  by  the  vendee  as  well  as  mortgages 
given  by  the  vendor.  The  act  of  sale  passes  the  property  to 
the  purchaser  whether  recorded  or  not,  so  that  he  can  make 
valid  mortgages  on  it,  as  well  as  subject  it  to  judgments  against 
him  ;  but,  unless  recorded  in  the  office  of  the  register  of  mort- 
gages, it  does  not  preserve  the  vendor's  privilege.  At  one  time 
it  was  held  otherwise,  namely :  that,  if  the  vendor's  privilege 
was  recorded  simultaneously  with  the  act  of  sale,  which  is  the 
case  when  it  is  contained  in  the  act  of  sale,  the  privilege  was 
reasonably  recorded  to  preserve  it  in  full  force  ;  ^  but  these  de- 
cisions have  been  overruled  in  subsequent  cases.* 

No  inscription  or  reinscription  is  necessary  as  against  the 
parties  or  their  heirs.^ 

The  object  of  the  reinscription  is  to  obviate  the  necessity  of 
searching  for  mortgages  more  than  ten  years  back.     To  effect 

1  Rev.  Code,  art.  3274  ;  1870,  art.  3241. 

^  Lombas  v.  Collet,  20  I>a.  Ann.  79 ;  Maniiillon  v.  Archinard,  24  La.  Ann. 
610;  Gay  v.  Bovard,  27  La.  Ann.  200;  Bank  r.  Fortier,  27  La.  Ann.  243; 
]\forriw)n  r.  Bank,  27  La.  Ann.  401 ;  Succession  of  Marc,  29  La.  Ann.  412; 
Logan  V.  Herbert,  30  La.  Ann.  727  ;  Slocomb  v.  Eogillio,  30  La.  Ann.  833  ;  Gay 
r.  Daigre,  30  La.  Ann.  1007  ;  Gallaugher  v.  Hebrew,  35  La  Ann.  829 ;  Givano- 
vitch  V.  Hebrew,  3()  La.  Ann.  272. 

*  Rochereau  v.  Colomb,  27  La.  Ann.  337  ;  Jumonville  v.  Sharp,  27  La.  Ann. 
461. 

V  *  Gallaugher  v.  Hebrew,  35  La.  Ann.  829 ;  Givanovitch  v.  Hebrew,  36  La. 
Ann.  272. 

^Cucullu  V.  Hernandez,  103  U.  S.  105. 


650  REGISTRATION   OF    THE   INSTRUMENT. 

it,  a  new  description  of  the  property  is  necessary,  and  a  mere 
reference  to  the  previous  mortgage  is  not  sufficient.' 

The  law  requiring  a  mortgage  to  be  reinscribed  within  ten 
years  after  the  original  inscription  has  been  made  is  peremp- 
tory in  case  of  succession,  whether  solvent  or  not ;  if  a  creditor 
has  failed  to  reinscribe,  he  may  remain  an  original  creditor.^ 

§  610.  Maine. — Mortgages  are  executed  in  the  same  manner 
as  deeds,  and  must  be  acknowledged  and  recorded  in  the 
registry  of  deeds  for  the  county  or  district  where  the  land  lies, 
in  order  to  be  effectual  against  any  person  except  the  grantor, 
his  heirs  and  devisees,  and  persons  having  actual  notice.  A 
separate  defeasance  must  be  recorded  in  order  to  take  effect  as 
against  third  persons.  Mortgages  are  generally  made  by  war- 
ranty deed  with  defeasance  inserted.^ 

A  party  having  notice  of  a  prior  unrecorded  mortgage,  even 
though  such  notice  came  through  his  agent,  is  affected  with 
such  notice  of  the  unrecorded  mortgage,  so  as  to  postpone  his 
subsequent  levy  upon  the  property,  though  the  levy  was  first 
recorded/ 

§  611.  Maryland. — Mortgages  are  executed  and  acknowl- 
edged as  deeds,  and  must  be  recorded  within  six  months  from 
date  in  the  county  or  city  in  which  the  land  lies,  and  when 
acknowledged  and  recorded  shall  take  effect  as  between  the 
parties  from  date.^  To  make  them  valid  as  against  third  par- 
ties without  actual  notice,  an  affidavit  of  the  mortgagee  or  his 
agent  must  be  indorsed  thereon  and  recorded  therewith. 

Recording  a  mortgage  without  such  affidavit  does  not 
operate  as  constructive  notice.^  The  code^  provides  that 
to  entitle  a  deed  to  registration  it  must  contain  the  names 
of  the  grantor  and  the  grantee.     A  mortgage  executed  to  a 

^Hyde  v.  Bennett,  2  La.  Ann.  799 ;  Poutz  v.  Reggio,  25  La.  Ann.  637. 

^  Succession  of  Myrick,  43  La.  Ann.  884. 

»Rev.  Stat.,  1883,  ch.  73,  sects.  8,  9. 

*  Bunker  v.  Gordon,  81  Me.  66. 

6  Code,  1888,  art.  21,  sect.  14. 

«Byles  V.  Tome,  39  Md.  461. 

^  Gen.  Code,  art.  24,  sect.  9. 


REGISTRATION.  651 

firm  in  the  firm  name,  omitting  the  Christian  names  of  the 
partners,  is  entitled  to  registration,  though  the  code '  provides 
that  after  the  clerk  records  a  deed,  he  shall  enter  the  Christian 
names  and  surnames  of  the  parties.^  And  when  a  mortgage 
is  not  recorded  within  six  months,  as  required  by  the  registra- 
tion laws,  other  liens  of  third  parties  without  notice  will  take 
precedence.^ 

Unless  the  affidavit  required  by  law  is  indorsed  and  re- 
corded, the  mortgage  does  not  Operate  as  constructive  notice  to 
a  subsequent  mortgagee  unless  he  has  actual  notice  of  such 
mortgage.* 

If  a  mortgage  is  not  recorded  within  six  months  from  its 
date  it  is  nevertheless  an  equitable  lien,  and  takes  precedence 
of  those  who  were  general  creditors  at  its  date,  but  not  over 
subsequent  creditors.^ 

§  612.  Massachusetts. — Mortgages  are  executed  and  ac- 
knowledged as  deeds  and  recorded  in  the  registry  of  deeds  for 
the  county  or  district  where  the  land  lies.  The  conveyance  is 
not  valid  against  any  person  other  than  the  grantor  and  his 
heirs  and  devisees,  and  persons  having  actual  notice,  unless  so 
recorded.®  When  an  absolute  deed  is  made,  with  a  defeasance 
separate  from  the  mortgage,  the  defeasance  must  be  recorded 
to  be  effectual  against  third  persons.^  This  defeasance  is  valid 
between  the  parties  without  record.^ 

The  defeasance  should  be  acknowledged  before  record.^ 

§  613.  Michigan. — Every  conveyance  of  real  estate  which 
shall  not  be  recorded  according  to  the  provisions  of  the  statute 

*  Gen.  Code,  art.  18,  sects.  54,  55. 

^  Bernstein  v.  Hobelman,  70  Md.  29. 

'  Harding  v.  Allen,  70  Md.  395. 

*Reiff  ?;.  Eshleman,  52  Md.  582. 

=  Dyson  v.  Simmons,   48  Md.   207 ;  Harding  v.  Allen,  70  Md.  395  ;  Sixth 
Ward  Build.  Asso.  v.  Willson,  41  Md.  506;  Pfeaff  v.  Jones,  50  Md.  263. 

6  Pub.  Stat.,  1882,  eh.  120,  sect.  4. 

^  Pub.  Stat.,  1882,  ch.  120,  sect.  23. 

*Bayley  v.  Bailey,  5  Gray  (Mass.),  505,  510. 

' » Dale  r.  Thurlow,  12  Met.  (Mass.)  157,  163.     Compare  Stetson  v.  Gulliver, 
2  Cush.  (Mass.)  497. 


I 


652  REGISTRATION    OF    THE    INSTRUMENT. 

is  void  as  against  any  subsequent  purchaser  in  good  faith  and 
for  a  valuable  consideration  of  the  same  premises,  or  any  por- 
tion thereof,  whose  conveyance  is  first  duly  recorded.  Mort- 
gages must  be  recorded  in  the  office  of  the  register  of  deeds  for 
the  county  where  the  land  lies.  A  deed  absolute  in  terms,  but 
intended  to  be  made  defeasible  by  force  of  a  deed  of  defeasance 
or  other  instrument  for  that  purj^ose,  is  not  defeated  or  affected 
thereby  as  against  any  person  than  the  maker,  his  heirs,  or 
devisees,  or  persons  having  actual  notice,  unless  the  defeasance 
is  recorded.^ 

When  an  assignment  is  made  on  the  back  of  the  mortgage, 
properly  acknowledged  and  recorded  in  the  same  volume  as 
the  mortgage,  but  not  on  the  same  page,  and  the  register  of 
deeds  makes  a  cross-reference  on  the  margin  of  each  record, 
calling  the  attention  to  each  instrument,  and  clearly  indicating 
the  two  records,  it  is  a  sufficient  record  of  the  assignment ;  ^ 
but  if  the  instrument  had  made  no  reference  to  any  other 
record  by  cross-reference  it  would  be  uncertain  and  therefore 
void.*  If  the  mortgage  is  recorded  according  to  law,  it  is  not 
necessary  that,  the  bond  secured  by  it,  and  an  agreement  re- 
ferred to  in  the  mortgage,  and  adopted  and  made  a  part  of  it, 
should  also  be  recorded  in  order  to  be  valid  against  the  mort- 
gagor.^ 

No  mortgage  shall  be  recorded  which  does  not  give  the  name 
and  residence  of  the  mortgagee.^ 

When  the  assignment  of  a  mortgage  is  executed  in  another 
State,  the  officer  taking  the  acknowledgment  must  be  vouched 
for  b}''  a  certificate  of  magistracy'^  or  the  assignment  will  not 
be  entitled  to  record  ;  to  be  valid  as  to  third  parties,  the  as- 
signment and  mortgage  must  be  entitled  to  record  as  well  as 
recorded.^ 

1  Howell's  Stat.,  sects.  5674-5689. 

2  Soule  V.  Corbley,  65  Mich.  109. 

*  Bassett  v.  Hathaway,  9  Mich.  31. 

*  Bacon  v.  Ins.  Co.,  131  U.  S.  258. 
=  Act  262  of  1887,  sect.  12. 

«  How.  Stat.,  sect.  5660. 

'  Dohrn  V.  Haskin,  88  Mich.  144. 


J 


REGISTRATION.  653 

§  614.  Minnesota. — Every  conveyance  by  deed,  mortgage, 
or  otherwise  of  real  estate  must  be  recorded  in  the  office  of  the 
register  of  deeds  of  the  county  where  the  land  is  situated ; 
and  unless  so  recorded  shall  be  void  as  against  subsequent  pur- 
chasers in  good  faith  for  a  valuable  consideration  w^hose  con- 
veyance is  first  recorded ;  or  as  against  any  attachment  levied, 
or  judgment  lawfully  obtained  against  the  person  in  whose 
name  such  lands  appear  of  record  prior  to  the  recording  of  such 
conveyance. 

When  a  deed  purports  to  be  an  absolute  conveyance  in  terms, 
but  is  made  or  intended  to  be  piade  defeasible  by  force  of  a 
deed  of  defeasance  or  other  instrument  for  that  purpose,  the 
original  conveyance  is  not  defeated  or  affected  as  against  any 
person  other  than  the  maker  of  the  defeasance,  or  his  heirs  or 
devisees,  or  persons  having  actual  notice,  unless  the  instrument 
of  defeasance  is  recorded.^ 

A  defeasance  need  not  be  recorded  with  the  deed  intended 
as  a  mortgage,  when  it  is  delivered  to  the  grantor.^ 

§615.  Mississippi. — All  deeds  of  trust  and  mortgages  what- 
soever, title-bonds  and  written  contracts  in  relation  to  lands 
must  be  recorded  in  the  office  of  the  clerk  of  the  Chancery 
Court  for  the  county  wherein  the  property  is ;  and  unless  so 
recorded,  the  conveyance  is  voidable  by  any  subsequent  bona 
fide  purchaser  or  creditor.  The  record  cannot  be  made  unless 
the  deed  or  other  writing  is  either  acknowledged  or  attested 
by  subscribing  witnesses,  whose  signatures,  or  that  of  the 
grantor,  must  be  properly  proven.  When  the  record  is  made 
it  gives  constructive  notice  to  all  the  world  as  of  the  date 
of  the  filing  for  record.  Actual  possession  and  occupancy 
of  property  conveyed  by  the  grantee  is  equivalent  to 
record. 

As  between  the  parties  and  their  heirs,  and  as  to  all  subse- 
quent purchasers  with  notice,  or  without  valuable  considera- 
tion, mortgages  are  valid  and  binding  without  record.     They 

'  Gen.  Stat.,  1878,  ch.  40,  sects.  20,  21. 
*  Marston  v.  Williams,  45  Minn.  116. 


654  REGISTRATION   OF    THE    INSTRUMENT. 

take  effect  and  are  valid  as  to  third  persons  from  the  time  they 
are  delivered  to  the  clerk  to  be  recorded/ 

Under  the  registry  law  a  judgment  lien  of  land  previously 
conveyed  by  an  unrecorded  mortgage  of  the  debtor,  of  which  the 
judgment  creditor  had  not  actual  notice,  and  nothing  to  put 
him  upon  inquiry  before  the  recovery  of  his  judgment,  is 
superior  to  the  title  of  the  mortgage.^ 

Under  the  code,^  providing  that  persons  doing  business  in 
Mississippi  shall  take  out  a  license,  a  mortgage  given  to  secure 
a  debt  to  a  mercantile  house,  which  has  not  obtained  such 
license,  is  void.* 

§  616.  Missouri. — Mortgages  and  deeds  of  trust  must  be 
executed  and  acknowledged  like  other  deeds,  and,  to  be  effective 
against  purchasers  without  notice  in  fact  thereof,  must  be  re- 
corded in  the  county  where  the  land  lies,  in  the  office  of  the 
recorder  of  deeds.  Every  deed,  mortgage,  conveyance,  deed  of 
trust,  bond,  or  other  instrument  of  writing  affecting  real  estate 
authorized  by  law  to  be  recorded,  in  order  to  be  recorded,  must 
be  acknowledged  before  some  officer  authorized  to  take 
acknowledgments  of  deeds.  No  such  instrument  in  writing 
shall  be  valid  except  between  the  parties  thereto,  and  such  as 
have  actual  notice  thereof,  until  the  same  shall  be  deposited 
with  the  recorder  for  record.^ 

So  when  an  agreement  is  made  at  the  time  of  executing  a 
deed  of  trust  wherein  the  beneficiaries  promise  that  they  will 
not  sell  under  the  deed  until  they  have  sustained  a  loss  as 
sureties  on  the  creditor's  bond  in  a  criminal  proceeding,  such 
suretyship  being  the  consideration  for  the  note  secured  by  the 
deed  of  trust,  is  a  part  of  the  deed  and  is  an  instrument  in 
writing  affecting  real  estate,  and  must  be  acknowledged  and 
recorded  to  be  valid  as  to  others  than  the  parties  thereto  and 

'Rev.  Code,  1880,  sects.  1209,  1212,  1213. 

"^  Mississippi  Valley  Co.  v.  Railroad  Co.,  58  Miss.  846,  Taylor  v.  Miller,  13 
How.  (U.  S.)  287,  292. 
3  Rev.  Code,  1880,  sect.  589. 
*  Deans  v.  Robertson,  64  Miss.  195. 
5  Rev.  Stat.  1879,  ch.  20,  sects.  691-694. 


REGISTRATION.  655 

those  affected  with  actual  notice.^  So  one  accepting  a  convey- 
ance of  land  with  knowledge  of  a  prior  unrecorded  deed  of 
trust  takes  subject  to  the  incumbrance.^ 

The  statute  applies  to  a  mortgage  of  personal  property  and  of 
leashold  estate  in  lands  as  an  instrument  aifecting  real  estate.^ 

Under  the  statute  *  the  husband  may,  until  filing  of  the 
notice  of  the  homestead,  mortgage  it  without  the  wife's  joining.^ 

§  617.  Montana. — Mortgages  must  be  executed  and  acknowl- 
edged as  deeds,  and  recorded  in  the  office  of  the  recorder  of 
deeds  of  the  county  where  the  real  estate  is  situated.  Every 
such  recorded  instrument,  from  the  time  of  its  filing  for 
record,  imparts  notice  to  all  persons  of  its  contents,  and  subse- 
quent purchasers  and  mortgagees  are  deemed  to  purchase  and 
take  with  notice.  Unrecorded  mortgages  are  void  as  against 
any  subsequent  purchaser  in  good  faith  and  for  a  valuable 
consideration,  whose  conveyance  is  first  recorded.  Mortgages 
given  by  a  corporation  must  be  verified  like  a  chattel  mort- 
gage. 

Mortgages  are  deemed  a  conveyance,  whatever  their  terms, 
but  they  may  be  in  the  form  of  a  trust  deed.^ 

An  unrecorded  mortgage  has  priority  over  a  judgment 
docketed  after  the  execution  of  the  mortgage.^ 

§  618.  Nebraska. — Mortgages  must  be  executed  and  ac- 
knowledged in  the  same  manner  as  deeds  and  recorded  in  the 
office  of  the  register  of  deeds  in  the  county  where  the  land  is 
situated,  but  in  case  the  county  is  not  organized,  then  in  the 
county  to  which  it  is  attached  for  judicial  purposes.  They  are 
in  force  from  and  after  they  are  delivered  to  the  recording 
officer  in  the  county  in  which  the  land  lies,  as  to  all  creditors 

'  Mun?on  v.  Ensor,  94  Mo.  504.  See,  also,  Fox  v.  Hall,  74  Mo.  315 ;  Willing- 
ham  V.  Hardin,  75  Mo.  429 ;  Campbell  v.  Gas  Co.,  84  Mo.  352. 
■^  Johnston  v.  Shortridge,  93  Mo.  227. 
''Jennings  v.  Sparkman,  39  Mo.  App.  663. 

*  Rev.  Stat.  1879,  sect.  2689. 

*  Tucker  v.  Wells,  20  S.  W.  Rep.  114. 
«Com.  Laws,  1887,  p.  661. 

'  Vaughn  v.  Schmalsle,  10  Mont.  186. 


656  REGISTRATION    OF    THE   INSTRUMENT. 

and  subsequent  purchasers  in  good  faith  without  notice,  and 
are  void  as  to  creditors  and  purchasers  without  notice  whose 
instruments  are  first  recorded.^ 

Register  of  deeds  is  elected  in  all  counties  having  a  popula- 
tion of  at  least  eighteen  thousand,  who  has  the  power  to  perform 
all  the  duties  relative  to  papers,  writings,  and  instruments  per- 
taining to  real  estate  heretofore  enjoined  by  law  on  county 
clerks.^ 

The  certificate  of  the  proof  or  acknowledgment  of  every 
deed  and  the  certificate  of  the  genuineness  of  the  signature  of 
every  officer  where  such  certificate  is  required  must  be  recorded 
together  with  the  deed.^ 

It  shall  be  no  objection  to  the  record  of  a  deed  that  no 
official  seal  is  appended  to  the  acknowledgment  or  proof,  if 
the  same  purports  to  be  taken  by  an  officer  with  official  seal  of 
office,  in  which  case  it  will  be  presumed  that  the  seal  was 
attached  to  the  original.* 

Deeds  are  not  deemed  lawfully  recorded  unless  previously 
acknowledged  or  proved.^  And  all  certificates  of  entry  of 
government  lands  and  all  letters-patent  of  land  from  the 
United  States,  of  land  lying  within  the  State,  must  be  recorded 
in  the  county  in  which  the  land  lies." 

Every  deed,  though  absolute,  shown  by  any  other  instru- 
ment in  writing  to  be  intended  as  a  security  in  the  nature  of 
a  mortgage,  is  considered  a  mortgage,  and  no  advantage  can  be 
derived  from  the  record  thereof  by  the  person  for  whose  benefit 
it  is  made,  except  the  defeasance  be  also  recorded. 

Deeds  of  trust  to  secure  the  payment  of  money  are  con- 
sidered and  treated  as  mortgages.' 

After  seasonable  acceptance  of  an  option  contained  in  a 
lease,  the  lessee's  possession  becomes  that  of  an  owner,  and 

1  Com.  Stat.,  1881,  p.  389,  sect.  16. 

*Lawsof  1887,  p.  362. 

^  Com.  Stat.,  p.  389,  sect.  16. 

*  Com.  Stat.,  p.  390,  sect.  20. 

*  Com.  Stat.,  p.  390,  sect.  17. 
«  Laws  of  1883,  p.  265. 

'  Com.  Stat.,  pp.  390,  394. 


REGISTRATION.  657 

gives  notice  of  his  rights  as  such  to  a  subsequent  mortgagee 
of  the  vendor  or  lessor,  who  takes  the  mortgage  subject  thereto/ 
The  record  of  a  real  estate  mortgage,  which  is  not  legally 
acknowledged,  does  not  operate  as  constructive  notice.^ 

§  G19.  Nevada. — Mortgages  must  be  executed  and  acknowl- 
edged in  like  manner  as  deeds,  and  recorded  in  the  office  of 
the  recorder  of  the  county  in  which  the  real  estate  is  situated. 
Every  conveyance  is  void  as  against  any  subsequent  purchaser, 
in  good  faith,  and  for  a  valuable  consideration,  whose  convey- 
ance shall  be  first  duly  recorded,  but  is  binding  as  between  the 
parties  thereto  without  record.^ 

The  record  of  a  deed  absolute  upon  its  face,  though  intended 
as  a  mortgage,  gives  no  notice  to  a  subsequent  bona  fide  mort- 
gagee. Both  subsequent  purchasers  and  mortgagees  have  con- 
structive notice  under  the  statute  of  other  properly  recorded 
conveyances  affecting  the  same  real  estate.* 

§  620.  New  Hampshire. — All  deeds  and  mortgages  of  real 
estate  must  be  recorded  in  the  registry  of  deeds  of  the  county 
wherein  the  real  estate  is  situate.  Conveyances  required  by 
law  to  be  recorded  have  no  effect  whatever  until  they  are 
placed  in  the  office  of  the  register  or  clerk  for  record,  so  far  as 
third  parties  are  concerned,  unless  such  third  parties  have 
actual  notice  or  constructive  notice  thereof.  The  official  hav- 
ing charge  of  the  county  records  is  called  the  register  of  deeds. 

Trust  deeds  must  be  executed  with  the  same  formalities 
and  are  subject  to  the  same  statutory  provisions  as  conveyance 
in  fee.  Mortgages  of  real  estate  can  secure  only  the  liability 
existing  at  the  time  of  their  execution,  and  the  condition  must 
be  expressed,  stating  distinctly  the  sum  of  money  to  be  se- 
cured or  the  thing  to  be  done,  and  they  must  be  executed  with 
the  same  formalities  as  deeds.^ 

^  Smith  V.  Gibson,  25  Nebr.  511. 

*  Keeling  v.  Hoyt,  41  Nebr.  45.3. 

'  Comp.  Laws,  1873,  sects.  252,  254. 

*  Grellet  v.  Heilshorn,  4  Nev.  526. 

*Gen.  Laws,  327;  G.  L.  1878,  ch.  136,  sect.  2;  Pub.  Stat.  1892,  ch.  136, 
sect.  3. 

42 


658  REGISTRATION    OP    THE    INSTRUMENT. 

§  621.  New  Jersey. — Formerly  deeds  not  recorded  within 
fifteen  days  after  sealing  and  delivering  the  same  were  void, 
.and  of  no  effect  against  a  subsequent  judgment  creditor  or 
■bona  fide  purchaser  or  mortgagee  without  notice.  Now,  the 
record  is  notice,  although  the  deed  was  not  recorded  within 
fifteen  days;  and  all  deeds  made  after  July  4,  1883,  are  void 
until  they  are  recorded  against  all  subsequent  judgment  cred- 
itors without  notice,  and  against  all  subsequent  bona  fide  pur- 
,chasers  or  mortgagees  for  a  valuable  consideration,  not  having 
notice  thereof,  whose  deed  or  mortgage  has  been  first  duly  re- 
corded or  registered.^  The  records  are  kept  by  the  clerk  of  the 
county  in  all  the  counties  except  Essex,  Camden,  and  Hudson, 
in  which  a  register  officiates.  Trust  deeds  in  the  nature  of  a 
mortgage  are  not  generally  used. 

Leases  for  more  than  ten  years,  or  mortgages  thereof  not 
recorded  within  fifteen  days  after  sealing  and  delivering  the 
same  are  void  and  of  no  effect  against  a  subsequent  judgment 
creditor  or  bona  fide  purchaser  or  mortgagee  without  notice,  but 
are  valid  between  the  parties.^ 

A  mortgage  taken  under  order  of  court  to  secure  a  fund 
having  been  to  the  chancellor  in  his  official  capacity,  is  suffi- 
cient notice  to  the  purchaser  of  the  equity  of  redemption  to  put 
him  on  his  guard  as  to  the  contents  of  those  orders.^  And  when 
a  purchaser,  being  put  on  inquiry  by  the  circumstances  of  the 
case,  takes  real  estate  subject  to  a  mortgage,  his  right  is  subor- 
dinate to  the  mortgage  lien.* 

Section  14  of  the  act  concerning  conveyances  requiring  deeds 
or  conveyances  of  land  to  be  recorded,  does  not  apply  to  leases 
for  years,  nor  does  the  mortgage  registry  act  apply  to  mortgages 
of  such  leasehold  estates.^ 

1  Act  of  1883,  March  23. 

^  Laws  of  1887,  ch.  161 ;  Act  of  April  21.  See  Laws  of  1888,  oh.  199 ;  Laws 
of  1881,  ch.  147. 

3  Chancellor  v.  Bell,  45  N.  J.  Eq.  538. 

*  Anglesey  v.  Colgan,  44  N.  J.  Eq.  203. 

^  Hutchinson  v.  Bramhall,  42  N.  J.  Eq.  372,  reversing  Deane  v.  Hutchinson, 
40  N.  J.  Eq.  83.  The  act  of  April  21,  1887,  provides  that  leases  for  more 
than  ten  years  or  mortgages  thereof  not  recorded  within  fifteen  days  after 


REGISTRATION.  659 

A  prior  mortgage  to  the  State,  not  recorded  until  after  the 
recording  of  a  subsequent  mortgage,  which  was  given  in  good 
faith,  is  postponed  to  the  junior  mortgage.  Tlie  recording  act 
makes  no  exceptions  in  favor  of  the  State.^ 

Tlie  records  are  kept  by  the  clerk  of  the  county,  in  all  the 
counties  except  Essex,  Camden,  and  Hudson ;  in  these  by  a 
register. 

§  622.  New  Mexico  Territory. — Mortgages  must  be  exe- 
cuted in  the  same  manner  as  deeds  of  conveyance  and  re- 
corded in  the  office  of  the  clerk  of  the  probate  court  of  the 
county  where  the  real  estate  is  situate,  and  such  record  is 
notice  to  all  persons  of  the  contents  of  such  instruments.  All 
conveyances  of  real  estate  to  bind  purchasers  for  value  without 
notice  must  be  recorded.  The  records  of  deeds  and  mort- 
gages are  kspt  in  separate  books.  The  record  is  notice  from 
the  time  of  deposit  for  record.  An  unrecorded  instrument 
does  not  affect  the  title  or  rights  of  third  persons  without 
notice.^ 

§  623.  New  York. — Every  conveyance  of  real  estate  is  void 

as  against  a  subsequent  purchaser  in  good  faith  and  for  a 

valuable  consideration  of  the  same  real  estate,  or  any  portion 

thereof,  whose  conveyance  shall  be  first  duly  recorded  in  the 

office  of  the  clerk  of  the  county  where  the  land  is  situated,  except 

in  tlie  counties  of  New  York,  Westchester,  and  Kings,  where  it 

must  bo  recorded  in  the  register's  office.     This  applies  to  real 

estate  mortgages.     An  absolute  conveyance  shown  by  any  other 

written  instrument  to  be  intended  as  a  mortgage  is  considered 

as  a  mortgage,  and  must  be  recorded  among  the  mortgages  at 

the  same  time  and  together  with  such  instrument  of  defeasance, 

and  the  recording  the  conveyance  has  no  effect  unless  such 

other  instrument  be  also  recorded  therewith  and  at  the  same 

time.'     Separate    books    are    kept    for   the    record    of    mort- 

sealing  and  delivering  the  game  are  void  and  of  no  eflFect  against  third  par- 
ties without  notice. 

•  Clement  v.  Bartlett,  33  N.  J.  Eq.  43. 

*  Laws  of  1887,  ch.  10. 
^  1  Rev.  Stat.  756. 


660  REGISTRATION    OF    THE    INSTRUMENT. 

gages.  An  assignment  of  a  mortgage  must  be  recorded  to 
protect  the  assignee  against  subsequent  assignments  duly 
recorded. 

Mortgages  are  void  as  against  bona  fide  purchasers  for  value 
without  notice,  unless  within  one  year  prior  to  expiration  of 
every  term  of  twenty  years  from  record  thereof  a  statement, 
referring  to  the  mortgage,  and  showing  the  amount  due,  date 
of  last  payment,  name  of  mortgagee  and  of  owners  of  property, 
and  names  and  residences  of  owners  of  the  mortgage — is  filed 
with  the  clerk  or  register  of  the  county  where  the  property  is 
situated.^ 

Knowledge  of  an  agent  can  be  charged  to  his  principal 
only  when  clear  proof  is  made  that  the  knowledge  was  present 
in  the  agent's  mind  at  the  time  of  the  transaction,  which  is 
the  subject  of  the  consideration,  in  relation  to  notice  of  a  prior 
unrecorded  mortgage.^ 

After  land  had  been  conveyed  to  a  party,  but  before  the 
deed  was  recorded,  a  mortgagee  of  the  property  foreclosed  his 
mortgage,  became  the  purchaser  at  the  sale,  and  then  con- 
veyed the  property  for  a  valuable  consideration  to  another 
party.  ,  Held,  that  the  last  vendee  was  entitled  to  protection 
against  the  conveyance  to  the  first  vendee,  without  regard  to 
the  question  whether  the  grantor  had  or  had  not  notice  thereof.'* 
When  a  recorded  mortgage  recites  that  it  was  given  to  secure 
an  annual  payment  for  the  benefit  of  a  minor  until  she 
became  of  age,  a  purchaser  for  a  valuable  consideration,  after 
the  mortgage  is  discharged,  and  before  the  minor  comes  of  age, 
is  charged  with  notice  of  the  terms  of  the  trust.* 

The  fact  that  a  mortgage  is  not  upon  record,  is  no  defense 
to  the  mortgagor  when  suit  on  the  covenants  in  the  mortgage 
is  brought,  the  mortgage  property  having  passed  to  a  purchaser 
for  value  without  notice.* 

1  Laws  of  1890,  ch.  282. 

^Constant  v.  University,  111  N.  Y.  604  ;  Slattery  v. Schwannecke,  118  N.  Y. 
543. 
3  Slattery  v.  Schwannecke,  118  N.  Y.  543. 
♦McPherson  v.  Rollins,  107  N.  Y.  316. 
*  Forrester  v.  Parker,  14  Daly  (N.  Y.),  208. 


REGISTRATION.  661 

§  624.  North  Carolina. — No  deed  of  trust  or  mortgage  of 
real  estate  shall  be  valid  at  law  to  pass  any  property  as  against 
creditors  or  purchasers  for  a  valuable  consideration  from  the 
donor,  bargainor,  or  mortgagor,  but  from  the  registration  of 
such  deed  or  mortgage  in  the  county  where  the  land  lies,  in 
the  office  of  the  register  of  deeds.^ 

No  purchase  shall  avail  against  an  unrecorded  deed  when 
the  person  claiming  or  holding  under  such  deed  is  in  actual 
possession,  either  in  person  or  by  his  tenant  at  the  time  of  the 
execution  of  a  subsequent  deed,  or  when  the  person  claiming 
under  such  subsequent  deed  had  actual  or  constructive  notice 
of  such  unregistered  deed.^  A  mortgage  takes  effect  only 
from  its  registration. 

Under  the  code  ^  declaring  that  no  mortgage  shall  be  valid 
to  pass  any  property  as  against  creditors  or  purchasers  for  a 
valuable  consideration  from  the  mortgagor  until  registered,  a 
mortgage  not  recorded  till  after  the  recording  of  a  subsequent 
one,  in  the  absence  of  fraud  is  invalid  as  against  it,  though 
the  mortgagee  had  actual  notice  of  the  earlier  unrecorded 
mortgage.*  So  when  one  who  knows  of  a  prior  unrecorded 
mortgage  or  deed  of  trust  procures  a  mortgage  for  his  own 
benefit  on  the  same  property  which  is  recorded  first,  he  gets  the 
first  lien  on  the  property  unless  he  uses  fraud  to  prevent 
registration  of  the  mortgage  which  is  first  in  date.^ 

Under  the  statute  ^  a  mortgage  conveying  land  which  is  not 
registered  in  the  county  where  the  land  lies  is  not  valid  as 
against  creditors  and  purchasers  for  value.^  Mortgages  and 
trust  deeds  take  effect  only  from  and  after  the  registration. 
No  notice,  however  full,  and  formalities  will  supply  the  place 
of  registration.^ 

'  Code,  sect.  1254. 

'  Laws  of  1885,  ch.  147,  sect.  1. 

^Code,  sect.  1254. 

*Hinton  r.  Leigh,  102  N.  Car.  28. 

*  Traders'  Nat.  Bank  v.  Woodlawn  Manuf.  Co.,  96  N.  Car.  298. 

*  Bat.  Rev.,  ch.  35,  sect.  12. 

'  King  V.  Portis,  77  N.  Car.  25. 

*  Robinson  v.  Willoughby,  70  N.  Car.  358. 


662  REGISTRATION    OF    THE    INSTRUMENT. 

When  the  execution  of  the  mortgage  is  not  denied,  an  ob- 
jection to  the  sufficiency  of  the  probate  on  the  ground  of 
variance  in  the  name  of  the  subscribing  witness  as  attached 
to  the  mortgage  is  properly  overruled/ 

§  625.  North  Dakota. — Every  con-veyance  of  real  property 
other  than  a  lease  for  a  term  not  exceeding  one  year  is  void  as 
against  any  subsequent  purchaser  or  incumbrancer,  including 
an  assignee  of  a  mortgage,  lease,  or  other  conditional  sale  of 
the  same  property,  or  any  part  thereof,  in  good  faith  and  for  a 
valuable  consideration,  whose  conveyance  is  first  duly  re- 
corded. All  instruments  of  conveyance  of  real  property  must 
be  recorded  in  the  office  of  register  of  deeds  of  the  county  in 
which  the  land  lies.^ 

A  mortgage  of  real  estate  can  be  created,  renewed,  or  ex- 
tended only  by  writing,  with  the  formalities  required  in  the 
case  of  a  grant  of  real  estate. 

§  626.  Ohio. — Mortgages  are  executed  in  the  same  manner 
as  deeds.  The  mortgage  first  presented  must  be  first  recorded, 
and  the  first  recorded  has  preference.  Mortgages  of  real  estate 
are  not  good  against  subsequent  lien-holders  or  purchasers, 
unless  delivered  to  the  recorder  of  the  county  where  the  land 
is  situate,  for  registration,  and  then  only  from  that  time,  even 
though  such  purchaser  or  lien-holder  has  actual  notice  of  the 
existence  of  said  mortgage.  Between  the  parties  thereto  an 
unrecorded  mortgage  is  valid.  And  until  so  recorded  or  filed 
for  record  the  same  shall  be  deemed  fraudulent  so  far  as  relates 
to  a  subsequent  bona  fide  purchaser  having  at  the  time  of  pur- 
chase no  knowledge  of  the  existence  of  such  former  deed  or 
instrument.^ 

A  mortgage  takes  effect  only  from  the  time  it  is  left  for 
record.* 

'  Simpson  v.  Simpson,  107  N.  Car.  552. 
'^  Civil  Code  of  Procedure,  sects.  651,  671. 

» Rev.  Stat.,  sect.  4134,  82  Ohio  L.  230,  Laws  of  1885  ;  Tousley  v.  Tousley,  5 
Ohio  St.  78. 
*Sturgessi).  Bank,  3  McLean,  C.  C.  140. 


REGISTRATION.  663 

A  mortgage  duly  executed  and  deposited  with  the  recorder 
and  recorded  in  the  "record  of  deeds  "  instead  of  the  "record 
for  mortgages,"  but  indexed  in  both,  and  indexed  in  the 
general  index  with  the  letters  "  mtg.,"  is  valid  against  a 
subsequent  purchaser  for  value  without  actual  notice  of  such 
mortgage.' 

A  deed  absolute  in  form,  intended'  however  to  secure  the 
payment  of  money  due  from  the  maker  to  the  grantee,  and 
upon  the  payment  of  which  by  a  certain  time  the  grantee 
agreed  to  reconvey  the  property  to  the  grantor,  though  in  equity 
a  mortgage  is  not  a  legal  one ;  and  to  make  it  valuable  against 
creditors  of  the  grantor,  it  need  not  be  recorded  under  the  sec- 
tion ^  providing  for  registration  of  mortgages.  It  is  sufficient 
for  such  purpose  if  it  be  registered  within  the  time  prescribed 
by  the  section  ^  making  provisions  for  the  registration  of  all 
other  deeds  and  instruments  in  writing  for  the  conveyance  or 
incumbrance  of  lands  other  than  as  provided  in  the  previous 
section,  4133.* 

The  purchaser  from  the  mortgagor  of  lands  incumbered  by 
an  unrecorded  mortgage  takes  title  thereto  free  from  such  in- 
cumbrance, even  if  he  has  full  knowledge  and  notice  of  its 
existence,  and  that  it  is  unpaid  at  the  date  of  his  purchase ; 
and  if  the  mortgage  is  then  recorded  and  a  creditor  takes  judg- 
ment against  the  vendee,  his  judgment  will  take  precedence 
over  the  mortgage.^  The  dactrine  that  the  delivery  of  a  mort- 
gage for  record  is  a  part  of  the  execution  of  the  instrument, 
and  that  before  the  filing  for  record  a  mortgage  is  not  valid 
either  in  law  or  in  equity,  as  decided  in  Holliday  v.  Bank,® 
must  be  received  with  the  qualification  that  it  has  exclusive 
reference  to  the  effect  of  the  instruments  as  to  those  not  parties 
to  it.^     The  omission  of  an  officer  to  certify  a  privy  examina- 

'     '  Smith  V.  Smith,  13  Ohio  St.  532. 
"^  Rev.  Stat.,  sect.  4133. 
'  Rev.  Stat.,  sect.  4134. 
♦  Kemper  r.  Campbell,  44  Ohio  St.  210. 
*Buildin<i  Association  v.  Clark,  43  Ohio  St.  427. 
«ir,  Ohio,  53.3. 
'  Building  Association  v.  Clark,  43  Ohio  St.  427,  434 ;  Fosdick  v.   Barr,  3 


664  EEGISTRATION   OF   THE   INSTRUMENT. 

tion  of  the  wife  in  the  mortgage  makes  the  instrument  defec- 
tive, and  with  this  defect  it  conveys  no  interest  whatever  as 
against  subsequent  purchasers  and  judgment  creditors/  and  if 
she  sells  the  premises  subject  to  the  mortgage,  her  grantee  is 
estopped  to  assert  the  defect  in  the  mortgage,  who  assumes  to 
pay  such  incumbrance.^  As  against  third  persons,  a  mortgage 
has  no  effect,  either  at  law  or  in  equity,  until  delivered  to  the 
recorder  of  the  proper  county  for  record.  The  legal  rights  of 
such  persons  cannot  be  displaced  at  the  instance  of  a  holder  of 
a  prior  unrecorded  mortgage  or  contract  for  a  mortgage, 
although  acquired  with  notice  of  such  mortgage,  or  of  Ihe  ex- 
istence of  such  contract.^ 

§  627.  Oklahoma  Territory. — Deeds,  mortgages,  and  other 
instruments  required  by  law  to  be  registered,  are  in  force  from 
and  after  they  are  delivered  to  the  register  of  deeds  in  the  county 
in  which  the  land  lies,  as  to  all  creditors  and  subsequent  pur- 
chasers in  good  faith  without  notice,  and  are  void  as  to  cred- 
itors and  purchasers  without  notice  whose  instruments  are  first 
recorded.  Mortgages  are  executed  as  deeds  and  are  not  deemed 
lawfully  recorded  unless  jjreviously  acknowledged  or  proved.* 

§  628.  Oregon. — Mortgages  are  executed  in  the  same  man- 
ner as  deeds,  and  must  be  recorded  by  the  county  clerk  in  the 
county  where  the  laud  lies  within  five  days  from  execution. 
If  not  so  recorded  they  are  void  against  any  subsequent  pur- 
chaser in  good  faith  and  for  a  valuable  consideration,  whose 
conveyance  is  first  duly  recorded.  An  absolute  conveyance,  if 
intended  as  securit}^,  will  be  considered  a  mortgage.  Mort- 
gages on  land  situated  in  more  than  one  county  are  void,  ex- 
cept those  in  favor  of  State  or  the  board  of  commissioners  for 
sale  of  school  or  university  lands,  and  those  given  by  a  corpo- 
ration manufacturing  iron  or  steel,  or  working  any  iron,  gold, 

Ohio  St.  471 ;  Gill  v.  Pinney,  12  Ohio  St.  38;  Stewart  v.  Hopkins,  30  Ohio  St. 
502 ;  Riley  v.  Rice,  40  Ohio  St.  441. 

1  Van  Thonilley  v.  Peters,  26  Ohio  St.  471 

2  Riley  v.  Rice,  40  Ohio  St.  441. 

*  Bloom  V.  Noggle,  4  Ohio  St.  45. 

*  Com.  Laws,  sect.  6718 ;  Territory  v.  Diehl,  30  Pac.  Rep.  368. 


REGISTRATION.  665 

or  silver  mines,  or  owning  or  operating  a  railroad.     Separate 
books  are  kept  for  the  record  of  mortgages.^ 

Hill's  code,^  which  provides  that  a  conveyance  of  real 
estate  or  any  interest  therein,  shall  as  against  the  lien  of  a 
judgment  be  void  unless  recorded,  applies  to  conveyances 
which,  if  recorded,  would  give  notice,  but  does  not  apply  to 
the  equities  of  the  assignees  of  a  mortgage  containing  a  wrong 
description,  which  requires  the  aid  of  court  to  establish.^ 

§  629.  Pennsylvania. — Mortgages  are  executed  and  ac- 
knowledged like  deeds.  A  conveyance  as  security  is  considered 
a  mortgage,  although  it  appears  absolute  upon  its  face.  It  is 
provided  by  act  of  June  8,  1881,  that  no  defeasance  to  any 
deed  absolute  on  its  face  shall  have  the  effect  of  reducing  it  to 
a  mortgage,  unless  the  defeasance  is  made  at  the  same  time 
with  the  deed,  and  in  writing,  signed,  sealed,  acknowledged, 
and  delivered  by  the  grantee  in  the  deed,  and  is  recorded  in 
the  county  where  the  land  lies  within  sixty  days  from  its  exe- 
cution. Such  defeasances  must  be  recorded  and  indexed  as 
mortgages. 

Deeds  and  other  written  instruments  authorized  to  be  re- 
corded, must  be  recorded  in  the  office  of  the  recorder  of  deeds 
in  the  county  where  the  land  lies.  Deeds  made  in  Philadel- 
phia county  must  be  recorded  at  once.  Deeds  not  recorded  in 
time  are  void  as  against  bona  fide  purchasers  or  mortgagees  for 
value,  whose  deeds  or  mortgages  are  first  duly  recorded.  A 
purchaser  at  sheriff's  sale  is  within  the  protection  of  the  act, 
but  a  judgment  creditor  is  not.^ 

The  lien  of  a  mortgage,  except  for  purchase-money,  dates 
from  the  time  of  recording  it.^ 

When  the  lien  of  a  mortgage  upon  real  estate,  excepting 
unseated  lands,  is  prior  to  all  liens  upon  the  same  property, 
except  other  mortgages,  ground-rents,  purchase-money  due  to 

*  Anno.  Laws,  1887,  gects.  3024-3029. 
'Hill's  Code,  sect.  271. 

^  Meier  v.  Kelly,  29  Pac.  Eep.  265. 

*  Pardon's  Ann.  Dig.,  p.  2110,  sect.  5  ;  Act  of  May  25,  1878. 
*Brightly's  Purdon  Dig.  1883,  pp.  587,  588. 


666  REGISTRATION    OF    THE    INSTRUMENT. 

the  commonwealth,  taxes,  charges,  assessments,  and  municipal 
claims,  whose  lien,  though  afterward  accruing,  has  by  law  prior- 
ity given  it — the  lien  of  such  mortgage  shall  not  be  destroyed, 
or  in  any  way  affected  by  any  judicial  or  other  sale  whatever. 
This  law  does  not  apply  to  mortgages  of  unseated  lands  or 
to  sales  of  unseated  lands  for  taxes.  If  a  judicial  sale  is  made 
under  a  prior  mortgage  or  for  ground-rent,  etc.,  the  subsequent 
mortgage  will  be  discharged.  A  purchase-money  mortgage  is 
a  lien  from  its  date,  if  recorded  within  sixty  days.' 

A  mortgage  recorded  in  only  one  of  two  adjoining  counties, 
but  embraces  a  tract  of  land  forming  one  farm  in  both  coun- 
ties, is  not  a  lien  upon  land  lying  in  the  county  where  it  is 
not  recorded,  except  as  to  the  mortgagor  and  those  claiming 
under  him,  and  those  having  actual  notice  of  its  existence. 

The  act  of  1715  required  a  mortgage  to  be  recorded  within 
six  months  after  its  date  in  the  county  where  the  land  lay. 
The  act  of  1820  declares  that  mortgages  shall  have  priority 
according  to  the  date  of  the  recording  the  same,  and  no 
mortgage  or  defeasible  deed  shall  be  a  lien  until  such 
mortgage  or  defeasible  deed  shall  be  recorded  or  left  for 
record.^ 

When  real  estate  is  held  by  a  title  regular  on  its  face,  a 
bona  fide  mortgagee  thereof,  or  one.  claiming  under  such 
mortgagee,  is  not  affected  by  any  secret  trust  or  equity  if 
he  be  without  notice  thereof.  But  if  an  agent  of  the  per- 
son holding  such  secret  trust  or  equity  gives  actual  notice 
thereof  to  the  agent  of  the  mortgagee  prior  to  the  execution 
of  the  mortgage,  the  mortgagee  is  bound  thereby,  and  takes 
subject  to  such  trust.^ 

An  unrecorded  mortgage  can  take  nothing  as  against  judg- 
ments in  point  of  law,  nor  is  it  entitled  to  any  preference 
^  in  equity.  If  it  is  it  must  be  by  bringing  home  to  the 
owner  of  the  judgment  actual  notice  of  the  existence  of  the 
unrecorded  mortgage,  not  only  before  his  respective  lien  at- 

» Brightly's  Pur.  Dig.,  p.  588. 

«  Appeal  of  Oberholtzer,  124  Pa.  St.  583. 

^Bigley  v.  Jones,  114  Pa.  St.  510. 


REGISTRATION.  667 

taches,  but  before  the  debts  on  which  the  lien  is  founded 
were  contracted.^ 

Since  the  act  of  June  8,  1881,^  a  written  defeasance,  signed 
by  the  mortgagee,  but  unacknowledged  and  unrecorded, 
though  contemporaneous  with  the  execution  and  delivery  of 
the  deed  absolute  on  its  face,  will  not  be  deemed  to  convert 
such  a  deed  into  a  mortgage.^ 

A  debt  secured  by  an  unrecorded  mortgage,  without  posses- 
sion taken  under  it  in  the  lifetime  of  the  mortgagor,  cannot, 
upon  his  death,  take  precedence  of  his  general  debts,  but 
must  go  in  for  its  share  as  one  of  them.* 

With  the  exception  of  mortgages  for  purchase-money,  no 
mortgage  is  a  lien  until  left  for  record.  When  recorded,  the 
priority  of  the  lien  is  according  to  priority  of  record,''  and  if 
two  mortgages  are  left  the  same  day,  they  have  priority  ac- 
cording to  the  time  they  were  left  at  the  office  for  record.® 
Of  two  mortgages  for  purchase-money  recorded  within  sixty 
days,  that  which  is  first  recorded  has  priority.'  By  the  act 
of  1705,  where  the  default  clauses  are  omitted  from  a  mortgage, 
a  year  and  a  day  must  elapse  after  the  mortgage  is  due  before 
payment  can  be  enforced. 

§  630.  Rhode  Island. — Real  estate  mortgages  are  executed 
in  the  same  manner  as  deeds,  and  must  be  recorded  in  the  town 
clerk's  office  wherein  the  estate  is  situated,  except  in  the  city 
of  Providence,  which  has  a  recorder  of  deeds,  in  whose  office 
the  record  is  made.  All  deeds  of  trust,  mortgages,  and  other 
conveyances  of  real  estate  are  void  unless  acknowledged  and 
so  recorded.     As  between  the  parties  no  record  is  required.^ 

A  bond  of  defeasance  or  other  instrument  operating  as  a 
mortgage  must  be  recorded,  otherwise  it  will  not  be  effective  as 

'  Lahr'g  Appeal,  90  Pa.  St.  507. 

"^  Pub.  Laws,  84. 

'Sankey  v.  Hawley,  118  Pa.  St.  30. 

*  Nice's  Appeal,  54  Pa.  St.  200 ;  Brirrhtly's  Pur.  Dig.,  p.  588. 

'-  Brooke's  Appeal,  64  Pa.  St.  127  ;  Calder  v.  Chapman,  52  Pa.  St.  359. 

« Brooke's  Appeal,  64  Pa.  St.  127. 

'Dungan  v.  Am.  L.  I.  &  Trust  Co.,  52  Pa.  St.  253. 

*  Pub.  Stat.  1882,  ch.  173,  sect.  4. 


668  REGISTRATION    OP    THE    INSTRUMENT. 

a  mortgage  against  any  person  who  may  bona  fide  and  without 
notice  of  sucli  lien  purchase  tlie  real  estate  conveyed  by  such 
deed  of  the  person  to  whom  the  same  was  made,  and  the  per- 
son entitled  to  the  defeasance  is  barred  of  all  right  of  redemp- 
tion against  such  purchaser.^ 

§  031.  South  Carolina. — Mortgages  of  realty  and  deeds  of 
trust  in  the  nature  of  mortgages  must  be  executed  in  like  man- 
ner as  deeds.  All  mortgages,  or  deeds  in  the  nature  of  mort- 
gages, must  be  recorded  within  forty  days  after  the  execution 
thereof,  in  the  county  in  which  the  land  lies.  The  place  of 
record  in  every  county  except  Charleston  and  Greenville  is  the 
office  of  the  clerk  of  the  court  of  common  pleas.  In  Charles- 
ton and  Greenville  the  proper  office  is  that  of  register  of  mesne 
conveyances. 

All  such  instruments  shall  be  valid  so  as  to  affect,  from  the 
time  of  such  delivery  or  execution,  the  rights  of  subsequent 
creditors  or  purchasers  for  valuable  consideration  without 
notice  only  when  recorded  within  forty  days  from  the  time  of 
such  delivery  or  execution  in  the  office  of  the  register  of  mesne 
conveyances  of  the  county  where  the  property  affected  thereby 
is  situated.  Provided,  nevertheless,  that  the  above  mentioned 
deeds  or  instruments  in  writing,  if  recorded  subsequent  to  the 
expiration  of  said  period  of  forty  days,  shall  be  valid  to  affect 
the  rights  of  subsequent  creditors  and  purchasers  for  valuable 
consideration  without  notice  only  from  the  date  of  such  record.^ 

Prior  to  January  1,  1877,  a  valid  record  could  not  be  made 
after  the  time  limited.^ 

The  mere  fact  that  an  attorney  drew  a  mortgage  and  nego- 
tiated a  loan  it  secured,  where  the  evidenpe  fails  to  show  that 
he  had  been  appointed  agent  of  the  mortgagee,  and  his  testi- 
mony denies  such  appointment,  will  not  constitute  him  such 
agent  as  to  make  his  knowledge  of  a  prior  unrecorded  mort- 
gage the  knowledge  of  the  mortgagee.* 

1  Pub.  Stat.  1882,  ch.  176,  sects.  1,  2. 

''Pub.  Stat.,  1882,  sect.  1776 ;  16  Stat.  92 ;  A.  A.,  1876. 

3  Bloom  V.  Simms,  27  S.  Car.  90. 

*  Caughman  v.  Smith,  28  S.  Car.  605. 


REGISTRATION.  6G9 

As  the  record  of  a  prior  deed  is  notice,  whether  it  is  actually 
known  or  not,  so  possession,  whether  known  or  not,  is  also 
sufficient  notice.' 

Under  the  act  of  1843  ^  a  mortgage  not  recorded  within 
sixty  days  was  void  as  to  subsequent  purchasers  for  value  and 
without  notice,  and  its  record  after  the  time  allowed  by  that 
act  could  not  give  it  a  lien  under  the  act  of  1876,^  as  these 
acts  apply  only  to  instruments  in  writing  executed  after  Jan- 
uary 1,  1877." 

A  mortgage  recorded  after  the  prescribed  time,  by  the  act  of 
187G,*  is  a  lien  from  the  date  of  recording,  and  consequently 
takes  priority  over  claims  of  all  creditors  who  have  not  before 
that  time  established  a  lien.^ 

Proceedings  in  a  probate  court,  and  an  order  therein  direct- 
ing a  sale  and  recording  a  mortgage  for  the  purchase-money, 
do  not  constitute  constructive  notice  of  an  unrecorded  mort- 
gage taken  pursuant  to  such  order.^ 

A  judgment  rendered,  after  the  execution  of  a  mortgage,  for  a 
debt  contracted  before  such  execution,  is  not  a  subsequent  debt.^ 

A  mortgage  recorded  after  forty  days,  after  the  mortgagee 
has  notice  of  subsequent  mortgages,  is  subordinate  to  them.^ 

The  record  of  a  deed  after  forty  days  from  date,  taken  to  se- 
cure pre-existing  debts  by  the  grantee,  who  had  acquired 
knowledge  of  a  prior  unrecorded  mortgage  thereon  for  value 
and  had  recorded  his  conveyance,  gives  no  priority  over  the 
mortgage ;  the  sole  value  of  the  record  being,  as  prescribed  by 
the  statute,'"  to  give  notice  to  subsequent  creditors  and  pur- 

'Sheom  v.   Robinpon,   22  S.  Car.  32;    Bieman  u.  White,  23  S.  Car.  490; 
Graham  v.  Nesmith,  24  S.  Car.  285 ;  Sweatman  v.  Edmunds,  28  S.  Car.  58. 
mstat.  256. 
^  1()  Stat.  92 ;  Gen.  Stat.,  sect.  1776. 

*  Bloom  V.  Simms,  27  S.  Car.  90. 

5 16  Stat.  92 ;  Gen.  Stat.,  sect.  1776. 

®  South  Car.  Loan  and  Trust  Co.  v.  McPherson,  26  S.  Car.  431 ;  King  v.  Fraser, 
23  S.  Car.  543. 
'Piester  v.  Piester,  22  S.  Car.  1,S9. 

*  Carraway  v.  Carraway,  27  S.  Car.  576. 
'Mowry  v.  Crocker,  33  S.  Car.  436. 
^°Gen.  Stat.,  sect.  1776. 


670  REGISTRATION    OF    THE    INSTRUMENT. 

chasers  for  value  without  notice,  such  notice  to  take  effect  from 
the  date  of  record,  if  the  record  dates  forty  days  after  execution 
or  dehvery/ 

§  632.  South  Dakota. — A  mortgage  of  real  estate  can  be 
created,  renewed,  or  extended  only  by  writing,  with  the  for- 
malities required  in  the  case  of  a  grant  of  real  estate.  Every 
conveyance  of  real  property,  other  than  a  lease  for  a  term  not 
exceeding  one  year,  is  void  as  against  any  subsequent  pur- 
chaser or  incumbrancer,  including  an  assignee  of  a  mortgage, 
lease,  or  conditional  sale  of  the  same  property,  or  any  part 
thereof,  in  good  faith  and  for  a  valuable  consideration,  whose 
conveyance  is  first  duly  recorded  in  the  office  of  the  register 
of  deeds  of  the  county  where  the  land  lies.^ 

§  633.  Tennessee. — Real  estate  mortgages,  deeds  of  trust, 
assignments  of  land,  must  be  registered  in  the  county  where 
the  land  lies.  This  law  applies  to  deeds  of  trust  to  secure 
creditors,  and  assignments  for  the  benefit  of  creditors. 

Registration  without  proper  probate  or  acknowledgment,  in 
the  same  manner  as  deeds  to  real  estate,  is  ineffectual  against 
seizure  by  execution  or  other  process  against  the  maker  of  the 
mortgage,  deed  in  trust,  or  assignment.  Until  filed  for  regis- 
tration, the  mortgage,  deed  in  trust,  or  assignment  in  like  man- 
ner is  ineffectual  as  against  creditors,  with  or  without  notice, 
and  as  against  purchasers  without  actual  notice.  So  records 
to  be  effectual  against  purchasers  without  actual  notice,  or 
creditors  by  judgment  or  decree,  with  or  without  notice,  deeds 
of  conveyance  of  lands,  bonds  or  agreements  to  convey  lands, 
mortgages  or  deeds  in  trust  of  lands,  must  be  registered  in 
the  office  of  the  county  register  upon  proper  probate  or  ac- 
knowledgment of  their  execution.  Registration  without  such 
probate  or  acknowledgment  is  without  any  virtue.  Registra- 
tion upon  such  probate  or  acknowledgment  is  constructive 
absolute  notice  to  all  persons.^ 

'  Summers  v.  Brice,  15  S.  E.  Rep.  374. 

^  Civil  Code  of  Procedure,  sects.  651,  (571 ;  Comp.  L.,  sects.  3272,  3273. 

^Milliken  &  Ventrees'  Code,  sects.  2887,  2888. 


mi 


REGISTRATION.  671 

Generally,  deeds  of  absolute  conveyance  of  lands,  mortgages, 
deed  in  trust,  and  all  other  registrable  instruments  are  valid 
between  the  parties  without  registration.* 

If  the  land  lies  partly  in  two  counties,  then  the  mortgage 
may  be  registered  in  either ;  but  if  the  land  consists  of  sepa- 
rate tracts,  the  deed  must  be  registered  in  each  of  the  counties 
where  any  of  the  tracts  lies.^ 

§  634.  Texas. — Mortgages  and  trust  deeds  are  upon  the  same 
footing  and  governed  by  the  same  law^s  generally  as  deeds,  with 
the  addition  that  it  is  made  a  highly  penal  offense  for  the 
mortgagor  after  the  execution  of  the  mortgage  to  deal  fraudu- 
lently with  the  mortgaged  property  so  as  to  defeat  the  lien. 
All  mortgages  to  be  effective  against  third  persons  must  be 
recorded  in  the  county  where  the  property  is  situated,  unless 
such  third  person  has  actual  notice  or  reasonable  information 
thereof.  Such  deed  or  mortgage  takes  effect  as  against  subse- 
quent purchasers  and  creditors  wibliout  notice  from  the  date 
of  its  delivery  for  registration  in  the  office  of  the  clerk  of  the 
county  court  of  the  county  where  the  property  is,  or  to  which 
such  county  is  attached  for  judicial  purposes,  or  from  its  date 
ns  to  persons  with  actual  notice  or  reasonable  information  of 
such  grant  or  deed.* 

A  petition  of  a  mortgagee  alleging  that  the  purchaser  of  the 
mortgaged  property  took  with  notice  of  the  mortgage,  states 
a  cause  of  action  against  him  without  alleging  that  the  mort- 
gage had  been  recorded.* 

The  statute  requires  that  liens  shall  be  recorded  separate 
from  absolute  conveyances,  but  it  does  not  follow  that  liens  of 
different  character  shall  be  recorded  separate  from  each  other  ;  ■' 
hence  a  mechanic's  lien  is  fixed  by  ju'operly  recording  it  in  a 
book  in  which  also  mortgages  are  recorded.*^  A  mortgage  is  valid 

'  Millikcn  &  Ventrees'  Code,  sect.  2887. 

'Milliken  &  Ventrees'  Code,  28;}7.2843. 

'  Rev.  Stat.,  1879,  arts.  4332-4;j;34. 

*  Freiberg  v.  Magale,  70  Tex.  116. 

^  Rev.  Stat.,  art.  4304. 

"  Quinn  v.  Logan,  67  Tex.  600. 


672  REGISTRATION    OP   THE   INSTRUMENT, 

between  the  parties  whether  recorded  or  not/  Under  the  Re- 
vised Statutes "  providing  tliat  mortgages  shall  be  valid  from 
the  time  they  are  filed  for  record,  and  the  like  provision  of 
other  sections,^  an  absolute  deed  intended  as  a  mortgage  re- 
corded in  a  book  of  deeds  is  valid  against  creditors  and  pur- 
chasers, though  it  is  provided  *  that  mortgages  shall  be  re- 
corded in  a  separate  book.^ 

§  635.  Utah  Territory. — Real  estate  mortgages  are  exe- 
cuted in  the  same  manner  as  deeds.  They  are  recorded  in  the 
office  of  the  county  recorder  for  the  county  where  the  land 
lies.  The  first  recorded,  if  taken  in  good  faith  for  a  valuable 
consideration,  has  preference  unless  junior  mortgagee  has 
actual  notice  of  a  prior  unrecorded  mortgage.  A  mortgage  is 
binding  between  the  parties,  and  as  to  those  having  actual 
notice,  without  record,  and  they  take  effect  as  to  third  parties 
from  the  time  of  filing  for  record.  An  unrecorded  mortgage 
is  void  as  against  a  subsequent  purchaser  in  good  faith  and 
for  a  valuable  consideration,  when  such  subsequent  purchaser 
shall  first  have  his  mortgage  recorded.® 

By  the  laws  of  Utah  in  force  in  1873,  a  mortgage  of  land 
which  is  first  recorded,  if  it  be  taken  without  notice  of  an 
elder  mortgage,  is  entitled  to  precedence  of  lien.^ 

§  636.  Vermont. — Deeds  and  mortgages  must  be  recorded 
in  the  town  or  city  where  the  land  is  situate,  in  the  office  of 
the  town  or  city  clerk,  in  order  to  be  effectual,  as  against  sub- 
sequent purchasers  or  attaching  creditors  without  notice.  Unless 
so  recorded,  they  are  not  valid  to  hold  the  lands  against  any 
other  person  but  the  grantor  and  his  heirs.  When  a  deed 
is  made  by  virtue  of  a  power  of  attorney,  this  must  also  be  re- 
corded, or  the  deed  is  without  effect,  and  is  inadmissible  in 

'  Paschal's  Dig.  4986 ;  Cavanaugh  v.  Peterson,  47  Tex.  197. 

"  Sect.  4334. 

3  Sects.  4299,  4332. 

*  Sect.  4304. 

^  Kennard  v.  Mabry,  78  Tex.  151. 

«Comp.  Laws,  1870,  p.  254. 

'  Neslin  v.  Wells,  104  U.  S.  428. 


REGISTRATION.  673 

evidence ;  it  must  be  recorded  in  the  town  where  the  deed  is  to 
be  r^'corded/ 

§  637.  Virginia. — Real  estate  mortgages,  in  the  technical 
sense  of  the  term,  are  rarely  used  in  Virginia,  being  superseded 
in  practice  by  deeds  of  trust. 

Deeds  and  contracts  relating  to  real  estate  are  valid  as  be- 
tween the  parties  without  record.  Every  contract  not  in 
writing,  made  in  respect  to  real  estate  or  goods  and  chattels, 
or  made  for  the  conveyance  or  sale  of  real  estate,  or  a  term 
therein  of  more  than  five  years,  shall  be  void,  both  at  law  and 
in  equity,  as  to  purchasers  for  valuable  consideration  without 
notice  and  creditors.^ 

Any  such  contract,  if  in  writing,  shall  from  the  time  it  is 
duly  admitted  to  record,  be,  as  against  creditors  and  purchas- 
ers, as  valid  as  if  the  contract  was  a  deed  conveying  the  real 
estate  or  interest  embraced  in  the  contract.^ 

Every  such  contract,  every  deed  of  gift  or  deed  of  trust  or 
mortgage,  conveying  real  estate,  or  goods  and  chattels,  shall  be 
void  as  to  subsequent  purchasers  for  valuable  consideration 
without  notice  and  creditors,  until  and  except  from  the  time 
that  it  is  duly  admitted  to  record  in  the  county  or  corporation 
wherein  the  property  embraced  in  such  a  contract  or  deed  may 
be  ;*  and  altliough  recorded  in  the  county,  it  is  not  valid  as  to 
property  embraced  in  it  lying  or  being  in  another  county.^ 

A  recorded  deed  of  trust  is  constructive  notice  to  a  subse- 
quent purchaser.'' 

In  an  action  to  set  aside  a  deed  of  trust  and  sale  thereunder, 
the  purchasers  answered  that  they  were  purchasers  for  value 
and  without  notice.  It  appeared  that  one  of  the  purchasers 
had  drawn  an  agreement  settling  the  property  on  the  wife  of 
the  grantor  in  the  deed,  and  after  the  wife's  death  had  been 

'  Rev.  Laws,  1880,  ch.  97,  sects.  1927-1935. 
'  Code,  1887,  sect.  2463. 
'  Code,  1887,  sect.  24G4. 
*Code,  1887,  sect.  2465. 
*Code,  1887,  sect.  2466. 
•McCormack  v.  James,  36  Fed.  Rep.  14. 
43 


674  REGISTRATION    OF    THE    INSTRUMENT. 

told  by  the  trustee  of  the  wife  that  the  property  belonged  to 
■children.  The  other  purchaser  had  been  informed  by  his  at- 
torney that  the  grantor's  title  to  the  property  was  not  good.  It 
y.  as  held  that  the  purchasers  had  sufficient  notice  of  the  equities 
sagainst  them,  and  took  the  property  subject  thereto.^ 

§  638.  Washington. — Mortgages  are  executed  and  acknowl- 
edged in  the  same  manner  as  deeds.  Deeds  and  mortgages  are 
recorded  in  the  office  of  the  auditor  of  the  county  where  the 
land  lies,  and  are  valid  as  against  bona  fide  purchasers  from 
the  date  of  the  filing  of  them  for  record,  and  when  so  filed  or 
recorded  lare  notice  to  all  the  world.^ 

Notice  is  not  given  where  the  record  is  not  indexed,  and  the 
recorder  is  responsible  in  damages  to  the  grantee  for  loss  re- 
sulting from  any  mistake  or  negligence  in  this  respect.^ 

§  639.  West  Virginia. — Mortgages  are  executed  and  ac- 
knowledged in  the  same  manner  as  deeds,  but  contain  a  clause 
of  defeasance.  Mortgages,  however,  are  rarely  executed  in 
West  Virginia ;  deeds  of  trust  take  their  place.  No  specific 
time  is  given  for  the  record  of  deeds,  mortgages,  and  contracts 
in  writing  relating  to  real  estate.  They  are  void  as  to  cred- 
itors and  subsequent  purchasers  for  a  valuable  consideration 
without  notice,  until  and  except  the  time  they  are  duly  ad- 
mitted to  record  in  the  county  wherein  the  property  embraced 
in  such  deed  or  contract  may  be  situate.* 

If  two  or  more  writings  embracing  the  same  property  are 
filed  for  record  in  the  same  county  on  the  same  day,  that  which 
was  first  admitted  to  record  takes  precedence.^ 

To  charge  a  bona  fide  purchaser  with  notice,  either  express 
or  implied,  the  notice  must  be  something  more  than  a  vague 
statement  that  the  vendor's  title  is  subject  to  an  equity.® 

A.,  having  the  equitable  title  to  real  estate,  executed  a  trust 

'  Dugger  V.  Dugger,  84  Va.  130. 

''Laws  of  1877,  p.  312,  sect.  4;  Rev.  Code,  1881,  sects.  2311,  2312,  2314. 

"Ritchie  v.  Griffiths,  1  Wash.  St.  429. 

*  Code,  ch.  74,  sect.  5. 

*  Code,  ch.  74,  sect.  8. 

«  Connell  v.  Connell,  32  W.  Va.  319. 


REGISTRATION.  675 

deed  thereon  to  secure  a  debt  to  B.,  and  such  deed  was  duly 
recorded.  Subsequently  A.  sold  the  property  to  C,  and  by 
direction  of  A.  the  holder  of  the  legal  title  conveyed  the  same 
by  deed  directly  to  C,  but  after  his  deed  had  been  recorded 
executed  a  trust  deed  upon  the  real  estate  to  secure  a  debt  to 
D.  It  was  held  that  recordation  of  such  trust  deed  to  secure 
a  debt  to  B.  did  not  operate  as  constructive  notice  to  D.,  and 
D.'s  lien  took  priority  over  that  of  B.'s  unless  B.  could  show 
that  D.  had  actual  notice  of  the  existence  of  his  deed  at  the 
time  D.  acquired  his  lien.^ 

§  640.  Wisconsin. — Mortgages  are  executed  the  same  as 
deeds.  Every  conveyance  of  real  estate,  which  shall  not  be 
recorded  in  the  office  of  the  register  of  deeds  in  the  county 
where  the  land  is  situate  shall  be  void  as  against  any  subse- 
quent purchaser  in  good  faitli  and  for  a  valuable  consideration, 
whose  conveyance  shall  first  be  recorded.^ 

Provision  is  made  for  the  giving  of  constructive  notice  of 
the  pendency  of  suits  relating  to  real  estate,  of  attachments  on 
real  estate,  and  sales  upon  execution,  by  filing  notice  thereof 
in  the  office  of  the  register  of  deeds.^ 

Every  instrument  received  by  the  register  of  deeds  for 
record  shall  be  considered  as  recorded  from  the  moment  of  its 
entry  on  the  index. 

In  the  absence  of  proof  to  the  contrary,  it  will  be  presumed 
that  the  entry  in  the  general  index,  and  the  actual  recording 
of  the  mortgage  were  simultaneous. 

The  fact  that  entries  in  the  record  are  not  made  m  consecu- 
tive order,  either  as  to  number  or  date  of  receipt  as  required 
by  the  statute,  does  not  necessarily  impeach  the  index  so  as  to 
destroy  the  validity  of  the  register.  If  it  is  made  to  appear 
that  the  entry  of  the  mortgage  therein  was  made  at  a  later 
date,  the  same  presumption  arises  that  the  mortgage  was  tran- 
scribed on  the  records  and  the  registry  completed  at  that  time.* 

'  Sands  v.  Beardsley,  32  W.  Va.  594. 
"San.  &  Berr.  Stat.,  sect.  2241. 

*  San.  &  Berr.  Stat.,  sect.  .3187. 

*  Lane  v.  Duchac,  73  Wis.  646 


676  REGISTRATION    OF    THE    INSTRUMENT. 

Prior  to  his  discovery  of  the  fraud  by  which  a  conveyance 
of  land  had  been  induced,  the  grantor  continued  in  possession 
of  the  land  under  an  agreement  with  the  grantee.  It  was  held 
that  such  possession  was  not  constructive  notice  of  his  equities 
arising  out  of  the  fraud  to  one  claiming  under  a  mortgage 
from  the  grantee.' 

§  641.  Wyoming. — All  deeds,  mortgages,  bonds,  contracts, 
agreements,  or  other  instruments  concerning  any  interest  in 
lands  made  in  writing  under  seal,  attested  by  one  witness,  and 
acknowledged  before  some  person  authorized  by  law  to  take 
acknowledgments  of  deeds  shall  be  recorded  in  the  office  of  the 
register  of  deeds  of  the  county  where  the  land  lies  within 
three  months  of  the  date  of  such  instrument,  and  shall  be  notice 
to  and  take  precedence  of  any  subsequent  purchaser  from  the 
date  of  such  record.  Want  of  record  of  a  deed  or  mortgage 
does  not  affect  the  validity  of  the  same  except  as  to  subse- 
quent purchasers  of  the  same  premises  in  good  faith  and  for  a 
valuable  consideration  whose  conveyance  is  first  duly  recorded. 

When  an  absolute  deed  is  intended  as  a  mortgage  by  force  of 
a  deed  of  defeasance,  the  original  conveyance  is  not  thereby 
affected  or  defeated  as  against  any  person  other  than  the  maker 
of  the  defeasance,  or  his  heirs  or  devisees,  or  persons  having 
actual  notice  thereof,  unless  the  defeasance  has  been  recorded.^ 

Article  2. 
Registration  of  Separate  Defeasance. 

§  642.  Sufficient  Notice.  §  &45.  Actual  Notice. 

§  643.  Rights  of  Third  Persons.  §  646.  When  the  Record  is  not  Notice. 

§  644.  Rights  of  Purchasers.  §  647.  When  Possession  is  Notice. 

§  642.  Sufficient  Notice. — An  absolute  deed  intended  as 
a  mortgage  recorded  is  a  sufficient  notice  of  the  grantee's  in- 
terest, without  the  record  of  the  defeasance.  So  when  the  deed 
is  recorded,  and  the  grantee  gives  the  grantor  a  defeasance  to 

'  Mateskey  v.  Feldman,  75  Wis.  103. 
»Rev.  Stat.,  1887,  sects.  15-21. 


REGISTRATION.  677 

convey  back,  but  which  is  not  recorded,  the  record  of  the  deed 
of  the  land  is  sufficient  notice  to  subsequent  purchasers/ 

So  the  failure  of  a  grantor  in  an  absolute  deed  of  conveyance, 
which  has  been  recorded,  to  have  the  separate  defeasance  exe- 
cuted by  his  grantee  also  recorded,  does  not  give  to  such  in- 
strument the  character  of  an  unrecorded  mortgage  and  entitle 
judgment  creditors  of  such  grantor  having  no  actual  notice 
thereof  to  subject  to  his  judgment  the  property  thus  conveyed.^ 

In  many  States  the  recording  of  the  defeasance  is  expressly 
required  as  a  condition  upon  which  the  mortgagee  shall  derive 
any  benefit  from  the  record  of  the  deed.  This  is  the  rule  in 
California,^  Delaware,*  Maryland,^  Nebraska,^  New  Jersey,^ 
New  York,^  North  Dakota,"  Pennsylvania,^"  and  South  Dakota." 

In  Connecticut  a  deed  absolute  on  its  face,  but  with  a  sepa- 
rate defeasance,  making  it  a  mortgage,  which  is  recorded  with- 
out the  defeasance,  is  not  valid  against  attaching  creditors  of 
the  grantor. ^^ 

§  643.  Rights  of  Third  Persons. — As  to  third  persons  the 
absolute  conveyance  cannot  be  defeated  or  affected  unless  the 
defeasance  is  also  recorded  with  the  deed.  This  rule  has  been 
declared  by  statute  in  many  States.  This  is  the  law  in  Dela- 
ware,'^  Indiana,'*   Kansas,'^  Maine,'®   Massachusetts,"'   Michi- 

^Marsten  v.   Williams,  45  Minn.  116;    demons  v.  Elder,  9  Iowa,  272; 
Yoimg  V.  Thompson,  2  Kan.  83 ;  Newberry  v.  Bulkley,  5  Day  (Conn.),  384. 
''Bank  v.  Savings  Inst.,  62  Miss.  250. 
'Civil  Code,  1885,  sects.  2950,  2952. 
*  Rev.  Code,  1874,  p.  504. 
*Rev.  Code,  1878,  art.  06,  sect.  42. 
«Comp.  Stat.,  1881,  p.  389. 
'Nixon's  Dig.,  1808,  pp.  147,  611. 
83  Rev.  Stat.,  pp.  2215,  2216. 
»C.C.  P.,  sects.  651,671. 
^"  Laws  of  1881,  Pub.  Laws,  p.  84. 
"C.  C.  P.,  sects.  651,  671. 
"  Ives  V.  Stone,  51  Conn.  446. 
"  Rev.  Code,  1874,  p.  504. 
"Rev.  Stat.,  1888,  sects.  2931,  2932. 
■^Dassler's  Com.  L.,  1SS5,  ch.  68,  sect.  2. 
^^  Rev.  Stat.,  1883,  ch.  73,  sects.  8,  9. 
"  Pub.  Stat.,  ch.  120,  sect.  23. 


678  REGISTRATION    OF    THE    INSTRUMENT. 

gan/  Minnesota,^  New  Hampshire,^  Oregon,*  Rhode  Island,^ 
Wisconsin/  and  Wyoming/ 

A  purchaser  who  purchases  from  the  mortgagee,  by  an  ab- 
solute conveyance,  with  notice,  either  express  or  implied,  holds 
the  title,  subject  to  the  equity  of  redemption.* 

But  the  provisions  of  the  statutes  do  not  apply  when  the 
conveyance  to  which  the  defeasance  relates  does  not  purport 
upon  its  face  to  be  absolute  and  unconditional.^ 

§  644.  Rights  of  Purchasers, — As  a  general  rule  the  pur- 
chasers may  rely  upon  the  title  as  it  appears  upon  the  record.'" 

In  some  of  the  States  an  attaching  creditor  nor  judgment 
creditor  is  regarded  as  a  purchaser,  and  cannot  acquire  a  lien 
by  his  attachment  or  judgment  upon  the  land  in  the  hands  of 
the  grantee  holding  the  title  absolutely,  as  against  the  equit- 
able cestui  que  trust,  or  grantor  entitled  in  equity  to  the  equity 
of  redemption." 

If  the  deed  is  recorded  but  the  defeasance  is  not,  such  de- 
feasance is  not  made  void  except  as  to  purchasers  for  a  valuable 
consideration  without  notice  of  its  existence.'^ 

When  the  defeasance  is  not  recorded,  the  grantee  can  give 
good  title  to  a  purchaser  for  value  without  notice.'^  Such  pur- 
chaser acquires  a  title  free  from  all  equities  of  the  grantor.'* 

In  Pennsylvania  a  written  defeasance,  signed  by  the  grantee, 

»  Anno.  Stat.,  1882,  sects.  5674-5689. 

''Gen.  Stat.  1878,  oh.  40,  sects.  21,  23. 

2  Gen.  Laws,  1878,  ch.  136,  sect.  2. 

*Anno.  Stat.,  1887,  sects.  3024-3029. 

^Pub.  Stat.,  1882,  ch.  176,  sects.  1,  2. 

6  Rev.  Stat.,  1878,  p.  641,  sect.  2243. 

T  Rev.  Stat.,  1887,  sect.  21. 

« Brown  v.  Gaffney,  28  111.  149  ;  Shaver  v.  Woodward,  28  111.  277  ;  Mann  v. 
Falcon,  25  Tex.  271-274 ;  Williams  v.  Thorn,  11  Paige  (N.  Y.),  459. 

» Russell  V.  Waite,  Walk.  (Mich.)  31. 

'« Newhall  v.  Burt,  7  Pick.  (Mass.)  157  ;  Mills  v.  Comstock,  5  Johns.  Ch. 
(N.  Y.)  214 ;  Harrison  v.  Academy,  12  Mass.  456. 

"  Hart  V.  Bank,  33  Vt.  252. 

12  Columbia  Bank  v.  Jacobs,  10  Mich.  349. 

13  Bailey  v.  Myrick,  50  Me.  171. 

1*  Pico  V.  Gallardo,  52  Cal.  206;  Tufts  v.  Tapley,  129  Mass.  380. 


1 


REGISTRATION.  679 

but  unacknowledged  and  unrecorded,  though  contemporaneous 
with  the  execution  and  delivery  of  the  deed  absolute  on  its 
face,  will  not  be  admitted  in  evidence  to  convert  such  deed 
into  a  mortgage/ 

§  640.  Actual  Notice. — What  is  actual  notice  under  the 
statutes  is  a  question  of  some  difficulty.  Where  actual  notice 
is  required,  no  implied  or  constructive  notice  of  an  unrecorded 
deed  will  give  it  validity  against  a  subsequent  purchaser.  So 
by  some  courts  it  is  held  that  proof  of  open  and  notorious  oc- 
cupation and  improvements,  or  of  other  facts  which  will  rea- 
sonably put  a  purchaser  upon  inquiry,  are  not  sufficient,  but 
the  party  who  claims  under  an  unrecorded  deed  must  prove 
that  the  subsequent  purchaser  had  actual  knowledge  or  notice 
of  such  deed.^  So  under  such  sale  the  actual  notice  required 
is  not  of  the  sale  alone  but  of  the-deed  also,^  and  a  continued 
possession  by  the  grantor  of  land  after  making  of  his  deed 
will  not  be  notice  of  a  defeasance  held  by  him  which  is  not 
recorded.* 

But  the  current  of  authority  does  not  coincide  with  this 
doctrine ;  hence,  a  purchaser  of  land  with  knowledge  of  such 
facts  as  will  put  a  prudent  man  upon  inquiry,  which  if  prose- 
cuted with  ordinary  diligence  would  lead  to  actual  notice  of 
rights  claimed  adversely  to  his  vendor,  is  guilty  of  bad  faith 
for  the  neglect  to  make  such  inquiry  and  is  chargeable  with 
actual  notice  he  would  have  received.^  The  actual  notice  re- 
quired by  the  statute  is  in  contradistinction  to  the  constructive 
notice  given  by  the  record.  It  does  not  mean  that  there  must 
necessarily  be  direct  and  positive  evidence  that  the  subsequent 
purchaser  knew  of  the  existence  of  the  deed.  Any  proper 
evidence  tending  to  show  it,  facts  and  circumstances  coming 

'  Sankey  v.  Hawley,  118  Pa.  St.  30  ;  Laws  of  1881 ;  Rib.  L.,  p.  8-4. 
*Pomroy  v.  Stevens,  11  Met.  (^Vlass.)  244;  Parker  t;.  Osgood,  3  Allen  (Mass.), 
487 ;  Sibley  v.  Leffingwell,  8  Allen  (Mass.),  584. 
'Lamb  v.  Pierce,  113  Mass.  72. 

*  Crassen  v.  Swoveland,  22  Ind.  427 ;  Hennesey  v.  Andrews,  6  Cush.  (Mass.) 
170 ;  White  v.  Foster,  102  Mass.  375. 

*  Brinkman  v.  Jones,  44  Wis.  498,  519 ;  Musgrove  v.  Bonser,  5  Oreg.  313 ; 
Wilson  V.  Miller,  16  Iowa,  111. 


680  REGISTRATION    OF   THE   INSTRUMENT. 

to  his  knowledge  that  will  put  a  man  of  ordinary  circumspec- 
tion upon  inquiry,  is  evidence  of  such  notice/ 

§  646.  When  the  Record  is  not  Notice. — A  purchaser 
must  have  reason  to  believe  that  the  conveyance  and  bond 
were  executed  and  delivered  so  as  to  form  one  transaction,  to 
constitute  a  legal  mortgage  as  distinguished  from  one  that  is 
merely  equitable.^ 

Though  the  instruments  may  in  fact  constitute  a  mortgage 
as  between  the  parties,  yet,  if  they  do  not  of  themselves  show 
that  they  are  parts  of  one  transaction,  but  were  executed  at 
different  times,  and  each  is  complete  in  itself,  and  independent 
of  the  other,  the  record  of  them  is  not  notice  to  a  subsequent 
purchaser  that  they  constitute  a  mortgage.^ 

The  fact  that  they  are  on  separate  papers  does  not  in  equity 
change  the  nature  of  the  transaction.  They  are  to  be  read 
together,  and  the  bond  must  be  recorded  as  a  defeasance  of  the 
deed  in  order  to  be  notice.*  So  it  is  usual  to  make  such  refer- 
ence in  the  bond  to  the  debt  secured,  or  to  the  deed  of  convey- 
ance, that  it  is  apparent  that  the  transaction  was  a  mortgage, 
and  then  the  purchaser  is  bound  by  the  record  and  has 
notice.^ 

It  is  not  required  that  every  conveyance  of  land  accom- 
panied by  a  defeasance  shall  be  recorded  as  a  mortgage.  The 
statute  applies  when  the  defeasance  is  analogous  to  that  of  a 
mortgage.  Hence,  an  agreement  that  if  certain  acts  are  per- 
formed, the  deed  shall  not  operate,  but  shall  become  void, 

1  Maupin  v.  Emmons,  47  Mo.  304,  SOfj ;  Speck  v.  Eisrfifin,  40  Mo.  405 ;  Roberts 
V.  Moseley,  64  Mo.  507  ;  Price  v.  McDonald,  1  Md.  403  ;  Hastings  v.  Cutler,  24 
N.  H.  481 ;  Whitebread  v.  Jordan,  1  Younge  &  Coll.  303 ;  Hankinson  v.  Bar- 
bour, 29  111.  80;  Jordan  v.  Pollock,  14  Ga.  157 ;  Lewis  v.  Bradford.  10  Watts 
(Pa.),  G7;  Blaisdell  r.  Stevens,  16  Vt.  179;  Hubbard  v.  Smith,  2  Mich.  207; 
Buck  V.  Holloway,  2  J.  J.  Marsh.  (Ky.)  163,  180 ;  Daniels  v.  Davison,  16 
Ves.  249. 

Some  of  these  decisions  arc  not  controlled  by  the  statute. 

"Newhall  v.  Burt,  7  Pick.  (Mass.)  157. 

MVeider.  Gehl,  21  Minn.  449. 

*Holbrook  v.  Finney,  4  Mass.  566;  Kerr  v.  Gilmore,  6  AVatts  (Pa.),  408; 
Harrison  v.  Lemon,  3  Blackf.  (Ind.)  51. 

*Hill  V.  Edwards,  11  Minn.  22 ;  King  v.  Little,  1  Cush.  (Mass.)  436. 


REGISTRATION.  681 

must  be  recorded  with  the  deed,  both  forming  a  mortgage  and 
one  transaction.^ 

§647.  When  Possession  is  Notice. — Actual  possession  of 
land  by  a  person  other  than  the  vendor  thereof  is  notice 
sufficient  to  put  a  purchaser,  whether  in  fee  simple  or  in  mort- 
gage, on  inquiry  as  to  the  particulars  of  the  title  of  the  occu- 
pant.^ So,  where  property  is  mortgaged  by  an  unrecorded 
deed  absolute  upon  its  face,  accompanied  by  a  separate  defea- 
sance, possession  and  actual  occupancy  by  the  mortgagor  is 
notice  of  his  title  to  the  purchaser  from  the  mortgagee.^  But 
a  bona  fide  purchaser  without  the  requisite  notice  cannot  be 
affected  by  a  parol  defeasance.* 

A  conveyance  of  the  premises  by  the  mortgagee  to  a  third 
person  with  notice  of  the  defeasance  amounts  to  an  assignment 
of  the  mortgage.^ 

Article  3. 

Title-Deeds. 

§  648.  American  Doctrine. 

§  648.  The  American  Doctrine. — The  doctrine  of  a  mort- 
gage by  deposit  of  title-deeds  is  not  compatible  with  the  registry 
system,  and  hence  title-deeds  are  seldom  used  in  the  United 
States.  The  registry  of  a  mortgage  is  a  substitute  for  the 
deposit  of  title-deeds.'' 

But  the  mere  circumstance  of  the  first  mortgagee  leaving  the 
title-deeds  with  the  mortgagor  is  not  of  itself  sufficient  to 
postpone  the  first  mortgagee  to  a  second  mortgagee,  who  has 
taken  the  title-deeds  without  notice  of  the  prior  incumbrance.^ 

^Macaulay  v.  Porter,  71  N.  Y.  173. 

*  Morrison  v.  March,  4  Minn.  325;  Groff  t'.  Ramsey,  19  Minn.  44;  New  v. 
Wheaton,  24  Minn.  406 ;  Brown  v.  Gaffney,  28  111.  149. 

5  Daubenspeek  v.  Piatt,  22  Cal.  330 ;  Pritchard  v.  Brown,  4  N.  H.  397  ;  Hun- 
ter V.  Watson,  12  Cal.  363. 
<  Pancake  v.  Cauffinan,  114  Pa.  St.  113. 
^Halsey  v.  Martin,  22  Cal.  645. 

*  Bowers  v.  Oyster,  3  Pa.  239 ;  Gothard  v.  Flynn,  25  Miss.  58 ;  Berry  v.  Mut. 
Ins.  Co.,  2  Johns.  Ch.  (N.  Y.)  603. 

'  BeiTy  V.  Mut.  Ins.  Co.,  2  Johns.  Ch.  (N.  Y.)  603 ;  Evans  v.  Jones,  1  Ycate8 
(Pa.),  172. 


682  REGISTRATION    OF    THE    INSTRUMENT. 


Article  4, 
Equitable  Mortgages  are  Within  the  Rule. 

I  649.  Equitable  Mortgages.  1 651.  Agreements  to  Convey — Ex- 

'i  650.  Equitable  Interest  under  a  Con-  tension  of  Mortgage, 

tract  of  Purchase.  ?  652.  For  a  Precedent  Debt. 

§  653.  Leasehold  Estate. 

§649.  Equitable  Mortgages. — An  equitable  mortgage, 
though  expressing  no  legal  consideration  otherwise  than  by 
the  seal,  is  within  the  recording  acts  and  must  be  recorded.^ 

This  is  the  prevailing  doctrine  now  that  conveyances  of 
equitable  interests  in  land  are  within  the  recording  acts.^ 

So  a  written  instrument  given  as  security  for  a  debt  con- 
taining no  words  of  conveyance  in  prxsenti,  and  operative  only 
as  an  equitable  mortgage,  is  an  instrument  in  the  nature  of  a 
mortgage,  and  should  be  registered.^ 

§  650.  Equitable  Interest  Under  a  Contract  op  Pur- 
chase.— A  mortgage  under  a  contract  of  purchase,  of  an 
equitable  interest,  although  no  legal  estate  passes  by  it  is 
within  the  operation  of  the  registration  acts.* 

The  registration  of  an  instrument  which  is  entitled  to  be 
recorded,  operates  as  a  constructive  notice  to  subsequent  pur- 
chasers claiming  under  the  same  grantor,  or  through  one  who 
is  the  common  source  of  title.^  And  one  in  possession  of  land 
under  a  parol  contract  to  purchase  it  may  mortgage  his  interest, 

» Hunt  V.  Johnson,  19  N.  Y.  279. 

''Parkist  v.  Alexander,  1  Johns.  Ch.  (N.  Y.)  ,394 ;  Johnson  v.  Stagg,  2  Johns. 
510 ;  Stoddard  v.  Whiting,  46  N.  Y.  627  ;  United  States  Ins.  Co.  v.  Shriver,  3 
Md.  Ch.  381 ;  Wendell  v.  Wadsworth,  20  Johns.  (N.  Y.)  663  ;  Jackson  v.  Du- 
bois, 4  Johns.  216;  Tarbell  v.  West,  86  N.  Y.  280;  Shaw  v.  Poor,  6  Pick. 
(Mass.)  86 ;  Wilder  v.  Brooks,  10  Minn.  50 ;  Digman  v.  McCuUum,  47  Mo. 
372 ;  General  Ins.  Co.  v.  V.  8.  Ins.  Co.,  10  Md.  524 ;  Hays  v.  Richardson,  1 
Gill  &  J.  (Md.)  384 ;  Thomas  r.  Kennedy,  24  Iowa,  397, 407  ;  Bellas  v.  M'Carty, 
10  AVatts  (Pa.),  13 ;  Neligh  v.  Michenor,  3  Stock.  (N.  J.)  539  ;  Edwards  v.  Mc- 
Kernan,  55  Mich.  520;  Smith  v.  Neilson,  13  Lea  (Tenn.),  461. 

'  O'Neal  V.  Siexas,  85  Ala.  80,  overruling  Bailey  v.  Timberlake,  74  Ala.  221 ; 
Pierce  o.  Jackson,  56  Ala.  599. 

*Bank  v.  Clapp,  76  N.  Car.  482. 

5  Edwards  v.  McKernan,  55  Mich.  520,  526. 


II 


REGISTRATION.  683 

and  the  record  of  such  mortgage  will  be  notice  to  subsequent 
purchasers  and  incumbrancers/ 

A  holder  of  a  bond  for  a  deed  has  an  equity  he  can  mort- 
gage, and  the  mortgagee  will  succeed  to  all  his  equities.^ 

But  the  mortgage  of  an  equitable  title,  such  as  that  consti- 
tuted by  a  bond  for  a  deed,  is  not  constructive  notice  to  pur- 
chasers of  the  land  from  a  holder  of  the  legal  title  in  possession 
of  the  land,  inasmuch  as  the  purchaser's  title  is  not  derived 
through  the  title  of  the  mortgagor.* 

§  651.  Agreements  to  Convey. — A  mortgage  of  an  equita- 
ble estate  in  land,  executed  and  acknowledged  in  the  manner 
prescribed,  is  an  agreement  concerning  an  interest  in  land, 
and  may  be  recorded  in  the  proper  county,  and  when  recorded 
it  is  notice  to  and  takes  precedence  of  any  subsequent  pur- 
chaser, and  operates  as  a  lien  upon  the  land  therein  described 
according  to  its  import  and  meaning.* 

The  record  of  such  an  agreement  is  notice  to  a  subsequent 
purchaser  of  the  legal  estate  from  the  same  grantor.^ 

An  agreement  for  an  extension  of  a  mortgage  duly  recorded, 
but  which  does  not  identify  the  mortgage  by  a  sufficient  re- 
cital, has  no  effect  by  reason  of  its  record.®  And  an  agree- 
ment between  the  parties  for  an  extension  of  time,  and  for 
a  higher  rate  of  interest,  must  be  duly  executed  and  recorded 
in  order  to  be  notice  to  third  persons.*^ 

The  demand  cannot  be  enlarged  beyond  what  appears  on 
the  record,  and  become  a  lien  upon  the  land  as  to  subsequent 
purchasers  without  notice.^ 

'  Crane  v.  Turner,  7  Hun  (N.  Y.),  357. 

'^  Irish  V.  Sharp,  89  111.  261 ;  Chickering  v.  Fullerton,  90  111.  520. 

'  Halstead  v.  Bank,  4  J.  J.  Marsh.  (Ky.)  554 ;  Irish  v.  Sharp,  89  111.  261. 

Marvis  v.  Dutcher,  16  Wis.  307. 

^Parkist  v.  Alexander,  1  Johns.  Ch.  (N.  Y.)  394 ;  Hunt  v.  Jackson,  19  N.  Y. 
279 ;  General  Ins.  Co.  v.  United  States  Ins.  Co.,  10  Md.  517. 

*  Bassett  v.  Hathaway,  9  Mich.  28. 

'Da\n8  V.  Jewett,  3  Greena  (Iowa),  226;  Gardner  v.  Emerson,  40  111.  296  ; 
Whittaker  v.  Fuller,  5  Minn.  508. 

*St.  Andrew's  Church  v.  Tompkins,  7  Johns.  Ch.  (N.  Y.)  14;  Bassett  v. 
McDonel,  13  Wis.  444  ;  Thompson  v.  Lyman,  28  Wis.  266. 


684  REGISTRATION    OF    THE    INSTRUMENT. 

§  652.  For  a  Precedent  Debt. — An  equitable  mortgage  for 
a  precedent  debt  has  no  equity  superior  to  that  of  a  valid  sub- 
sequent judgment  at  law.  Between  such  contestants,  the  first 
perfected  legal  lien  should  prevail.  The  rule  is  otherwise  with 
regard  to  a  bona  fide  purchaser  or  equitable  mortgagee,  where 
the  consideration  of  the  mortgage  is  paid  at  the  time  it  is 
given.  Equity  in  the  latter  case  regards  the  equitable  mort- 
gagee as  a  bona  fide  purchaser.' 

§  653.  Leasehold  Estates. — It  is  said  that  the  act  concern- 
ing mortgages  extends  to  leasehold  as  well  as  to  freehold 
estates.^ 

On  the  other  hand,  it  is  held  that  the  act  concerning  con- 
veyancing, requiring  deeds  or  conveyances  of  lands,  tenements, 
or  herediaments  to  be  recorded,  does  not  apply  to  leases  for 
years,  nor  does  the  mortgage  registry  act  apply  to  mortgages 
of  such  leasehold  estates.^ 

In  Pennsylvania  a  leasehold  mortgage  is  required  by  statute 
to  be  recorded  with  the  lease.  The  mortgage  must  refer  to  the 
record  of  the  lease ;  or  if  it  is  not  recorded,  it  must  be  recorded 
with  the  mortgage.* 

A  mortgage  taken  with  knowledge  of  a  lessee's  right,  though 
it  had  been  unrecorded  and  unacknowledged,  is  subject  to  the 
lease.^ 

I  Wheeler  v.  Kirtland,  24  N.  J.  Eq.  552. 

"^  Berry  v.  Mut.  Ins.  Co.,  2  Johns.  Ch.  (N.  Y.)  003  ;  Johnson  v.  Stagg,  2  Johns. 
(N.  Y.)  510,  523  ;  Breese  v.  Ban<re,  2  E.  D.  Smith  (N.  Y.),  474. 

^HutfhinHon  v  Bramhall,  42  N.  J.  Eq.  372,  in  effect  overruling  Decker  v. 
Clarke,  2(j  N.  J.  Eq.  163  ;  Spielman  v.  Kliest,  3G  N.  J.  Eq.  199. 

*  Hilton's  Appeal,  116  Pa.  St.  351. 

*  Arnold  v.  AVhitcomb,  83  Mich.  19. 


registration.  685 

Article  5. 
Assignment  of  Mortgages. 

§  654.  Statutory  Provisions.  ^  G58.  Sufficiency  of  Record. 

^  655.  Provisions  not  to    Invalidate  §  659.  Agreements     Affecting     Mort- 

Payments     IMade     by    the  gages. 

Mortgagor  to  the  Holder  of  |  660.  Rights  of  Assignee. 

the  Bond  or  Note.  I  661.  Priority  of  Assignments  of  the 

§  656.  When     Governed    by    Stat-  Same  Mortgage. 

ute.  §  662.  Mortgages    of   Growing    Crops 

§  657.  Innocent  Purchasers.  and  Timber. 

§  654.  Statutory  Provisions. — lu  some  of  the  States  laws 
have  been  enacted  for  the  registration  of  assignments  of 
mortgages.  Tlius,  in  Delaware,  it  is  provided  that  an  assign- 
ment of  a  mortgage  attested  by  one  witness  is  valid.'  In 
Indiana,  any  mortgage  of  record  or  any  part  thereof,  may  be 
assigned,  either  by  an  assignment  entered  on  the  margin  of 
such  record,  signed  by  the  person  making  the  assignment  and 
attested  by  the  recorder,  or  by  a  separate  instrument  executed 
and  acknowledged  before  any  person  authorized  to  take  ac- 
knowledgments, and  recorded  on  such  margin,  or  in  the  mort- 
gage records  of  the  country.' 

In  Maryland  an  act  provides  for  the  recording  of  assign- 
ments of  mortgages,^  but  this  does  not  affect  an  equitable 
assignment.'* 

In  Pennsylvania  the  record  of  an  assignment  of  a  mortgage  is 
notice  to  subsequent  assignees  of  the  mortgage,^  and  to  subse- 
quent purchasers  and  mortgagees.® 

§  655.  Provisions  not  to  Invalidate  Payments  Made  by 
the  Mortgagor  to  the  Holder  of  the  Bond  or  Note. — 

1  Laws  of  1887,  ch.  21.3. 

'Acts  of  1877,  ch.  58,  sect.  1 ;  Rev.  Stat.,  1881,  sect.  1093.  Before  this  act 
the  record  of  assignments  of  mortgages  was  not  notice :  Reeves  v.  Hayes, 
95  Ind.  521 ;  Dixon  v.  Hunter,  57  Ind.  278. 

» Rev.  Code,  1878,  art.  44,  sects.  37,  38. 

*  Byles  V.  Tome,  39  Md.  461. 

*  Act  of  April  9,  1849,  sect.  14 ;  Neide  v.  Pennypacker,  9  Phila.  (Pa.)  86. 

*  Leech  v.  Bonsall,  9  Phila.  (Pa.)  204 ;  Pepper's  Appeal,  77  Pa.  St.  373 ; 
Philips  V.  Bank,  18  Pa.  St.  394,  401. 


686  REGISTRATION    OF    THE    INSTRUMENT. 

Many  of  the  States  have  provided  by  statute  that  the  recording 
of  an  assignment  shall  not  of  itself  be  deemed  notice  of  such 
assignment  to  the  mortgagor,  his  heirs,  and  personal  represen- 
tatives, so  as  to  make  void  any  payment  made  by  them  to  the 
holder  of  the  bond  or  note.  The  States  having  such  a  stat- 
utory provision  are :  California,^  Kansas,^  Michigan,'^  Minne- 
sota,* Nebraska,^  New  York,^  Oregon,^  Wisconsin,*  and  Wyo- 
ming.^ 

Under  these  statutes  the  record  of  an  assignment  of  a  mort- 
gage is  constructive  notice  as  against  a  grantee  of  the  mort- 
gagor that  the  mortgagee  has  no  longer  any  interest  in  the 
mortgage  title,  and  that  he  cannot  release  the  mortgage.'" 
Such  statute  does  not  apply  to  a  purchaser  of  the  equity  of  re- 
demption where  the  terms  do  not  make  it  applicable. '^ 

In  New  Jersey,  however,  the  statute  provides  that  if  the 
assignment  be  not  recorded  any  payments  made  in  good  faith 
and  without  actual  notice  of  the  assignment,  and  any  release 
of  the  premises  to  a  person  not  having  actual  notice  of  the 
assignment,  are  as  valid  as  if  the  mortgage  had  not  been 
assigned  ;  '^  this  would  indicate  that  such  record  is  notice  to 
the  owner  of  the  equity  of  redemption. 

In  North  and  South  Dakota  a  record  of  the  assignment 
operates  as  notice  to  all  persons  subsequently  deriving  title  to 
the  mortgage  from  the  assignor. ^^ 

In  Indiana  the  mortgagor  and  all  persons  are  bound  by  the 
record  of  the  assignment,  as  it  is  a  public  record.'* 

1  Civil  Code,  sect.  2935. 

"^  Dasslers'  Stat.,  1876,  ch.  68,  sect.  3. 

^Comp.L.  1871,  p.  1347. 

*  Gen.  Stat.,  1878,  ch.  40,  sect.  24. 

^Com.  Stat.,  1881,  p.  392. 

8 1  Eev.  St.,  p.  763,  sect.  41. 

T  Anno.  Stat.,  1887,  sect.  3030. 

8  Rev.  Stat.,  1878,  p.  641,  sect.  2244. 

»  Eev.  Stat.,  1887,  sect.  22. 

i»  Belden  v.  Meeker,  47  N.  Y.  307  ;  Viele  r.  Judson,  82  N.  Y.  32. 

"  Brewster  v.  Carnes,  103  N.  Y.  556. 

'2  Nixon's  Dig.,  1868,  p.  612. 

"Civil  Code  of  Procedure,  sects.  651,  671 ;  Civil  Code,  1871,  sect.  1629. 

"  Connecticut  Mut.  L.  Ins.  Co.  v.  Talbot,  113  Ind.  373. 


REGISTRATION.  687 

§  656.  When  Governed  by  Statute. — The  registration 
laws  generally  apply  to  the  assignment  of  mortgages.  Hence, 
an  assignment  of  a  mortgage  is  invalid  against  a  subsequent 
purchaser  without  notice,  or  mortgagee  of  a  subsequent 
mortgage,  unless  such  assignment  is  recorded.'  Assignments 
of  mortgages  should  be  recorded  to  protect  the  assignee  against 
fraudulent  release  by  the  mortgagee  ;  ^  and  to  protect  assignees 
against  subsequent  mortgagees  and  purchasers.'* 

So  it  is  settled  that  unrecorded  assignments  of  mortgages 
are  void  as  against  subsequent  purchasers  whose  interests 
may  be  affected  thereby,  and  whose  conveyances  are  duly  re- 
corded, provided  such  assignments  are  embraced  by  the  record- 
ing acts.* 

When  the  recording  acts  do  not  directl}'^  ^Pply  to  the  record 
of  assignments  of  mortgages,  the  court  often  interprets  them 
as  intended  to  apply.^ 

So  an  assignee  is  not  bound  by  an  unrecorded  agreement, 
whereby  the  mortgagee  was  obligated  to  release  a  part  of  the 
premises.^ 

It  is  provided  by  statute  in  Wisconsin  ^  that  the  assignee  of 
a  mortgage  takes  it  subject  to  all  the  equities  existing  between 
the  mortgagor  or  his  grantees.  Mortgages  are  included 
with  those  instruments  which  are  properly  designated  in 
the  recording  acts  as  conveyances,  and  also  a  release  of  a 
mortgage  and  an  agreement  for  such  release  without  nulli- 

'  Bowling  V.  Cook,  39  Iowa,  200 ;  Cornog  v.  Fuller,  30  Iowa,  212 ;  Smith  v. 
Keohane,  6  111.  App.  585 ;  Gregory  v.  Savage,  32  Conn.  262 ;  Edgerton  v. 
Young,  43  111.  464  ;  Bailey  v.  Myrick,  50  Me.  180 ;  Turpin  v.  Ogle,  4  111.  App. 
611. 

'^Howard  v.  Ross,  5  111.  App.  456. 

^  Smith  V.  Keohane,  6  111.  App.  585 ;  Belden  v.  Meeker,  47  N.  Y.  307  ;  Brew- 
ster V.  Carnes,  103  N.  Y.  556 ;  Stein  r.  Sullivan,  31  N.  J.  Eq.  40n  ;  Tradesmen's 
Build.  Asso.  V.  Thompson,  31  N.  J.  Eq.  536. 

^  Bacon  v.  Van  Schoonhoven,  87  N.  Y.  440;  Decker  v.  Boice,  83  N.  Y.  215  ; 
Swartz  V.  Leist,  13  Ohio  St.  419 ;  Yerger  v.  Barz,  56  Iowa,  77 ;  Henderson  v. 
Pilgrim,  22  Tex.  464 ;  Conn.  Mut.  L.  Ins.  Co.  v.  Talbot,  113  Ind.  373  ;  Brew- 
ster V.  Carnes,  103  N.  Y.  556 ;  Lewis  v.  Kirk,  28  Kan.  497. 

•'Summers  v.  Kilgus,  14  Bush  (Ky.),  449;  Bowling  v.  Cook,  39  Iowa,  200. 

•=  Warner  v.  Winslow,  1  Sandf.  Ch.  (N.  Y.)  430. 

'  Rev.  Stat.,  1871,  p.  1149. 


688  REGISTRATION    OF   THE    INSTRUMENT. 

fying  the  acts  to  that  extent,  and  withholding  the  protection 
they  were  designed  to  confer  upon  purchasers/ 

A  purchaser  of  the  equity  of  redemption  has  notice  of  a 
recorded  assignment  and  is  bound  thereby.^ 

Recording  an  assignment  of  a  mortgage  protects  the  as- 
signee from  a  subsequent  sale  of  the  mortgage.^ 

If  the  mortgagee  assign  one  of  two  simultaneous  mortgages 
with  the  representation  that  it  is  the  first  lien,  it  will  estop 
him  from  acting  otherwise.  But  such  representation  will  not 
bind  the  assignee  of  the  other  mortgage  without  notice.* 

§  657.  Innocent  Purchasers. — The  rights  of  an  innocent 
purchaser  of  real  estate  are  superior  to  those  of  an  assignee 
who  fails  to  have  the  assignment  of  the  mortgage  properly  re- 
corded, the  mortgagee  discharging  the  mortgage,  and  there 
being  nothing  to  put  the  purchaser  on  inquiry.'^  It  is  notice 
to  buy  of  the  mortgagee,  and  it  is  the  duty  of  a  purchaser  to 
inquire  whether  his  vendor,  the  mortgagee,  is  still  the  owner 
of  the  mortgage,  and  his  omission  to  make  that  inquiry  makes 
him  a  mala  fide  purchaser.*^ 

As  a  general  rule  the  mortgagor  may  deal  with  the  fnort- 
gagee  as  the  holder  of  the  mortgage  until  he  has  actual  notice 
of  an  assignment.  But  this  rule  does  not  apply  when  the 
mortgage  secures  a  negotiable  note  which  is  transferred  before 
maturity.^ 

However,  some  courts  hold  that  the  estate  of  a  mortgagee 
of  land  is  a  legal  estate,  which  passes  by  the  same  instruments 
of  conveyance  as  other  legal  estates,  and  in  the  absence  of  fraud 

1  Ely  V.  Scofield,  35  Barb.  (N.  Y.)  330. 

^  Brewster  v.  Carnes,  103  N.  Y.  556.  See,  also,  Jones  v.  Gibbons,  9  Ves.  407, 
410 ;  Ex  parte  Barnett,  1  De  G.  194. 

2  Greene  v.  Warnick,  64  N.  Y.  220. 

*  Vredenburgh  v.  Burnet,  31  N.  J.  Eq.  229. 

*  Ladd  V.  Campbell,  56  Vt.  529 ;  Torrey  v.  Deavitt,  53  Vt.  331 ;  Ackla  v.  Ackla, 
6  Pa.  St.,  228  ;  Storrs  v.  Barker,  6  Johns.  Ch.  (N.  Y.)  166 ;  Crane  v.  Turner,  67 
N.  Y.  437 ;  Van  Keuren  v.  Corkins,  66  N.  Y.  77 ;  Pannenter  v.  Oakley,  69 
Iowa,  388. 

^Burhansr.  Hutcheson,  25  Kan.  625;  Oregon  Trust  Co.  v.  Shaw,  5  Saw. 
C.  C.  336 ;  Gillig  v.  Maass,  28  N.  Y.  191. 
^  Jones  V.  Smith,  22  Mich.  360. 


REGISTRATION.  689 

a  conveyance  by  the  party  who  appears  on  the  record  to  be 
the  owner  of  the  mortgage  will  protect  a  purchaser  who  has 
no  actual  or  constructive  notice  of  title  in  any  other/ 

§  658.  Sufficiency  of  Record. — It  is  a  sufficient  record  if 
it  so  identifies  the  mortgage  that  by  examining  the  records 
the  one  referred  to  can  be  ascertained.^  A  mortgage  which 
had  been  duly  recorded  was  assigned  by  deed  and  indorsed 
upon  it,  and  described  it  as  "  the  within  described  mortgage." 
Said  deed  of  assignment  was  also  recorded  on  a  subsequent 
page  of  the  volume  of  records  in  which  the  mortgage  was  re- 
corded, but  the  mortgage  was  not  recorded  with  it.  It  was 
held  that  the  assignment  was  recorded  within  the  provision  of 
the  statute.^ 

It  is  not  necessary  for  the  register  to  note  an  assignment  of 
a  mortgage  upon  the  margin  of  the  record  unless  the  statute  so 
provides ;  and  there  being  no  such  provision  the  omission  of  the 
register  to  do  so  has  no  effect  as  to  the  rights  of  the  assignee.* 

In  the  assignment  of  the  mortgage  there  should  be  the  re- 
cital of  the  names  of  the  parties  to  the  mortgage,  and  its  date, 
and  also  reference  in  the  description  of  it,  to  the  book  of  record 
and  the  page.  However,  a  reference  to  the  record  of  the  mort- 
gage, nor  a  description  of  the  mortgaged  land,  is  necessary.^ 

§  659.  Agreements  Affecting  Mortgages. — A  record  of 
an  instrument  not  by  law  entitled  to  record,  is  notice  to  no  one. 
So  where  an  agreement  was  witnessed,  acknowledged,  and 
recorded,  concerning  a  mortgage  of  land,  such  instrument  not 
being  the  subject  of  record,  the  assignee  of  a  second  mortgage 
of  the  same  land,  who  receives  the  same  for  a  valuable  con- 
sideration before  it  was  due  and  without  actual  notice  of  this 
agreement  is  not  affected  thereby.^ 

»  Ladd  V.  Campbell,  56  Vt.  529 ;  Welch  v.  Priest,  8  Allen  (Mass.),  165 ;  Blunt 
V.  Norris,  123  Mass.  55  ;  Wolcott  v.  Winchester,  15  Gray  (Mass.),  461. 
"  Viele  V.  Judson,  82  N.  Y.  32. 
'  Carli  V.  Taylor,  15  Minn.  171. 

*  Viele  V.  Judson,  82  N.  Y.  32. 

*  Viele  V.  Judson,  82  N.  Y.  32. 
*Dutton  V.  Ives,  5  Mich,  515. 

44 


690  REGISTRATION    OP    THE    INSTRUMENT. 

And  an  unrecorded  agreement  to  release  is  void  against  a 
bona  fide  assignee/ 

§  660.  Rights  of  Assignee. — An  assignee  of  a  mortgage 
takes  it  not  only  subject  to  all  the  equities  existing  between 
the  parties  to  the  instrument,  but  he  also  takes  it  subject  to  all 
equities  which  third  persons  can  enforce  against  the  assignor.^ 
So  where  a  junior  mortgagee  with  notice  of  a  prior  unrecorded 
mortgage  assigns  his  mortgage  to  a  bona  fide  purchaser  for 
value,  who  has  no  notice,  the  assignment  is  a  "  conveyance  " 
within  the  meaning  of  the  statute,  and  such  assignee  is  entitled 
to  preference  only  in  case  he  records  his  assignment  before  the 
first  mortgage  is  recorded.^  A  purchaser  of  a  recorded  mortgage, 
which  was  given  to  secure  a  negotiable  note,  who  purchases 
without  notice  of  a  prior  unrecorded  mortgage,  obtains  priority 
over  such  unrecorded  mortgage  ;  and  this  is  so,  notwithstand- 
ing the  party  of  whom  he  purchased  the  second  mortgage  had 
notice  of  the  prior  mortgage.*  So  an  unrecorded  instrument, 
whether  deed  or  mortgage,  is  void,  except  as  between  the  par- 
ties, and  those  who  have  actual  notice ;  and  a  party  ignorant 
of  an  unrecorded  instrument  may  purchase  of  one  holding  a 
recorded  title  or  mortgage  interest  without  fear  of  being 
disturbed  by  the  claimant  under  such  unrecorded  instru- 
ment.^ 

Where  the  mortgagee,  having  assigned  one  of  the  notes  se- 
cured by  the  mortgage  to  one  person,  and  afterward  assigns  the 
other  notes  and  the  whole  mortgage  to  another  party,  whose 
assignment  was  placed  on  record,  the  latter  was  not  protected 
as  against  the  first  assignee  as  an  innocent  purchaser,  because 

1  St.  John  V.  Spalding,  1  T.  &  C.  (N.  Y.)  483 ;  Mut.  L.  Ins.  Co.  v.  Wilcox,  55 
How.  Pr.  (N.  Y.)  43. 

•^  BuHh  V.  Lathrop,  22  N.  Y.  535  ;  Schafer  v.  Reilly,  50  N.  Y.  61 ;  Greene  v. 
Warnick,  f)4  N.  Y.  220 ;  Crane  v.  Turner,  67  N.  Y.  437. 

^  Weatbrook  v.  Gk^ason,  79  N.  Y.  23  ;  Decker  v.  Boice,  83  N.  Y.  215 ;  Smith 
V.  Ins.  Co.,  84  N.  Y.  589. 

*  Jackson  v.  Reid,  30  Kan.  10;  Union  College  v.  Wheeler,  59  Barb.  (N.  Y.) 
585;  Jackson  v.  Van  Valkenburgh,  8  Cow.  (N.  Y.)  260;  Bush  v.  Lathrop,  22 
N. Y.  535,  549. 

Hlott  y.  Clark,  9  Pa.  St.  399 ;  Choteau  v.  Jones,  11  111.  300;  Lightner  z;. 
Mooney,  10  Watts  (Pa.),  407. 


REGISTRATION.  691 

the  mortgage  itself  was  notice  to  him  of  the  existence  of  the 
note  which  he  had  not  received.^ 

§  661.  Priority  of  Assignments  of  the  Same  Mortgage. — 
If  two  or  more  assignments  are  made  of  the  same  mortgage  to 
bona  fide  assignees,  the  first  recorded  will  take  preference,  pro- 
vided the  full  consideration  was  paid  at  the  time  of  the  trans- 
action. If  only  part  of  the  consideration  has  been  paid  by  the 
assignee  who  first  has  his  assignment  recorded,  then  he  will  take 
priority  pro  tanto — that  is,  to  the  extent  of  the  payment  by  him.^ 

However,  priority  of  rights  of  different  assignments  of  the 
same  mortgage  seldom  arises,  because  an  assignment  is  generally 
accompanied  by  the  notes  or  bonds,  and  under  ordinary  condi- 
tions an  assignee  would  not  take  a  mortgage  without  these 
papers.^ 

The  absence  of  the  notes  or  bond  will  be  enough  to  put  in 
doubt  the  assignee's  good  faith,  and  he  would  be  chargeable 
with  this  defect.  If  the  mortgagee  has  not  these  papers,  it  is 
the  assignee's  business  to  know  the  reason  by  inquiry.* 

§  662.  Mortgages  of  Growing  Crops  and  Timber. — Under 
a  statute  requiring  "  all  agreements  and  bonds  for  the  convey- 
ance of  real  or  personal  estate  "  to  be  recorded,  all  liens  to  be 
valid  in  favor  of  the  landlord,  of  crops  to  be  raised  or  growing 
by  his  tenant  for  advances,  as  against  creditors  of  such  tenant, 
should  be  registered.^ 

So  if  a  mortgagor  sells  growing  timber  upon  the  mortgaged 
premises  before  the  record  of  his  mortgage,  and  the  purchaser 
having  removed  it  from  the  land  without  notice  of  the  mort- 
gage, he  will  hold  it  against  the  mortgagee.^ 

*  Wilson  r.  Eigenbrodt,  .SO  Minn.  4. 

nViley  V.  Williamson,  68  Me.  71 ;  Oregon  Trust  Co.  v.  Shaw,  5  Saw.  C.  C. 
336 ;  Potter  v.  Stransky,  48  Wis.  23-5 ;  Pickett  v.  Barron,  29  Barb.  (N.  Y.)  505 ; 
Campbell  v.  Vedder,  3  Keyes  (N.  Y.),  174. 

*  Porter  v.  King,  1  Fed.  Rep.  755. 

*Kellog  V.  Smith,  26  N.  Y.  18 ;  Brown  v.  Blydenburg,  7  N.  Y.  141 ;  Porter  v. 
King,  1  Fed.  Rep.  755. 
^  Jones  V.  Chamberlin,  5  Heisk.  (Tenn.)  210. 
'  Banton  v.  Shorey,  77  Me.  48. 


692  REGISTRATION    OF    THE  INSTRUMENT. 

Under  such  circumstances  as  to  the  timber  thus  cut  and 
removed,  the  contract  becomes  executed  and  the  title  to  which 
vests  in  the  innocent  purchaser  as  soon  as  it  is  severed  from 
the  land/ 

The  same  effect,  however,  of  passing  the  property  in  trees 
may  be  accomplished  by  conveyance  of  them  by  deed  as  grow- 
ing trees,  if  done  by  the  owner  of  the  freehold.  It  is  so  far 
considered  a  severance  of  the  property  in  the  trees  from  that 
in  the  soil  that  the  vendee  may  after  that  sell  and  pass  title 
to  them  by  a  mere  writing.^ 

1  Erskine  v.  Plummer,  7  Me.  451 ;  Buck  v.  Pickwell,  27  Vt.  157. 
^Kingsley  v.  Holbrook,  45  N.  H.  322 ;  Gooding  v.  Riley,  50  N.H.  407 ;  Hoit 
V.  Stratton  Mills,  54  N.  H.  110;  Warren  v.  Leland,  2  Barb.  (N.  Y.)  613. 


CHAPTER  XVII.    • 

THE    LIEN. 

Article  1. 
TJie  Parties. 

§  663.  Mortgagor  and  Mortgagee.  1 670.  Judgment  Liens. 

§  664.  Administrator  and  Assignee.  §  671.  Unrecorded     Mortgages     and 

I  665.  Judgment     and     Attachment  Subsequent  Judgments — First 

Creditors.  Class. 

§666.  Priorities.  ?672.  Unrecorded     Mortgages     and 

§  667.  Subsequent  Mortgages.  Subsequent  Judgments — Sec- 

1 668.  Subsequent  Deeds  or  Mortgages  ond  Class. 

Not  Notice  to  a  Prior  Mort-  1 673.  Statutory  Liens. 

gagee.  1 674.  To  Support  the  Validity  of  an 

§  669.  Destruction  of  Records.  Unrecorded  Deed — Evidence. 

§  663.  Mortgagor  and  Mortgagee. — The  record  of  the 
mortgage  is  not  necessary  to  maintain  the  lien  as  to  the  mort- 
gagor. So  far  as  the  mortgagee's  lien  is  concerned  as  to  him- 
self, the  registration  of  the  mortgage  has  no  effect.^  An  unre- 
corded mortgage,  as  between  the  parties  and  their  heirs,  is 
valid  and  operative.  So  the  heir  of  the  judgment  debtor  can 
take  nothing  from  his  ancestor  until  his  ancestor's  debts  are 
paid.  So  long  as  the  title  to  lands  descended  remains  in  the 
heir,  the  debts  of  the  ancestor  constitute  a  lien  thereon.^  And 
it  is  the  general  rule  that  the  lien  is  good  not  only  between 
the  parties,  but  also  as  to  those  having  notice,  though  the 
mortgage  is  not  recorded.^ 

In  Illinois  a  deed  is  valid  as  between  the  parties  to  it,  with- 

^  Moore  v.  Thomas,  1  Oreg.  201  ;  Seaver  v.  Spink,  65  111.  441 ;  Brem  v.  Lock- 
hart,  93  N.  Car.  191 ;  Wood  v.  Chapin,  13  N.  Y.  509 ;  Westervelt  v.  Voorhis, 
42  N.  J.  Eq.  179 ;  Hoes  v.  Boyer,  108  Ind.  494 ;  Roane  v.  Baker,  120  111.  308  ; 
Carleton  v.  Byington,  18  Iowa,  482 ;  Fosdick  v.  Barr,  3  Ohio  St.  471 ;  Jackson 
V.  Golden,  4  Cow.  (N.  Y.)  266. 

'^  Westervelt  r.  Voorhis,  42  N.  J.  Eq.  179. 

'HuUng  V.  Abbott,  86  Cal.  423 ;  Hoes  v.  Boyer,  108  Ind.  494. 

693 


694  REGISTRATION    OF    THE    INSTRUMENT. 

out  being  acknowledged/  So  when  a  deed  of  land  sold,  and 
a  purchase-money  mortgage  executed  on  the  same  date,  and 
handed  to  the  respective  parties  at  that  time,  the  delivery  is 
perfected  so  as  to  preserve  the  lien  of  the  mortgage,  even 
though  it  be  not  acknowledged  by  the  mortgagor  until  after 
the  delivery  and  record  of  the  deed.^ 

The  object  of  the  statute  requiring  the  record  of  mortgages  is 
to  give  notice  to  persons  other  than  those  who  are  parties  to 
the  instrument.  So  a  mortgage  may  be  valid  and  binding  as 
such  without  record  as  between  the  parties  to  the  instrument^ 
and  to  their  heirs.* 

It  is  the  general  rule  in  those  States  where  they  must  be  re- 
corded after  execution,  in  a  stipulated  time,  that  though  not 
recorded  as  required,  yet  they  are  valid  between  the  parties.^ 
The  lien  is  good  as  between  the  parties,  though  the  mortgage 
is  destroyed  by  third  parties  or  by  accident.® 

Under  the  Illinois  act,  there  may  be  a  valid  delivery  with- 
out acknowledgment.^ 

So  as  a  general  rule  an  unrecorded  mortgage,  even  though 
unacknowledged,  is  good  as  between  the  parties  to  it,  their 
heirs  and  devisees,  and  as  to  others  who  have  actual  notice  of 
the  lien  before  they  acquired  any  interest  in  the  property.* 

Subsequent  purchasers  for  value  without  notice  can  take 
advantage  of  the  fact  of  a  prior  unrecorded  mortgage.  It  can- 
not become  superior  to  their  lien." 

While  an  unacknowledged  mortgage  is  a  valid  security  in 
the  hands  of  the  mortgagee,   except  as  against  bona  fide  pur- 

igemple  v.  Miles,  2  Scam.  (111.)  315  ;  McConuel  v.  Reed,  2  Scam.  (111.)  371 ; 
Johnston  v.  Canby,  29  Md.  211. 

^  Roane  v.  Baker,  120  111.  308. 

3  Sidle  V.  Maxwell,  4  Ohio  St.  236. 

*  McLaughlin  v.  Ihmsen,  85  Pa.  St.  364 ;  Westervelt  v.  Voorhis,  42  N.  J.  Eq. 
179 ;  Hoes  v.  Boyer,  108  Ind.  494. 

nVynn  v.  Carter,  20  Wis,  107  ;  Kirkpatrick  v.  Caldwell,  32  Ind.  299. 

8  Sloan  V.  Holcomb,  29  Mich.  153. 

'  Darst  V.  Bates,  51  111.  439 ;  Roane  v.  Baker,  120  111.  308. 

8  Dole  V.  Thurlow,  12  Met.  (Mass.)  157,  162;  Marshall  v.  Fisk,  6  Mass.  24; 
Johnston  v.  Canby,  29  Md.  211. 

^  Merriman  v.  Hyde,  9  Nebr.  113. 


THE   LIEX.  695 

chasers  or  incumbrancers  without  notice/  yet  a  /erne  covert's 
mortgage  must  be  acknowledged  or  it  will  not  be  good  even 
between  the  parties  thereto  ^  in  those  States  where  a  married 
woman  has  not  the  same  rights  over  her  separate  property  as 
the  husband  has  over  his. 

Mortgages  executed  and  recorded  simultaneously  are  con- 
current liens.'^  Mortgages  may  have  a  concurrent  lien  by 
agreement  of  the  parties  that  neither  shall  have  priority.* 

A  bona  fide  purchaser  without  notice  of  land  takes  it  dis- 
charged of  a  lien  of  an  unrecorded  mortgage.  This  protection 
extends  to  all  persons  claiming  under  him.^  So  a  bona  fide 
purchaser  or  incumbrancer  of  the  legal  estate  in  land  will  be 
protected  against  a  prior  equitable  title  of  another  of  which 
he  had  no  notice.  Hence,  when  the  vendor  has  acquired  the 
legal  title  fraudulently  or  holds  the  legal  title  in  trust  even, 
the  bona  fide  purchaser  without  notice  of  any  defect  in  his  title 
growing  out  of  equities  in  some  other  person,  will  be  protected 
against  such  equities.^ 

In  Nebraska,  a  recorded  mortgage  which  is  not  legally  ac- 
knowledged does  not  operate  as  constructive  notice.'^  One  who 
takes  a  mortgage  with  knowledge  that  the  mortgagor  holds  the 
land  only  by  way  of  security  cannot  enforce  it  for  a  greater 
amount  than  the  mortgagor's  claim  against  his  grantor ;  but 
if  he  takes  without  notice  he  can  collect  the  whole  amount  of 
the  mortgage.^  If  a  mortgagee  releases  a  mortgage,  stating  in 
the  release  that  it  is  the  only  mortgage  he  holds  upon  the 

'  Vickrey  v.  Dickson,  62  Barb.  (N.  Y.)  272 ;  Haskill  v.  Sevier,  25  Ark.  152. 
^  Perdue  v.  Aldrid^e,  19  Ind.  290. 

3  Stafford  v.  Van  Rensselaer,  9  Cow.  (N.  Y.)  316;  Hopk.  (N.  Y.)  .569;  Gau- 
een  v.  Tomlinson,  2.3  N.  J.  Kq.  405  ;  Vredenburgh  v.  Barnet,  31  N.  J.  Eq.  229. 

*  Howard  v.  Chase,  104  Mass.  249. 

^  Huebsch  v.  Scheel,  81  111.  281 ;  Hodgen  v.  Guttery,  58  III.  431 ;  Holbrook 
V.  Dickenson,  56  111.  497 ;  Burns  v.  Berry,  42  Mich.  176 ;  Eiley  v.  Hoyt,  29 
Hun  (N.  Y.),  114 ;  Cook  v.  Travis,  20  N.  Y.  400 ;  Tarbell  v.  West,  86  k.  Y. 
280;  Clark  v.  Mackin,  30  Hun  (N.  Y.),  411 ;  Cook  v.  Travis,  22  Barb.  (N.  Y.) 
338;  Varick  v.  Briggs,  6  Paige  (N.  Y.),  323 ;  Crane  v.  Turner,  7  Hun  (N.  Y.), 
357. 

«  Robbins  v.  Moore.  129  111.  30 ;  McNab  v.  Young,  81  111.  11. 

'  Keeling  v.  Hoyt  (Nebr.),  48  N.  W.  Rep.  66. 

*  Truman  v.  Bell,  54  Ark.  273. 


696  REGISTRATION    OF   THE    INSTRUMENT. 

land,  though  contrary  to  the  record,  he  is  bound,  and  a  junior 
mortgagee  need  look  no  further/ 

In  a  suit  to  foreclose  a  mortgage  given  to  secure  a  note  of 
the  mortgagor  it  appeared  that  defendant,  a  second  mortgagee, 
held  another  mortgage  executed  later,  but  on  the  same  day 
that  the  complainant's  was  executed ;  that  defendant's  mort- 
gage was  recorded  first,  and  was  given  to  secure  the  future 
life  support  of  the  mortgagor  and  his  wife.  It  was  held  that 
the  fact  that  the  complainant's  mortgage  was  given  to  release 
an  attachment  on  the  premises  did  not  charge  defendant  with 
constructive  notice  of  his  mortgage.^ 

§  664.  Administrator  and  Assignee. — A  purchaser  from 
an  administrator,  under  order  of  court,  of  real  estate  incum- 
bered by  an  unrecorded  mortgage,  who  has  no  knowledge  of 
the  lien,  will  take  title,  but  the  mortgagee  will  have  a  lien  on 
the  money  in  the  hands  of  the  administrator  in  preference  to 
the  intestate's  general  creditors,  as  the  administrator  has  no 
greater  rights  than  his  intestate.^ 

Accordingly  a  purchaser  from  an  assignee  of  an  insolvent 
estate,  without  notice  and  for  value,  will  have  a  good  title, 
though  it  was  incumbered  by  an  unrecorded  mortgage,  because 
the  assignee  takes  the  bankrupt's  estate  subject  to  any  convey- 
ance he  has  made,  and  has  no  better  right  than  his  assignor 
had.* 

§665.  Judgment  and  Attachment  Creditors.  —  As  a 
general  rule,  says  Vice-Chancellor  Van  Fleet,  a  judgment 
creditor  can  take  nothing  for  the  satisfaction  of  his  debt  which 
his  debtor  cannot  himself  sell  and  make  a  good  title  to,  as 
against  his  creditors.^  Speaking  generally,  the  limit  of  his 
right  as  a  creditor  is  to  sell  by  judicial  process  only  such  prop- 

1  Lindauer  v.  Younglove  (Minn.),  49  N.  W.  Rep.  384. 
^Beaiiian  v.  Cooper  (Vt.),  23  At.  Rep.  794. 

^Kirkpatrick  v.  Caldwell,  32  Ind.  299  ;  Andrews  v.  Burns,  11  Ala.  691. 
*Hodgen  v.  Guttery,  58  111.  431.    See,  also,  Ross  v.  Sweeny  (Ky.),  15  S.  W. 
Rep.  357. 
^Westervelt  v.  Voorhis,  42  N.  J.  Eq.  179,  180. 


THE   LIEN.  697 

erty  for  the  satisfaction  of  his  debt  as  his  debtor  could  hiniself 
sell. 

In  New  Jersey,  however,  the  statute  declares  that  every 
mortgage  of  land  shall  be  void  and  of  no  q^ect  against  a  subse- 
quent judgment  creditor,  not  having  notice  thereof,  unless 
such  mortgage  be  recorded  or  lodged  for  that  purpose  at  or 
before  the  time  of  entering  such  judgment,  provided,  never- 
theless, that  such  mortgage  as  between  the  parties  and  heirs 
shall  be  valid  and  operative.  So  this  statute  has  changed  the 
general  rule,  and  has  given  a  judgment  creditor  in  a  certain 
contingency,  a  right  to  sell  property  for  the  satisfaction  of  his 
debt,  which  his  debtor  could  not  himself  sell,  and  to  sell  the 
same  free  from  the  lien  of  a  prior  unrecorded  mortgage  executed 
thereon  by  his  debtor. 

In  order  to  possess  this  right  he  must  be  a  judgment  cred- 
itor of  the  person  who  executed  the  prior  unrecorded  mortgage, 
and  not  a  judgment  creditor  of  some  person  who  may  at  some 
future  time  after  entry  of  his  judgment  become  the  owner  by 
descent  of  the  mortgaged  premises. 

A  judgment  creditor  at  common  law  is  not  a  purchaser  or 
mortgagee,  though  a  purchaser  at  a  sheriff's  sale  under  a 
judgment  is.'  One,  therefore,  cannot  call  a  judgment  cred- 
itor a  purchaser.^  An  attachment  and  a  levy  of  an  execution 
or  a  judgment  lien  are  not  much  different,  and  an  attachment 
creditor  cannot  be  considered  as  a  bona  fide  purchaser.^  The 
creditor  is  entitled  to  the  same  rights  as  the  debtor  had,  and 
to  no  more.* 

As  between  unrecorded  mortgages,  that  of  a  prior  execution 
takes  precedence,^  and  in  determining  such  priority  fractions 
of  a  day  will  be  considered ;  ^  whenever  it  becomes  important 

1  Heister  v.  Fortner,  2  Binn..  (Pa.)  40. 

"Brace  v.  Marlborough,  2  P.  Win.  491 ;  Knell  r.  Green  St.  Building  Asso., 
34  Md.  67  ;  Hackett  r.  Callender,  32  Vt.  97. 

3  Hart  V.  Bank,  33  Vt.  252. 

*  Norton  v.  Williams,  9  Iowa,  528. 

*Ely  V.  Scofield,  35  Barb.  (N.  Y.)  330  ;  Berry  v.  Mut.  Ins.  Co.,  2  Johns.  Ch. 
(N.  Y.)  603. 

^  Gibson  v.  Keyes,  112  Ind.  568. 


698  REGISTRATION    OF    THE   INSTRUMENT. 

to  the  ends  of  justice,  or  to  decide  upon  conflicting  interests, 
the  law  will  look  into  fractions  of  a  day  as  readily  as  into  the 
fractions  of  any  other  units. ^ 

§  666.  Priorities. — Due  registration  is  constructive  notice 
to  subsequent  purchasers  from  the  mortgagor,  and  the  mort- 
gagee is  under  no  obligations  to  give  them  actual  notice.^ 

There  being  an  unsatisfied  judgment  senior  in  date  and 
rank,  next  a  mortgage,  and  next  a  junior  judgment,  and  levy 
and  sale  under  the  junior  judgment,  it  was  held  that  the 
lien  of  the  mortgage  was  divested  by  the  sale  though  made 
under  a  junior  judgment,  as  there  was  a  senior  judgment  at 
the  time  unsatisfied  at  the  time  of  the  sale,  which  united  with 
the  junior  judgment  and  gave  the  purchaser  a  clear  title.^  A 
lien  acquired  by  the  vendor  by  oral  agreement  by  the  vendee 
that  he  would  execute  a  mortgage  back  for  the  purchase- 
money  is  superior  to  that  of  a  subsequent  judgment  creditor 
of  the  vendee,  where  the  credit  was  not  extended  on  the  faith 
of  the  land.* 

A  mortgage  executed  and  recorded  prior  to  the  entry  of  a 
judgmeiit  against  the  mortgagor  is  superior  to  the  judgment 
lien  ^  and  to  an  attachment  lien  subsequent  to  record.^  If  the 
creditor  has  actual  notice  of  a  prior  unrecorded  mortgage  at 
the  time  of  taking  his  judgment  lien  he  will  hold  it  subject 
to  the  mortgage.^  But  if  the  judgment  lien  operated  before 
the  mortgage  is  executed  and  recorded  it  is  paramount.^ 

Where  the  purchaser  of  property  subject  to  a  mortgage  pro- 
cures an  assignment  of  the  mortgage  which  includes  other 

1  Grosvenor  v.  Magill,  37  111.  239 ;  Louisville  v.  Bank,  104  U.  S.  469. 

'^  Davis  V.  Milligan,  88  Ala.  523. 

^  Henderson  v.  Trimmier,  32  S.  Car.  269. 

*  Devin  v.  Eagleson,  79  Iowa,  269. 

^Goodenough  v.  McCoid,  44  Iowa,  659;  Dunwell  i'.  Bid  well,  8  Minn.  34; 
Wertz's  Appeal,  65  Pa.  St.  306;  Jackson  v.  Dubois,  4  Johns.  (N.  Y.)  216; 
Tarver  v.  Ellison,  57  Ga.  54 ;  Scott  v.  M'Murran,  7  Blackf.  (Ind.)  284. 

«Gray  v.  Patton,  13  Bush  (Ky.),  625. 

'  Williams  r.  Tatnall,  29  111.  553 ;  Mead  v.  Kailroad  Co.,  45  Conn.  199 ; 
Thomas  v.  Vanlieu,  28  Cal.  616;  Britton's  Appeal,  45  Pa.  St.  172;  Lahr's  Ap- 
peal, 90  Pa.  St.  507. 

8  Tarver  v.  EUison,  57  Ga.  54. 


THE    LIEN.  699 

property,  to  himself,  and  a  junior  judgment  creditor  of  the 
mortgagor  levies  on  and  sells  the  part  of  the  property  included 
in  the  mortgage,  the  purchaser  is  entitled  to  the  proceeds 
under  the  lien  of  his  mortgage,  and  the  creditor  cannot  com- 
pel him,  to  resort  to  the  other  property  covered  by  the  mort- 
gage.' 

It  is  a  well-settled  equitable  rule  that  where  the  purchaser 
of  land  at  the  time  he  receives  the  conveyance  executes  a  mort- 
gage to  a  third  person  who  advances  the  purchase-money  for 
him,  such  mortgage  is  entitled  to  the  same  preference  over  the 
prior  judgment  as  it  would  have  had  if  it  had  been  executed 
to  the  vendor  himself.^  Such  mortgages  are  given  for  the  pur- 
chase-money, and  are  superior  in  equity  to  a  prior  judgment 
against  the  vendee.^  The  statutes  of  Ohio  and  Maryland  have 
changed  this  rule,  and  the  doctrine  is  otherwise  in  those 
States.* 

As  between  a  mortgage  of  land  and  a  judgment  rendered  in 
a  county  different  from  that  in  which  the  land  is,  priority  of 
lien  will  be  determined  by  priority  of  registration  in  the  county 
where  the  land  is  situated.^ 

A  mortgage  and  judgment  entered  of  record  simultaneously 
are  payable  pro  rata,  as  neither  is  superior.^ 

Where  the  statute  provides  that  a  mortgage  recorded  within 
a  certain  time  after  its  date  shall  be  effective  as  between  the 
parties  from  its  date,  a  judgment  rendered  subsequently  to  the 
date  of  the  mortgage,  and  before  the  recording  of  it,  is  subject 
to  the  mortgage  without  regard  to  the  question  of  actual  no- 
tice, if  the  mortgage  is  subsecjuently  recorded  within  the  time 
prescribed  by  law.'' 

The  right  of  an  execution  creditor  to  have  lands  of  his  de- 

*  Georgia  Chemical  Works  v.  Cartledge,  77  Gra.  547. 

'  Kaiser  v.  Lembeck,  55  Iowa,  24-1 ;  Haywood  v.  Nooney,  3  Barb.  (N.  Y.)  G45. 
^Laidley  V.  Aikin,  80  Iowa,  112. 

^Stanseil  v.  Roberts,  13  Ohio,  148;  Heuisler  t'.Nickum,  38  Md.270. 
^Firebaugh  v.  Ward,  51  Tex.  409. 

«  Hendrickson's  Appeal,  24  Pa.  St.  363  ;  Maze  v.  Burke,  12  Phila.  (Pa.)  335. 
''  Knell  V.  Green  St.  Build.  Asso.,  34  Md.  67.    Compure  Drew  v.  Streeter,  137 
Mass.  460. 


700  REGISTRATION    OP    THE    INSTRUMENT. 

ceased  debtor  applied  to  the  payment  of  his  debts  is  superior 
to  the  lien  of  a  mortgage  of  such  lands  given  by  the  devisee 
of  the  debtor,^ 

The  registration  of  the  mortgage  is  constructive  notice  to  all 
persons  who  may  become  subsequently  interested  in  the  prop- 
erty.^ 

Mortgages  take  precedence  in  order  of  their  record,  and  a 
purchaser  at  a  foreclosure  sale  of  the  first  recorded  mortgage 
obtains  a  complete  title.  However,  a  purchaser  at  a  foreclosure 
sale,  under  a  mortgage  recorded  next  in  order  of  time,  obtains 
an  equity  of  redemption  of  the  prior  mortgage.^ 

Where  there  are  several  notes,  held  by  different  j^arties, 
some  authorities  gives  priority,  according  to  the  order  of  their 
maturity  ;  *  and  the  holder  of  the  note  first  maturing  may 
foreclose  and  satisfy  his  debt.^ 

The  mortgagee  may  give  to  particular  notes  a  prior  lien 
upon  the  security  by  agreement,  irrespective  of  the  time  of 
their  maturity  ;  and  such  preferred  lien  will  be  valid  against 
an  assignee  who  had  not  inquired  as  to  the  priority.'^  So  a 
holder  of  several  promissory  notes  secured  by  mortgage,  may 
assign  part  of  the  notes,  giving  priority  to  the  assignee,  or  a 
2yro  rata  interest  in  the  security,  according  to  the  terms  of  the 
assignment.''  An  administrator  of  an  estate,  who  was  also  an 
heir,  procured  the  whole  estate  and  then  mortgaged  it  for  his 
own  debt,  after  which  it  was  sold  to  pay  debts  of  the  estate.  It 
was  held  that  his  mortgagee,  so  long  as  the  mortgage  was 

1  Shaw  V.  Barksdale,  25  S.  Car.  204. 

2  Dick  V.  Balch,  8  Pet.  (U.  S.)  30 ;  Mason  v.  Philbrook,  69  Me.  57  ;  Brincker- 
hofr  V.  Lansing,  4  Johns.  Ch.  (N.  Y.)  65. 

3  Harrington  v.  Allen,  48  Miss.  492 ;  Routh  v.  Spencer,  38  Ind.  393  ;  Burns 
V.  Berry,  42  Mich.  176 ;  Cook  v.  Stone,  63  Iowa,  352 ;  Ramsey  v.  Jones,  41 
Ohio  St.  685 ;  Tice  v.  Annin,  2  Johns.  Ch.  (N.  Y.)  125  ;  Gilbert  v.  Averill,  15 
Barb.  (N.  Y.)  20;  Buchanan  v.  Bank,  78  111.  500;  Vanderkemp  r.  Shelton,  11 
Paige  (N.  Y.),  28. 

*  Aultman,  Taylor  &  Co.  v.  McGeorge,  31  Kan.  329  ;  Wilson  v.  Eigenbrodt, 
30  Minn.  4 ;  Funk  v.  McReynolds,  33  111.  481. 

5  Marine  Bank  v.  Bank,  9  Wis.  57 ;  Lyman  v.  Smith,  21  Wis.  674. 

6  Walker  v.  Dement,  42  111.  272. 

T  Lane  v.  Davis,  14  Allen  (Mass.),  225 ;  Howard  v.  Schmidt,  29  La.  Ann.  129. 


THE    LIEN.  701 

unpaid,  took  priority  on   the  surplus  as  against   the  mort- 
gagor.' 

When  a  mortgage  is  renewed,  but  a  part  of  the  land  is 
omitted  by  mistake,  a  subsequent  mortgagee  taking  subject  to 
the  first,  knowing  of  the  fact  of  omission,  holds  his  lien  sub- 
ject to  the  first  mortgage,  and  has  no  j)rior  lien  on  the  part 
omitted/ 

§667.  Subsequent  Mortgages. — Of  two  mortgages,  one 
given  before  the  grantor  acquired  title,  and  the  other  as  part  of 
the  same  transaction  by  which  he  acquires  title,  being  for  part 
of  the  purchase-money,  the  second  mortgage  has  precedence, 
the  mortgagee  having  no  notice  of  the  prior  mortgage.^  And 
when  there  are  several  mortgages  in  favor  of  the  same  person 
on  one  parcel  of  land,  and  they  are  aggregated  into  one  sum 
and  secured  by  another  subsequent  mortgage,  the  date  of  the 
last  mortgage  will  govern.* 

A  subsequent  mortgagee  who  takes  a  mortgage  in  reliance 
upon  reliable  information,  that  the  prior  mortgage  has  been 
discharged,  will  be  protected,  if  it  turns  out  that  the  mort- 
gage was  in  fact  discharged.^  And  if  the  prior  mortgagee 
releases  his  mortgage  and  takes  a  second  in  good  faith  and 
without  negligence  under  a  mistake,  he  will  still  have  a  para- 
mount lien  under  his  first  mortgage  as  against  an  intermedi- 
ate mortgagee.^  So  where  a  trustee  of  a  mortgage  made  to 
indemnify  him  and  his  co-surety  against  loss  by  a  third  party, 
executed  to  the  maker  a  deed  of  release  without  the  knowledge 
of  his  co-surety,  to  the  land  conveyed  in  the  indemnifying 
mortgage,  an  action  to  enforce  the  mortgage  is  not  postponed 
until  the  deed  can  be  set  aside  in  an  independent  action.^ 

And  an  implied  covenant  against  incumbrances,  contained 

^Marx  V.  Bloch,  21  Oreg.  26.    See  Drake  v.  Paige,  127  N.  Y.  562. 

*  Kimble  v.  Harrington  (Mich.),  51  N.  W.  Rep.  936. 
'  Tolman  v.  Smith,  85  Cal.  280. 

*Ker  V.  Ker,  42  La.  Ann.  870. 

*  Moran  r.  Roberge,  84  Mich.  600. 

*  Wooster  v.  Cavender,  54  Ark.  153. 
'Southerland  v.  Fremont,  107  N.  Car.  565. 


702  REGISTRATION    OF    THE    INSTRUMENT. 

in  a  second  mortgage  by  a  corporation,  does  not  amount  to  a 
fraudulent  representation  that  there  is  no  previous  mortgage,  so 
as  to  preclude  the  holder  of  the  first  mortgage,  who,  though  a 
director  of  the  corporation,  did  not  sign  the  second  mortgage, 
from  insisting  upon  the  priority  of  his  lien.^ 

The  estoppel  of  a  grantor  in  a  deed  absolute,  intended  to  be 
a  mortgage,  as  to  a  mortgagee  without  notice  from  the  grantee, 
only  operates  to  postpone  his  lien  to  that  of  the  mortgagee, 
but  does  not  extinguish  his  rights.^  An  owner  of  an  undi- 
vided interest  in  land  who  redeems  the  whole  from  foreclosure 
to  save  his  rights,  has  an  equitable  lien  on  the  other  interest 
not  owned  by  him  for  a  proportionate  reimbursement.^ 

Where  a  second  mortgage  is  given  to  correct  a  mistake  in 
the  first,  upon  its  foreclosure,  it  takes  effect  by  relation  as  to 
the  date  of  the  first  against  all  who  had  dealings  with  the 
land  with  notice  of  the  mistake.*  A  notice  of  a  prior  lien 
to  the  second  mortgagee's  agent  is  notice  to  the  second  mort- 
gagee.^ 

§  668.  Subsequent  Deeds  or  Mortgages  not  Notice  to  a 
Prior  Mortgagee. — The  registry  of  a  subsequent  deed  or 
mortgage  is  not  notice  to  a  prior  mortgagee,  nor  is  he  required 
to  search  for  subsequent  incumbrances.  The  junior  incum- 
brancer desiring  to  protect  himself  must  give  the  prior  mort- 
gagee actual  notice  of  his  equities." 

If  the  prior  mortgagee  has  no  actual  notice  of  any  subse- 
quent deed,  he  may,  without  receiving  anything  upon  the 

1  Mullanphy  Bank  v.  Schott,  135  111.  655. 

^Turnian  r.  Bell,  54  Ark.  273. 

^Buettel  V.  Harmount,  46  Minn.  481. 

*  Brown  v.  Morrill,  45  Minn.  483. 

^France  v.  Holmes  (Iowa),  51  N.  W.  Eep.  152. 

"Boone  v.  Clark,  129  111.  466;  Doolittle  v.  Cook,  75  111.  354;  Sarles 
V.  McGee,  1  N.  Dak.  365 ;  Birnie  r.  Nain,  29  Ark.  591 ;  James  v.  Brown, 
11  Mich.  25;  Meier  v.  Meier,  105  Mo.  411;  Cooper  v.  Bigly,  13  Mich. 
463 ;  Heaton  r.  Prather,  84  111.  330 ;  Iglehart  r.  Crane,  42  111.  261  ;  George 
V.Wood,  9  Allen  (Mass.),  80;  Lake  v.  Shumate,  20  S.  Car.  23;  Straight  r. 
Harris,  14  Wis.  509 ;  Leiby  v.  Wolf,  10  Ohio,  83 ;  Hill  r.  McCarter,  27  N.  J. 
Eq.  41 ;  Taylor  v.  Maris,  5  Rawle  (Pa.),  51 ;  King  v.  McVickar,  3  Sandf.  Ch. 
(N.  Y.)  192. 


THE    LIEN.  703 

mortgage  debt,  release  any  portion  of  the  mortgaged  propert}'' 
without  impairing  his  security/ 

But  if  the  prior  mortgagee,  having  notice  of  successive  parts 
of  the  mortgaged  premises,  releases  a  part  then  liable  for  the 
payment  of  the  debt,  he  cannot  charge  the  other  portion  of  the 
premises  without  first  deducting  the  value  of  the  parts  released.^ 

§  669.  Destruction  of  Records. — ^When  a  mortgage  has 
been  duly  recorded  the  destruction  of  the  records  does  not 
affect  its  lien,  and  it  is  still  constructive  notice.^ 

Evidence  of  the  execution  of  a  mortgage  and  of  its  loss,  with 
slight  circumstances  in  regard  to  its  registration,  are  sufficient 
to  sustain  the  j^resumption  that  it  was  recorded,  as  against  a 
prior  mortgagee  who  claims  that  such  mortgage  had  never 
been  properly  recorded.^  The  recorder's  certificate  of  record  is 
the  highest  evidence  when  the  record  has  been  destroyed,^  and 
also  the  index  book,®  though  an  abstract  of  title  may  not  show 
that  the  mortgage  was  ever  recorded,  and  therefore  cannot  be 
received  in  evidence  to  prove  a  record  of  a  mortgage.'' 

The  mortgagee  may  foreclose  his  mortgage  at  its  maturity 
without  restoring  the  record.* 

Land  was  conveyed  to  a  trustee  by  deed  of  trust,  which  pro- 
vided that  no  lien,  incumbrance,  or  charge  should  be  created. 
The  record  of  such  trust  deed  having  been  destroyed  by  fire,  a 
decree  was  entered  in  a  proceeding  under  the  burnt  record  act 
of  Illinois,  establishing  the  trust  deed  without  the  provision 

'  Halstead  v.  Bank,  4  J.  J.  Marsh.  (Ky.)  555,  558  ;  Westbrook  v.  Gleason, 
14  Hun  (N.  Y.),  245  ;  Raynor  v.  Wilson^  (i  Hill  (N.  Y.),  469  ;  Ward  v.  Hague, 
25  N.  J.  Eq.  397 ;  Deuster  v.  McCamus,  14  Wis.  307 ;  McMillan  v.  McCormick, 
117  111.  79. 

'Boone  r.  Clark,  129  111.  4m,  483;  Iglehart  r.  Crane,  42  111.  261. 

^  Armentrout  v.  Gibbons,  30  Gratt.  (Va.)  632 ;  Curyea  v.  Berry,  84  111.  600  ; 
Heaton  v.  Prather,  84  111.  330 ;  Gammon  v.  Hodges,  73  III.  140 ;  Steele  v.  Boone, 
75  111.  457. 

*  Alston  V.  Alston,  4  S.  Car.  116. 

*  Alvis  V.  Morrison,  63  111.  181. 
« Alvis  V.  Morrison,  63  111.  181. 
^Steele  v.  Boone,  75  111.  457. 

« Shannon  v.  Hall,  72111. 354 ;  Hall  r.  Shannon,  85  111.473  ;  Curyea  v.  Berry, 
84  111.  600 ;  Hunt  v.  Innis,  2  Woods,  C.  C.  103. 


704  REGISTRATION    OF   THE    INSTRUMENT. 

aforesaid,  but  with  a  clause  authorizing  the  trustee  to  create 
liens.  After  entry  of  this  decree  the  trustee  gave  a  mortgage 
and  allowed  a  mechanic's  lien  to  be  created,  under  which  the 
land  was  sold.  Some  of  the  cestuis  que  trustent,  who  were  in- 
fants when  the  decrees  of  foreclosure  and  the  decree  restoring 
the  trust  deed  were  rendered,  but  who  had  appeared  therein 
by  guardian  ad  litem,  filed  a  bill  to  review  the  foreclosure 
suits.  As  to  them,  the  mortgages  and  the  mechanic's  lien  were 
invalid,  since  the  record  of  the  trust  deed,  though  destroyed, 
gave  the  mortgagee  and  lien  holder  notice  of  the  inability  of 
the  trustee  to  incumber  the  property.'^ 

It  is  settled  beyond  question  that  the  record  of  a  deed  of 
trust  or  mortgage  is  notice  to  all  persons  dealing  with  respect 
to  the  trust  property  that  no  valid  lien  can  be  created  upon 
the  property,  either  by  the  trustee  or  any  of  the  beneficiaries 
under  the  trust,  and  that  the  destruction  of  the  record  of  the 
deed  of  trust  or  mortgage  does  not  change  the  rule  as  to  its 
effect  as  notice.^ 

§  670.  Judgment  Lien. — Generally  a  creditor  cannot  enforce 
specific  performance  of  an  executory  agreement  between  his 
debtor  and  another  creditor  of  the  latter  for  the  application  of  fu- 
ture payments  to  particular  demands.  A  judgment  obtained  by 
such  general  creditor  should  not,  therefore,  be  given  precedence 
over  a  prior  mortgage  given  b}'^  a  debtor,  merely  because  such 
n^iortgage  would  have  been  satisfied  if  an  executory  agreement 
between  the  mortgagor  and  mortgagee  as  to  the  application  of 
payments  had  been  carried  out.*  And  the  lien  of  a  mortgage 
given  by  the  grantee  of  realty  to  a  third  person  some  time  after 
the  conveyance  to  secure  the  purchase-money  advanced  to 
him,  is  not  superior  to  a  judgment  lien  rendered  against  the 
grantee  before  the  purchase  when  it  appeared  that  the  advance 
was  in  the  nature  of  a  loan,  being  no  obligations  on  the  mort- 

1  Taylor  v.  Franklin  Sav.  Bank  (111.),  50  Fed.  Rep.  289. 

2  Bank  v.  Taylor,  131  111.386;  Curyea  v.  Berry,  84111.600;  Shannon  v.  Hall, 
72  111.  355 ;  85  111.  473 ;  Gammon  v.  Hodges,  73  111.  140 ;  Steele  v.  Boone,  75 
111.  457  ;  Heaton  v.  Prather,  84  111.  330. 

3  Whitney  v.  Traynor,  74  Wis.  289. 


fli 


THE    LIEN.  705 

gagee  to  pay  the  debt,  and  no  arrangement  between  the 
grantor  and  the  grantee  that  he  should  be  subrogated  to  the 
vendor's  rights.'  This  doctrine  is  not  in  conflict  with  prior 
decisions,^  which  are  dijfferent  and  were  not  cases  where  differ- 
ent parties  had  successive  claims  upon  the  same  property  by 
mortgage,  lien,  or  purchase,  and  the  facts  are  widely  different. 
Where  land  intended  to  be  included  in  a  mortgage  is  by  mis- 
take omitted  and  a  judgment  is  subsequently  rendered  against 
the  mortgagor,  the  lien  of  the  judgment  creditor  is  subject  to 
the  equity  of  the  mortgage.  The  lien  of  the  judgment  does 
not  exceed  the  actual  interest  which  the  judgment  debtor  had 
in  the  land  at  the  time  of  its  rendition.^ 

Where  a  deed  of  trust  is  valid  on  its  face,  though  rendered 
fraudulent  as  to  the  creditors  by  the  dealings  of  the  grantor 
under  it,  a  bona  fide  purchaser's  title  will  prevail  over  a  judg- 
ment against  the  grantor  rendered  subsequent  to  the  execution 
of  the  deed  of  trust.*  And  in  Michigan  where  a  judgment  is 
no  lien  the  purchaser's  title  is  paramount  where  he  bought 
before  levy  of  the  execution.^ 

Where  a  person  executes  a  mortgage  on  his  undivided  inter- 
est as  devisee  in  the  land  of  his  father's  estate,  and  afterward 
a  decree  is  rendered  for  the  sale  of  the  land  to  pay  debts  due 
decedent's  children,  including  the  mortgagor,  and  he  assigns 
his  interest  in  this  decree  to  his  sister,  who  purchases  the  land 
to  the  amount  of  both  interests,  it  was  held  that  the  mortgage 
was  no  lien  on  this  decree,  and  the  purchaser  of  the  land  there- 
under takes  it  free  from  any  lien." 

As  between  judgment  creditors  in  New  York,  that  one  has 
a  prior  lien  who  first  has  his  judgment  docketed  without  re- 
gard to  the  fact  that  he  did  not,  while  the  other  did,  bring  suit 
to  have  a  fraudulent  transfer  set  aside  as  to  himself^ 

1  Cohn  V.  Hoffman,  50  Ark.  108. 

""  Chaffe  V.  Oliver,  .39  Ark.  531  ;  Rodman  v.  Sanders,  40'  Ark.  504. 

^  Galway  v.  Malchow,  7  Nebr.  286 ;  Martin  v.  Nixon,  92  Mo.  26. 

*  Baldwin  v.  Little,  64  Miss.  126. 

*  Converse  v.  Michigan  Dairy  Co.,  45  Fed.  Rep.  18. 
«  Myers  v.  Pierce,  86  Ga.  786. 

'  Wilkinson  v.  Paddock,  57  Hun  (N.  Y.),  191 ;  125  N.  Y.  748. 
45 


70G  REGISTRATION    OF    THE    INSTRUMENT. 

And  generally  when  a  mortgage  is  executed  before  a  judg- 
ment against  the  mortgagor  and  assigned  to  a  bona  fide  pur- 
chaser, after  judgment,  but  before  sale  under  execution,  the 
assignee's  title  is  superior  to  that  of  the  purchaser  under 
execution  sale/ 

§  671.  Unrecorded  Mortgages  and  Subsequent  Judg- 
ments— First  Class. — Whether  the  lien  of  an  unrecorded 
mortgage  at  the  date  of  the  judgment,  but  recorded  before  the 
sale  upon  execution  issued  thereon,  is  prior  to  the  lien  of  the 
judgment,  and  the  purchaser  buys  with  a  constructive  notice 
of  the  mortgage,  is  a  question  which  must  be  settled  by  the 
construction  of  statutes  not  altogether  alike  but  somewhat 
similar.  The  conflict  of  authorities  is  more  visionary  than 
real.  The  difference  in  the  adjudicated  case  results  in  most 
cases  from  the  interpretation  of  different  acts.  Judge  Brewer 
says  :  "  The  contest  in  this  case  is  between  one  who  claims  the 
lien  of  an  execution  levy,  and  the  holder  of  a  prior  but  unre- 
corded mortgage.  .  .  .  The  levy  was  made  before,  but  the 
sale  not  till  after,  the  record  of  the  mortgage.  There  was 
no  actual  notice  of  the  existence  of  this  mortgage. 

"  On  the  one  side  it  is  claimed  that  by  virtue  of  the  statute, 
which  reads  as  follows  :  *  No  such  instrument  in  writing  shall 
be  valid  except  between  the  parties  thereto,  and  such  as  have 
actual  notice  thereof,  until  the  same  shall  be  deposited  with 
the  register  of  deeds  for  record,'  the  mortgage  is  to  be  consid- 
ered as  though  it  had  no  existence,  and  the  land  as  free  from 
any  incumbrances  at  the  date  of  the  levy,  and  that  the  lien 
thus  secured  by  the  levy  ripened  into  a  title  by  the  sale,  and 
was  paramount  to  the  lien  created  by  the  subsequent  record  of 
the  mortgage ;  and,  on  the  other  hand,  it  is  claimed  that  the 
lien  of  the  levy  was  only  upon  the  actual  interest  of  the  judg- 
ment de1:)tor  in  the  real  estate,  and  that  as  such  interest  was  in 
fact  limited  by  the  mortgage,  only  such  limited  interest  was 
seized  and  bound  by  the  levy. 

1  Martinez  v.  Lindsey,  91  Ala.  334.    See,  also,  Laidley  v.  Aiken,  80  Iowa, 
112 ;  Devin  v.  Eagleson,  79  Iowa,  269. 


THE   LIEN.  707 

"  Of  course,  this  is  but  part  and  parcel  of  a  still  broader  ques- 
tion, and  that  is,  does  the  lien  of  an  execution  levy  extend  to 
only  the  actual,  or  does  it  also  reach  the  apparent,  title  of  the 
judgment  debtor?  Is  the  inquiry  restricted  to  the  face  of  the 
record,  or  may  it  pass  to  the  actual  facts  ?  Authorities  are  not 
wanting  to  support  either  view,  and  cogent  reasons  may  be 
adduced  in  favor  of  each.  On  the  one  hand  it  may  be  said 
with  force  that  if  the  mortgage  lien  is  adjudged  paramount, 
then  the  section  quoted  is  practically  nullified,  and  an  instru- 
ment which  the  statute  declares  invalid  is  pronounced  valid ; 
and  on  the  other,  that  if  the  levy  is  adjudged  paramount,  then 
the  statute  which  authorizes  a  levy  upon  the  land,  tenements, 
and  hereditaments  of  the  debtor  is  extended  so  as  to  sustain 
a  levy  upon  lands  which  are  not  in  fact  wholly  his. 

''  With  hesitation,  and  after  a  long  and  careful  examination  of 
the  question  in  its  various  relations,  we  have  reached  the 
conclusion  that  the  lien  of  the  mortgage  must  be  adjudged 
prior  and  paramount."  ^ 

The  weight  of  authority,  therefore,  upon  the  exact  statute  as 
set  forth  in  Kansas  is  with  the  conclusions  of  that  court ;  and 
it  is  claimed  that  this  interpretation  sustains  and  enforces  the 
real  equities  of  all  parties,  and  is  upheld  by  many  courts.^ 

On  the  other  hand,  however,  the  Ohio  statute  declares  "that  all 
mortgages  executed  agreeably  to  the  provisions  of  this  act  shall 
be  recorded  in  the  office  of  the  recorder  of  the  county  in  which 
such  mortgaged  premises  are  situated,  and  shall  take  effect  from 
the  time  the  same  are  recorded."  ^ 

'  Holden  v.  Garrett,  23  Kan.  98,  107. 

^Vaughn  v.  Schmalsle,  10  Mont.  186;  Davis  v.  Ownsby,  14  IMo.  170; 
Valentine  v.  Havener,  20  Mo.  183;  Stilhvell  v.  McDonald,  39  ]Mo.  282; 
Potter  V.  McDowell,  43  Mo.  93 ;  Reed  v.  Ownby,  44  Mo.  204  ;  Sappington  v. 
Oeschli,  49  Mo.  244  ;  Black  v.  Long,  60  Mo.  181 ;  Jackson  v.  Dubois,  4  Johns. 
(N.  Y.)  216 ;  Pixley  v.  Huggins,  15  Cal.  127  ;  Righter  v.  Forrester,  1  Bush 
(Ky.),  278  ;  Morton  v.  Robards,  4  Dana  (Ky.),  258  ;  Orth  r.  Jennings,  S  Blackf. 
(Ind.)  420  ;  Greenleat  o.  Edes,  2  Minn.  264  ;  Duncan  v.  :\rillcr,  64  Iowa,  223  ; 
First  Nat.  Bank  v.  Hayzlett,  40  Iowa,  659 ;  Norton  v.  "Williams,  9  Iowa,  528, 
overruling  Brown  v.  Tuthill,  1  Greene  (Iowa),  189;  Patterson  v.  Linder,  14 
Iowa,  414 ;  Evans  v.  McGlasson,  18  Iowa,  150 ;  Welton  v.  Tizzard,  15  Iowa,  495. 

f  Swan's  Rev.  Stat.j  pp.  310,  311. 


708  REGISTRATION    OF    THE   INSTRUMENT. 

The  force  of  this  language  is  somewhat  similar  to  that  of  the 
Kansas  act,  and  under  it  the  Supreme  Court  of  Ohio  has  held 
the  unrecorded  mortgage  the  inferior  lien,  which  is  in  conflict 
with  the  authorities  consonant  with  the  Kansas  decision.^ 
However,  the  Ohio  act  attempts  to  make  the  record  a  part  of 
the  deliver}^  and  execution  of  the  mortgage.  It  is  like  the  rule 
requiring  the  mortgage  to  be  in  writing.  It  must  be  recorded 
before  it  is  a  mortgage.  But  by  the  Kansas  act  the  unrecorded 
mortgage  is  valid  inter  partes  under  all  circumstances,  and 
valid  as  to  every  one  having  actual  notice.  The  record  is 
not  essential  to  its  existence. 

§  672.  Unrecorded  Mortgages  and  Subsequent  Judg- 
ments— Second  Class. — In  nearly  every  State  except  Ohio,  in 
which  an  unrecorded  mortgage  has  been  postponed  to  a  judg- 
ment lien,  the  statute  has  expressly  declared  that  such  mort- 
gage shall  be  void  as  against  creditors ;  and  the  courts  have 
laid  stress  upon  this  fact  in  their  opinions,  which  is  a  great 
factor  in  the  determination  of  a  judgment  creditor's  lien. 
Thus,  in  Illinois,  the  statute  declares :  "  All  deeds  and  mort- 
gages, and  other  instruments  of  writing,  which  are  authorized 
to  be  recorded,  shall  take  effect  and  be  in  force  from  and  after 
the  time  of  filing  the  same  for  record,  and  not  before,  as  to  all 
creditors  and  subsequent  purchasers  without  notice ;  and  all 
such  deeds  and  title  papers  shall  be  adjudged  void  as  to  all 
such  creditors  and  subsequent  purchasers,  without  notice,  until 
the  same  shall  be  filed  for  record."  ^  It  will  be  noticed  that 
creditors  are  expressly  named,  and  under  this  act  that  a  deed 
not  filed  for  record  is,  as  to  creditors  and  subsequent  pur- 
chasers, wholly  without  effect.* 

Herein  lies  the  distinction  between  the  two  lines  of  decisions. 

1  AYhite  v.  Denman,  16  Ohio,  60 :  Holliday  v.  Bank,  16  Ohio,  534 ;  White  r. 
Denman,  1  Ohio  St.  110 ;  Bloom  v.  Noggle,  4  Ohio  St.  45. 

2  Rev.  Stat.,  1891,  ch.  30,  sect.  30. 

3  Martin  v.  Dryden,  1  Gilm.  (111.)  187  ;  Cook  v.  Hall,  1  ijilm.  (111.)  575 ;  Choteau 
V.  Jones,  11  111."  300 ;  Kennedy  v.  Northup,  15  111.  148  ;  Curtis  v.  Root,  28  111. 
367  ;  Brookfield  v.  Goodrich,  32  111.  363  ;  McFadden  v.  Worthington,  45  111. 
362.    See,  also,  McNitt  v.  Turner,  16  Wall.  (U.  S.)  352.    ' 


THE    LIEN.  709 

One  class  of  decisions  are  under  acts  that  do  not  provide  for 
judgment  creditors ;  the  other  acts  expressly  name  creditors. 

Chief  Justice  Chalmers  says :  "  Undoubtedly  at  common 
law  the  execution  purchaser  was  regarded  as  a  mere  volunteer, 
who  acquired  nothing  more  than  the  interest  of  the  defendant 
in  execution,  and  was  liable  to  be  defeated  by  any  one  who 
could  show  a  legal  or  equitable  right  superior  to  that  of  the 
defendant ;  nor  did  it  matter  if  that  right  was  unknown  to  all 
the  world,  provided  only  it  was  available  against  the  defend- 
ant. 

"  If  available  against  him,  it  was  equally  so  against  his  cred- 
itors and  assignees  by  operation  of  law. 

"  The  judgment  creditor  still  remains  to  some  extent  a  volun- 
teer, and  it  is  still  true  that  a  purchaser  at  an  execution  sale 
obtains  only  the  interest  of  the  defendant  in  execution,  except 
wliere  the  registry  laws  otherwise  provide.  But  those  laws  do 
provide  that  '  every  conveyance,  covenant,  agreement,  deed, 
mortgage,  and  trust  deed '  must  be  recorded  in  order  to  be 
valid  and  effectual  against  '  subsequent  purchasers  and  all 
creditors,'  which  is  the  same  thing  of  course,  as  saying  that 
these  conveyances,  as  to  creditors,  be  absolutely  void  unless 
recorded. 

"  Whenever  an  instrument  which  the  registry  laws  require  to 
be  recorded  has  been  made  by  the  grantor  having  a  beneficial 
interest  in  the  property  conveyed  which  is  vendible  under  exe- 
cution, and  such  instrument  remains  unrecorded,  a  judgment 
creditor  who  has  no  actual  notice  of  it,  nor  anything  to  put 
him  on  inquiry,  may  subject  the  interest  of  the  grantor  exactly 
as  if  he  had  made  no  such  instrument,  and  the  purchaser  at 
the  execution  sale  will  obtain  a  title  superior  to  the  right  of 
those  who  claim,  by,  through,  or  under  the  unrecorded  instru- 
ment." ^ 

However  where  the  grantor  is  without  beneficial  interest, 
though  clothed  with  a  naked  legal  title,  or  where  the  outstand- 
ing equity  of  a  third  person  is  such  as  arises  by  operation  of 
law,  and  is  incapable  of  being  made  a  matter  of  record — as, 
^  Mississippi  Valley  Co.  i'.  Railroad  Co.,  58  Miss.  846,  853. 


710  REGISTRATION    OF   THE    INSTRUMENT. 

for  instance,  when  it  is  a  resulting  trust — the  registry  laws 
have  no  application,  and  in  such  cases  the  judgment  creditor 
remains,  as  at  common  law,  a  mere  volunteer,  because  unpro- 
tected by  any  statute.' 

Under  this  class  of  cases  where  the  judgment  creditor  is 
protected,  a  judgment  lien  on  land  previously  conveyed  by  an 
unrecorded  mortgage  of  the  debtor,  of  which  the  judgment 
creditor  had  no  actual  notice,  and  nothing  to  put  him  upon 
inquiry  before  the  recovery  of  the  judgment,  is  superior  to  the 
title  of  the  mortgage,  though  recorded  before  the  execution-  sale.^ 

Undoubtedly  the  correct  doctrine  is  that  the  judgment  cred- 
itor will  subject  the  property  of  his  debtor,  stripped  of  all 
demands  and  interests  of  others,  which  must  be  evidenced  by 
written  instruments  required  by  law  to  be  recorded,  but  which 
have  not  been  recorded,  and  of  which  he  has  had  no  notice 
before  judgment ;  provided,  the  property  be  such  as  is  subject 
to  the  lien  of  the  judgment.  In  all  other  cases  the  creditor 
remains,  as  at  common  law,  a  mere  volunteer,  taking  only  the 
actual  interest  of  his  debtor,  and  liable  to  be  defeated  by  any- 
thing that  would  divest  the  debtor  himself  of  the  property; 
this  seems  to  be  the  later  and  better  doctrine.^ 

In  Ohio  this  doctrine  is  accepted,  though  the  statute  does  not 
provide  expressly  for  the  protection  of  the  judgment  creditor. 
So  a  defective  mortgage,  when  reformed,  will  not  affect  the 
lien  of  a  judgment  rendered  between  the  date  of  the  execution 
and  the  reformation  of  the  mortgage.*     But  in  Ohio  a  judg- 

1  Kelly  V.  Mills,  41  Miss.  267. 

^Mississippi  Valley  Co.  v.  Railroad  Co.,  58  Miss.  846;  Humphreys  v.  Mer- 
rill, 52  Miss.  92 ;  Longhridge  v.  Bowland,  52  Miss.  546.  See,  also,  Hoag  v. 
Sayre,  33  N.  J.  Eq.  552 ;  Sharp  v.  Shea,  32  N.  J.  Eq.  65 ;  Uhler  v.  Hutchinson, 
23  Pa.  St.  110 ;  Barkers.  Bell,  37  Ala.  354;  Moor  v.  Watson,  1  Root  (Conn), 
388  ;  Westervelt  v.  Voorhis,  42  N.  J.  Eq.  179 ;  Moore  v.  Davey,  1  N.  Mex.  303 ; 
Ludlow  V.  Railroad  Co.,  1  Flip.  C.  C.  25 ;  Hawkins  v.  Files,  51  Ark.  417 ;  Ringo 
V.  Wing,  49  Ark.  457 ;  Dodd  v.  Parker,  40  Ark.  536. 

3  Rorer's  Jud.  Sales,  sects.  707,  70S  ;  Duke  v.  Clark,  58  Miss.  465. 

*  Van  Thorniley  v.  Peters,  26  Ohio  St.  471 ;  Hood  v.  Brown,  2  Ohio,  266 ; 
Mayham  v.  Coombs,  14  Ohio,  428 ;  White  r.  Denman,  16  Ohio,  59 ;  White 
V.  Denman,  1  Ohio  St.  110 ;  Fosdick  v.  Barr,  3  Ohio  St.  471 ;  Holliday  v. 
Bank,  16  Ohio,  533. 


i 


THE    LIEN.  711 

ment  creditor  is  not  a  purchaser,  nor  is  he  in  any  way  entitled 
to  the  privilege  of  that  position.^ 

A  foreclosure  sale  of  laud  lying  in  two  counties  under  a 
mortgage  registered  in  but  one,  passes  title  to  the  land  in 
both,  as  against  a  purchaser  under  a  judgment  docketed  sub- 
sequently to  the  foreclosure  proceedings,  in  the  county  where 
the  mortgage  was  not  registered.^ 

Chief  Justice  Smith  says  the  delayed  registration  of  a  deed 
of  trust  or  mortgage  exposes  the  property  meanwhile  to  the 
claim  of  creditors,  who  may  prosecute  the  same  to  judgment 
and  execution ;  but  it  does  not  disable  the  debtor  from  dis- 
posing of  the  property  by  a  valid  conveyance  before  any  lien 
attaches,  nor  the  court,  in  a  proceeding  to  which  he  is  a  party, 
from  transferring  it  by  a  judicial  sale. 

§  673.  Statutory  Liens. — Statutory  provisions  in  force  at 
the  time  of  the  execution  of  a  mortgage  enter  into  and  become 
part  of  the  contract ;  and  where  they  provide  that  liens  of  a 
certain  class  shall  be  paramount  and  have  priority  over  all 
others,  the  mortgagee  takes  his  lien  subject  to  such  liens  of  the 
kind  specified  as  may  be  afterward  acquired  under  the  stat- 
ute.^ So  municipal  assessments  for  improvements  may  be 
paramount  to  a  prior  mortgage.* 

§  674.  To  Support  the  Validity  of  an  Unrecorded 
Deed — Evidence. — When  the  validity  of  an  unrecorded  deed 
as  against  a  subsequent  mortgage  is  supported  largely  by  the 
testimony  of  the  grantor,  it  is  competent,  after  evidence  tend- 
ing to  show  collusion  in  an  intent  to  defraud  the  mortgagee, 
to  admit  the  acts  and  declarations  of  the  grantor  and  of  othere 
acting  for  him  and  with  him,  in  order  to  impeach  his  testi- 
mony and  to  indicate  an  intention  to  defraud  the  creditor. 
Thus,  where  a  house  was  erected  upon  the  property  in  dispute, 
and  occupied  by   two  tenants ;  and  so  erected  with  another 

^Tousley  v.  Tousley,  5  Ohio  St.  78. 

"  King  V.  Portis,  81  N.  Car.  382. 

'  Warren  v.  Sohn,  112  Ind.  213.    See,  alao,  Long  v.  Straus,  107  Ind.  94. 

*Hand  v.  Startup,  38  N.  J.  Eq.  115. 


712  REGISTRATION    OF    THE    INSTRUMENT. 

house  occupied  by  the  mortgagor  as  to  constitute  a  double 
house  under  one  roof,  but  not  with  front  porches,  and  not 
finished,  the  rents  being  paid  sometimes  to  the  mortgagor,  are 
insufficient  notice  to  reheve  tlie  mortgagee  of  the  duty  of  in- 
quiry as  to  title. 

Justice  Williams  says  that  the  fact  that  both  parts  of  a 
double  house  are  built  together  affords  no  presumption  against 
the  occupant  of  either  part.  They  could  not  be  conveniently 
or  economically  built  in  any  other  manner.  The  fiict  that  the 
claimant  of  one  part  of  a  double  house  is  in  possession  by 
tenants,  instead  of  in  person,  is  immaterial.  The  possession 
of  the  tenant  is  the  possession  of  the  landlord.  The  absence 
of  the  front  porches  is  a  circumstance  of  no  significance.  The 
question  for  the  jury,  so  far  as  this  subject  was  concerned,  was 
whether  the  building  was  suitable  for  or  fairly  capable  of 
separate  occupancy,  and  whether  the  modes  of  access  to  its 
parts  and  its  external  appearance  were  such  as  to  make  this 
apparent  to  an  observer.     If  so,  inquiry  was  a  duty.^ 

And  when  the  good  faith  of  a  transaction  is  assailed  by  cred- 
itors on  the  ground  of  fraud,  and  some  evidence  is  adduced 
tending  to  show  collusion,  declarations  of  the  grantor  subse- 
quent to  the  conveyance  are  admissible.^ 

Where  the  property  is,  for  convenience,  called  two  houses, 
and  built  under  one  roof,  and  appears  as  a  store  on  one  side 
and  as  a  dwelling  on  the  other,  the  duty  of  a  mortgagee  is  to 
show  that  the  nature  of  the  property  was  such,  and  its  occu- 
pancy such,  as  were  visible  and  notorious,  and  such  as  to  attract 
the  attention  of  purchasers.  What  makes  inquiry  a  duty  is 
such  a  visible  state  of  things  as  is  inconsistent  with  a  perfect 
right  in  him  who  proposes  to  sell.^ 

The  question  for  the  jury  is,  whether  the  building  was  suit- 
able for,  and  fairly  capable  of,  a  separate  occupancy,  and 
whether  the  mode  of  access  to  its  parts  and  its  external  appear- 
ance were  such  as  to  make  this  apparent  to  an  observer ;  if  so, 

1  Crosland  v.  Mutual  Saving  Fund,  121  Pa.  St.  65. 

'Souder  v.  Scheehterly,  91  Pa.  St.  87;  Lowe  v.  Dalrymple,  117  Pa.  St.  564; 
Scott  V.  Heilager,  14  Pa.  St.  238. 
3  Meehan  v.  Williams,  48  Pa.  St.  240. 


11 


THE    LIEN.  713 

to  relieve  the  mortgagee  from  the  effect  of  constructive  notice 
of  title,  inquiry  was  a  duty.^ 

When  a  mortgage  is  unrecorded,  to  hold  priority  of  lien 
over  a  subsequent  purchaser,  the  mortgagee  must  show  that 
the  purchaser  had  actual  notice  of  the  mortgage,  or  of  circum- 
stances which  should  have  put  him  upon  inquiry  respecting  its 
existence.^ 

Article  2. 

Lien  of  Purchase- Money  Mortgages. 

I  675.  Statutory  Provisions.  |  680.  A  Vendee  May  Have  a  Lien 
§  676.  The  Mortgage  mu.st   be   Exe-  When      He     Advances     the 

cuted    Simultaneously     with  Money     and      the    Contract 

the  Deed.  Fails  of  Consummation. 

I  677.  Mortgage     to     Third     Person  §  681.  Homestead. 

who  Advances  the  Purchase-  |  682.  Dower. 

Money.  ^  683.  Wife  Need  Not  Join  in  a  Pur- 
§  678.  Priority — Assignee.  chase-Money  Mortgage. 

I  679.  Money   Advanced  to    One  of  §  684.  Mortgage  by  Married  Women. 

Two    Joint    Purchasers    and  I  685.  Judgments. 

Mortgage  Back. 

§  675.  Statutory  Provisions. — A  purchase-money  mort- 
gage, executed  at  the  same  time  with  the  deed  of  purchase,  to 
the  vendor  to  secure  the  purchase-money,  takes  precedence  of 
any  claim  or  lien  arising  through  the  mortgagor.  This  law  is 
enacted  by  Delaware,^  Georgia,*  Indiana,^  Kansas,®  Maryland/ 
Mississippi,*  New  Jersey,"  New  York,^**  and  North  Carolina." 

^  Green  v.  Drinker,  7  Watts  &  S.  (Pa.)  444 ;  Crosland  v.  Mutual  Saving 
Fund,  121  Pa.  St.  65.    See,  also,  Emeric  v.  Alvarado,  90  Cal.  444. 

'^  White  V.  McGarry,  47  Fed.  Rep.  420. 

■'Rev.  Stat.  269. 

*  Act  of  1875. 

*2G.  &  H.Stat.,  p.  .356. 

"  Dassler's  Stat.,  ch.  68,  sect.  4. 

'  Pub.  Gen.  Laws,  1860,  art.  64,  sect.  3. 

»Rev.  Code,  1871,  p.  501 ;  Rev.  Code,  1880,  sect.  1205. 

'Rev.  Stat.  1877,  p.  164,  sect.  77. 

^"Code  of  Remedial  Justice,  1876,  sect.  1254. 

"  Bat.  Dig.  1873,  ch.  35,  sect.  30. 

Before  this  enactment  in  Georgia,  dower  took  preference  to  a  purchase- 
money  mortgage  :  Wilson  v.  Peeples,  61  Gra.  218 ;  Carter  v.  Hallahan,  61  Ga. 
314. 


714  registration  of  the  instrument. 

§  676.  The  Mortgage  must  be  Executed  Simultaneously 
WITH  THE  Deed. — Generally  a  purchase-money  mortgage  must 
be  executed  simultaneously  with  the  deed  of  conveyance  from 
the  vendor.^  But  upon  principle  and  authority,  what  is  meant 
from  this  statement  of  the  rule  is  not  that  the  two  acts — the 
execution  of  the  deed  of  purchase  and  the  execution  of  the 
mortgage — should  be  literally  simultaneous,  as  this  would  be 
an  impossibility.  Some  lapse  of  time  must  necessarily  inter- 
vene between  the  two  acts.  The  real  test  is  not  whether  the 
deed  and  mortgage  were  in  fact  executed  at  the  same  instant, 
or  even  on  the  same  day,  but  whether  they  were  parts  of  one 
continuous  transaction,  and  so  intended  to  be,  so  that  the  two 
instruments  should  be  given  contemporaneous  operation  in 
order  to  promote  the  intent  of  the  parties.^ 

So  it  is  not  necessary  that  the  deed  and  the  mortgage 
should  be  in  fact  executed  at  the  same  moment,  or  even 
on  the  same  day,  provided  the  execution  of  the  two  instru- 
ments constitute  part  of  one  continuous  transaction,  and 
were  so  intended,  so  that  both  should  in  equity  be  given  a 
contemporaneous  operation  in  order  to  promote  the  intention 
of  the  parties.^ 

If  the  two  instruments  are  delivered  at  the  same  time,  it 
does  not  matter  that  they  were  executed  on  different  days,  be- 
cause they  take  effect  only  from  delivery.* 

If  the  vendor  neglects  to  take  a  mortgage  before  some  inter- 
vening rights  of  a  third  person  have  arisen,  the  vendor's  sub- 
sequent mortgage  is  inferior  to  the  prior  mortgage.^  And  the 
purchase-money  mortgage  may  become  a  second  lien  by  the 
acquiescence  of  the  vendor.^ 

1  Ahern  v.  White,  39  Md.  409 ;  Heuisler  v.  Nickum,  38  Md.  270 ;  Foster's 
Appeal,  3  Pa.  St.  79. 

''  Wheatley  v.  Calhoun,  12  Leigh  (Va.),  264 ;  37  Am.  Dec.  654 ;  Love  v. 
Jones,  4  Watts  (Pa.),  465  ;  Snyder's  Appeal,  91  Pa.  St.  477. 

*  Stewart  v.  Smith,  36  Minn.  82. 

*Pascault  V.  Cochran,  34  Fed.  Rep.  358;  Cake's  Appeal,  23  Pa.  St.  186; 
Summers  v.  Dame,  31  Gratt.  (Va.)  791 ;  Mayburry  v.  Brien,  15  Pet.  (U.  S.) 
21. 

*  Houston  V.  Houston,  67  Ind.  276 ;  Jackson  v.  Eeid,  30  Kan.  10. 
6  Mut.  Loan  Asso.  v.  Elwell,  38  N.  J.  Eq.  18. 


THE   LIEN.  715 

Where  two  or  more  purchase-money  mortgages  are  made 
simultaneously  to  difierent  persons,  but  are  in  fact  but  one 
transaction,  the  mortgagees  taking  with  notice,  the  mortgages 
will  take  priority  as  shall  best  carry  into  effect  the  intention 
and  best  secure  the  rights  of  the  parties/ 

The  deed  and  the  mortgage  for  purchase-money  are  parts  of 
one  transaction,  and  if  the  mortgagor  gives  another  mortgage 
to  a  third  person  at  the  time  of  such  transaction,  the  purchase- 
money  mortgage  will  take  priority,  both  being  recorded  at  the 
same  time  ;  ^  otherwise  if  recorded  later,  in  the  absence  of  no- 
tice.^ 

A  written  agreement  to  re-convey  by  the  grantee  which  is 
not  filed  for  record,  does  not  affect  a  lien  acquired  by  levy  of  a 
judgment  creditor  against  the  holder  of  the  legal  title  without 
notice  of  such  agreement ;  and  the  purchaser  at  sheriff 's 
sale  made  under  the  levy,  will  take  title  as  against  persons 
entitled  to  a  re-conveyance,  though  he  had  notice  of  the  agree- 
ment before  the  sheriff's  certificate  was  issued.* 

§  677.  Mortgage  to  Third  Person  who  Advances  the 
PuRCHASE-MoxEY. — A  purchasc-money  mortgage,  executed  at 
the  same  time  with  the  deed  of  purchase,  either  to  the  vendor 
or  to  a  third  person  who  advances  the  purchase-money  paid  to 
the  vendor,  takes  precedence  of  any  other  claim  or  lien  arising 
through  the  mortgagor.^  So  where  a  third  person  advances 
the  money,  and  the  purchaser,  at  the  same  time  the  deed  is 
given  to  him,  executes  a  mortgage  to  such  third  person  on  the 
same  land,  to  secure  the  purchase-money,  all  parties  agreeing 

'  Pomeroy  v.  Latting,  15  Gray  (Mass.),  435  ;  Decker  v.  Boice,  19  Hun  (N.Y.), 
152 ;  83  N.  Y.  215 ;  Jones  ;'.  Phelps,  2  Barb.  Ch.  (N.  Y.)  440  ;  Rhoades  v.  Can- 
field,  8  Paige  (N.  Y.),  545;  VanAken  v.  Gleason,  34  Mich.  477 ;  Sparks;'. 
Bank,  7  Blackf,  (Ind.)  469 ;  Houfes  v.  Schultze,  2  111.  App.  196. 

■'  Brasted  v.  Sutton,  29  N.  J.  Eq.  513  ;  Clark  v.  Brown,  3  Allen  (Mass.),  509; 
Heffron  v.  Flanigan,  37  Mich.  274 ;  Boyd  v.  Mundorf,  30  N.  J.  Eq.  545 ;  Lamb 
V.  Cannon,  38  N.  J.  L.  362. 

^Dusenbury  v.  Hulburt,  2  Thomp.  &  C.  (N.  Y.)  177. 

*  Stephens  y.  Keating  (Tex.),  17  S.  W.  Rep.  37. 

^  Jones  V.  Tainter,  15  Minn.  512;  Curtis  v.  Root,  20  111.  53;  Jackson  v. 
Austin,  15  Johns.  (N.  Y.)  477 ;  BoUes  v.  Carii,  12  Minn.  113. 


716  REGISTRATION    OF    THE   INSTRUMENT. 

to  this  arrangement,  such  mortgage,  as  held  by  many  courts,  is 
entitled  to  the  same  preference  over  a  prior  judgment  against 
the  purchaser  as  the  vendor  would  have  had  if  the  mortgage 
had  been  given  directly  to  him.^  But  this  rule  is  not  general, 
and  there  is  authority  to  the  contrary  ;  it  is  said  the  term 
purchase-money  does  not  include  money  that  may  be  borrowed 
to  complete  a  purchase,  but  that  which  is  stipulated  to  be  paid 
by  the  purchaser  to  the  vendor.  As  between  the  purchaser 
and  a  third  party,  it  is  simply  borrowed  money.^ 

A  mortgage  to  a  third  person  for  purchase-money  has  been 
held  prior  to  a  mechanic's  lien  on  the  premises.^ 

A  reservation  in  a  conveyance  of  annual  rent,  with  a  con- 
dition that  the  grantor  may  enter  and  take  possession  in  case 
of  non-payment,  is  in  effect  a  conveyance  and  mortgage  back 
for  the  purchase-money,  and  is  superior  to  any  other  incum- 
brance which  the  grantee  can  create.*  The  vendee  has  only 
an  instantaneous  seisin,  and  the  legal  title  remains  with  the 
vendor,  who  becomes  the  mortgagee  of  the  land.^ 

A  person  cannot  acquire  a  lien  upon  land  purchased  by 
another  by  the  voluntary  and  unauthorized  payment  of  the 
purchase-money ;  ^  nor  can  he  by  paying  the  debt  due  to  a 
vendor  who  has  a  lien  for  the  purchase-money,  be  subrogated 
to  such  vendor's  lien.'^ 

In  one  case  a  subsequent  mortgagee,  after  paying  the  vendor 
the  balance  of  the  purchase-money  due  him,  was  allowed  to 

^Mize  r.  Barnes,  78  Ky.  506 ;  Stevens  v.  Stevens,  10  Allen  (Mass.),  146; 
Pearl  v.  Hervey,  70  Mo.  160 ;  Austin  v.  Underwood,  37  111.  438 ;  Blevins  v. 
Rogers,  32  Ark.  258 ;  Mitchell  v.  Butt,  45  Ga.  1G2 ;  Magee  v.  Magee,  51  111. 
500 ;  Dvvenger  v.  Branigan,  95  Ind.  221 ;  Kaiser  v.  Lembeck,  55  Iowa,  244 ; 
Lovett  V.  Demarest,  1  Hal.  Ch.  (N.  J.)  113 ;  Haywood  v.  Nooney,  3  Barb. 
(N.  Y.)  643 ;  Jones  v.  Parker,  51  Wis.  218 ;  Moring  v.  Dickerson,  85  N.  Car. 
466 ;  Carey  v.  Boyle,  -53  Wis.  574. 

^  Alderson  v.  Ames,  6  Md.  52 ;  Heuisler  v.  Nickum,  38  Md.  270 ;  Skaggs  v. 
Nelson,  25  Miss.  88  ;  McLean  v.  Findley,  2  P.  &  W.  (Pa.)  101 ;  Stansell  v. 
Jennings,  13  Ohio,  148. 

3  Weldon  v.  Gibbon,  2  Phila.  (Pa.)  176  ;  Virgin  v.  Brubaker,  4  Nev.  31. 

*  Stephenson  v.  Haines,  16  Ohio  St.  478. 

^  Baker  v.  Clepper,  26  Tex.  629. 

«Truesdell  v.  Callaway,  6  Mo.  605. 

'  Nichol  V.  Dunn,  25  Ark.  129. 


THE    LIEN.  717 

tack  that  balance  to  his  own  mortgage/  but  that  principle 
does  not  prevail.^ 

§  678.  Priority — Assignee. — A  purchase-money  mortgage 
executed  when  the  title  to  the  land  passes,  takes  precedence  to 
one  given  to  secure  a  loan  with  which  to  make  a  cash  pay- 
ment, though  the  latter  was  recorded  first,  and  was  assigned  to 
one  who  paid  full  value,  the  assignment  not  being  made  until 
after  the  purchase-money  mortgage  was  recorded.  Chief  Jus- 
tice Elliott  says  that  the  assignor  of  the  latter  mortgage  was 
chargeable  with  actual  notice,  and  he  was  not  therefore  a  bona 
fide  mortgagee  as  against  the  purchase-money  mortgage  ;  nor 
did  he  become  a  holder  of  the  mortgage  until  after  the  pur- 
chase-money mortgage  had  been  recorded. 

"  Our  judgment  is  that  as  he  took  the  assignment  of  the 
mortgage  after  the  purchase-money  mortgage  was  recorded, 
and  from  one  chargeable  with  notice,  he  was  himself  charge- 
able with  notice  of  its  existence.  It  was  his  duty  to  ascertain 
from  the  records  the  condition  of  the  title  at  the  time  he  ac- 
quired his  mortgage."  ^ 

As  the  record  imported  notice  of  the  purchase-money  mort- 
gage, the  assignee  was  chargeable  with  notice,  all  of  which  a 
reasonable  inquiry  would  have  revealed.  The  notice  conveyed 
by  the  record  was  sufficient  to  impose  upon  the  assignee  the 
duty  to  ascertain  the  facts  respecting  the  mortgage  which  he 
found  on  record.* 

But  the  assignee  of  a  purchase-money  mortgage  duly  re- 
corded will  not  be  restrained  from  enforcing  his  lien  against 
the  land  on  the  ground  that  the  purchaser  of  the  land  under 
a  foreclosure  of  a  second  mortgage,  had  a  veiJbal  understand- 
ing with  the  parties  to  the  first  mortgage  that  its  lien  would 

^Henderson  v.  Stewart,  4  Hawks  (N.  Car.),  256. 

'^Fredericks  v.  Corcoran,  100  Pa.  St.  413;  Refeld  v.  Ferrell,  27  Ark.  534 ; 
30  Ark.  465. 

^Brower  v.  Witmeyer,  121  Ind.  83,  86;  City  Nat.  Bank's  Appeal,  91  Ta.  St. 
163 ;  Turk  v.  Funk,  68  Mo.  18. 

*  Jackson  v.  Post,  15  Wend.  (N.  Y.)  588  ;  Van  Rensselaer  r.  Clark,  17  Wend. 
(N.  Y.)  25 ;  31  Am.  Dec.  280. 


718  REGISTRATION    OF    THE    INSTRUMENT. 

be  postponed  to  that  of  the  second  mortgage,  and  that  he 
would  receive  a  free  title.  Chancellor  Saulsbury  says  the 
records  in  the  recorder's  office  are  public,  open  to  the  inspec- 
tion of  the  purchaser,  and  if  instead  of  examining  them,  he 
chooses  to  rely  upon  loose  declarations  of  others,  or  the  general 
understanding  of  people  attending  a  sale  at  the  foreclosure  of 
the  second  mortgage,  he  alone  must  suffer  by  his  folly.  Title 
to  lands  and  liens  thereon  are  not  to  be  affected  by  such  dec- 
larations or  understandings.^ 

§  679.  Money  Advanced  to  One  op  Two  Joint  Pur- 
chasers AND  Mortgage  Back. — A  lien  will  not  inure  for 
the  benefit  of  a  person  who  advances  part  of  the  purchase- 
money,  to  one  of  two  joint  purchasers,  and  who  takes  a  mort- 
gage back  therefor  on  his  undivided  moiety.^ 

But  if  the  vendor  agrees  that  part  of  the  purchase-money 
be  paid  to  a  third  person,  the  latter  is  entitled  to  a  lien  there- 
for until  paid.^ 

§  680.  A  Vendee  May  Have  a  Lien  When  He  Advances 
THE  Money  and  the  Contract  Fails  of  Consummation. — 
A  purchase-money  mortgage,  executed  simultaneously  with 
the  vendor's  deed,  excludes  any  claim  or  lien  arising  through 
the  mortgagor  or  vendee,  and  no  statute  is  necessary  to  effect 
this.* 

But  the  question  arises,  if  the  vendee  advances  the  money 
and  the  transaction  is  never  consummated,  or  the  contract  is 
rescinded,  does  the  vendee  have  a  similar  lien  on  the  land  in 
view  ?     It  is  the  general  rule  that  the  vendee  has  a  similar  lien 

1  Foxwell  V.  Slaughter,  5  Del.  Ch.  396. 

''Cox  V.  Carson,  .3  Head  (Tenn.),  607.  See,  also,  Crane  v.  Caldwell,  14  111. 
468 ;  White  v.  Wakefield,  7  Sim.  401 ;  Coster  v.  Bank,  24  Ala.  37 ;  Hall  r. 
Morris,  13  Bush  (Ky.),  322;  Glasscock  v.  Glasscock,  17  Tex.  480;  Patton  c. 
Hoge,  22  Gratt.  (Va.)  443. 

'  Lee  V.  Newman,  55  Miss.  365  ;  Gault  v.  Trumbo,  17  B.  Mon.  (Ky.)  682  ; 
Turkes  v.  Reis,  14  Abb.  Pr.  N.  Cas.  (N.  Y.)  26 ;  Hamilton  v.  Gilbert,  2  Heisk. 
(Tenn.)  680 ;  Latham  v.  Staples,  46  Ala.  462. 

*  Fitts  V.  Davis,  42  111.  391 ;  Banning  v.  Edes,  6  Minn.  402 ;  City  Nat.  Bank's 
Appeal,  91  Pa.  St.  163 ;  Moring  v.  Dickerson,  85  N.  Car.  466 ;  Howell  v.  How- 
ell, 7  Ired.  (N.  Car.)  491 ;  Roane  v.  Baker,  120  111.  308. 


THE    LIEN.  719 

for  purchase-money  advanced  by  him,  where  the  contract  is 
never  consummated/ 

§  681.  Homestead. — In  cases  of  purchase-money  mortgages, 
the  husband  acquires  no  homestead  right  when  he  made  the 
mortgage  against  the  debt  thus  contracted ;  nor  is  the  condi- 
tion of  the  wife  any  different.  The  property  undoubtedly  may 
become  impressed  with  the  character  of  a  homestead  in  re- 
spect to  other  debts ;  under  the  homestead  exemption  laws, 
claims  must  be  held  subordinate  to  the  mortgage,  for  no  home- 
stead claim  can  be  made  until  after  the  purchase  is  fully 
effected  by  the  payment  of  the  purchase-money.^ 

So  a  homestead  exemption  cannot  be  set  up  against  a  deed 
of  trust  executed  by  a  purchaser  of  land  to  secure  money  with 
which  to  pay  the  purchase  price  ;^  and  when  the  lien  is  not 
abandoned,  it  will  be  sustained  against  a  homestead  right  of 
the  family.* 

Many  of  the  States  have  a  provision  in  their  constitution, 
that  the  homestead  exemption  shall  not  prevail  as  against 
any  obligation  or  debt  contracted  for  the  purchase  of  the 
premises.^  And  two  States  will  not  allow  mortgages  upon 
the  homestead  except  for  the  purchase  thereof  or  improve- 
ments thereon.® 

iRose  V.  Watson,  10  H.  L.  Cas.  672;  Bibb  v.  Prather,  1  Bibb.  (Ky.)  313 ; 
Torrance  v.  Bolton,  L.  R.  8  Ch.  App.  118 ;  Griffith  v.  Depew,  3  A.  K.  Marsh 
(Ky.),  177;  Davis  v.  Heard,  44  Miss.  50;  Allen  v.  Bratton,  47  Miss.  119; 
Stewart  v.  Wood,  63  Mo.  252;  Taft  v.  Kessel,  16  Wis.  273  ;  Vaughan^'.  Myers, 
2  Dana  (Ky.),  113 ;  Shirley  v.  Shirley,  7'Blaekf.  (Ind.)  452. 

^  Hopper  V.  Parkinson,  5  Nev.  233,  238 ;  Peterson  v.  Hornblower,  33  Cal. 
275  ;  Hand  v.  Railroad  Co.,  12  S.  Car.  314 ;  Kimble  v.  Esworthy,  6  111.  App. 
517. 

'Guinn  v.  Spurgin,  1  Lea  (Tenn.),  228. 

*  Flanagan  v.  Cushman,  48  Tex.  241 ;  New  England  Jewelry  Co.  v.  Merriam, 
2  Allen  (Mass.),  .390;  Lane  ^;.  Collier,  46  Ga.  580;  Allen  v.  Hawley,  66  III. 
164,  168 ;  Austin  v.  Underwood,  37  111.  438  ;  Magee  r.  Magee,  51  111.  500 ;  Jones 
V.  Parker,  51  Wis.  218 ;  Amphlett  v.  Hibbard,  29  Mich.  298 ;  Nichols  v.  Over- 
acker,  16  Kan.  54. 

^Stims.  Am.  Stat.  Law,  sect.  84:  Kansas,  Florida,  Louisiana,  Georgia, 
California,  Nevada,  Texas,  Arkansas,  Tennessee,  North  Carolina,  West  Vir- 
ginia, and  Virginia. 

*  Stims.  Am.  Stat.  Law,  sect.  85  :  Louisiana  and  Texas. 


720  REGISTRATION    OF    THE    INSTRUMENT, 

§  682.  DowER. — In  like  manner,  when  land  is  conveyed  and 
a  mortgage  given  back  for  the  purchase-money,  the  wife  of  the 
mortgagor  has  no  interest  superior  to  that  of  the  vendor  or 
mortgagee,  though  she  did  not  release  her  dower  interest ;  she 
is  endowable  of  the  equity  of  redemption  only ;  but  against 
all  besides  she  has  an  endowable  right  in  the  land/ 

It  is  well  settled  by  the  entire  weight  of  authority,  as  well 
as  upon  the  clearest  principles  of  equity,  that  when  a  convey- 
ance is  made  to  one  who  at  the  time  mortgages  back  the 
premises  to  the  grantor  to  secure  the  purchase-money,  the  wife 
of  such  mortgagor  is  not,  as  against  the  mortgagee,  entitled  to 
dower,  save  in  the  equity  of  redemption. 

The  deed  and  mortgage  back  being  at  the  same  time,  thougli 
separate  instruments,  are  to  be  regarded  as  part  of  one  and  the 
same  transaction,  in  the  same  manner  as  a  deed  of  defeasance 
forms,  with  the  deed  to  be  defeated,  but  one  contract ;  the 
husband  is  not  deemed  sufficiently  or  beneficially  seized  of  an 
instantaneous  passage  of  the  fee  in  and  out  of  him  to  entitle 
the  wife  to  dower  as  against  the  mortgagee.^ 

The  wife  will  not  have  dower,  as  against  the  mortgage,  when 
it  is  given  for  purchase-money.^  So  where  land  is  conveyed  to 
a  husband,  and  at  the  same  time  mortgaged  to  a  third  person, 
who  furnishes  the  purchase-money,  the  widow  of  the  grantee 
will  have  no  right  of  dower  as  against  the  mortgagee.*  And 
it  is  the  general  rule  that  persons  who  have  furnished  money 
for  the  express  purpose  of  purchasing  real  estate,  have  the  same 
lien  given  vendors,^  and,  hence  the  wife  has  no  dower  right  as 
against  such  party. 

In  Illinois,  where  an  unmarried   man  mortgages  his  real 

1  Young  V.  Tarbell,  37  Me.  509. 

2  Mayburry  v.  Brien,  15  Pet.  (U.  S.)  21 ;  BuUard  v.  Bowers,  10  N.  H.  500 ; 
Stow  V.  Tifft,  15  Johns.  (N.  Y.)  459  ;  George  v.  Cooper,  15  W.  Va.  666 ;  Jones 
V.  Parker,  51  Wis.  218. 

^  Jones  V.  Parker,  51  Wis.  218 ;  Clark  v.  Munroe,  14  Mass.  351. 

*  Clark  V.  Munroe,  14  Mass.  351.  See,  also,  Kaiser  v.  Lembeck,  55  Iowa, 
244. 

^Dwenger  v.  Branigan,  95  Ind.  221 ;  Barrett  v.  Lewis,  106  Ind.  120;  Carey 
V.  Boyle,  53  Wis.  574 ;  Insurance  Co.  v.  Gisborne,  5  Utah,  319. 

«  Butler  V.  Thompson  (Ind.),  30  N.  E.  Rep.  1073. 


THE    LIEN.  721 

estate  and  then  marries,  his  wife  has  a  dower  interest  in  the 
same  as  to  all  persons,  except  as  to  the  mortgagee.  So  a  second 
wifj,  wlio  survives  her  husband,  is  entitled  to  dower  in  lands 
mortgaged  by  him  and  his  first  wife.^ 

A  widow  is  not  entitled  to  dower  in  land  mortgaged  by  her 
husband,  where  the  mortgage  has  been  foreclosed,  the  land 
bought  by  the  mortgagee,  and  the  time  for  redemption  has 
expired  before  the  death  of  the  husband.^ 

§  683.  Wife  Need  Not  Join  in  a  Purchase-Money 
Mortgage. — As  the  wife  has  no  dowable  right  in  the  land 
covered  by  a  purchase-money  mortgage  of  her  husband,  the 
mortgage  is  effective  without  her  joining  with  the  husband  in 
the  execution  of  it,  in  order  to  bar  her  dower  as  against  the 
mortgagee  and  those  claiming  under  him.^ 

§  684.  Mortgage  by  Married  Woman. — In  those  States 
where  the  wife  is  not  emancipated,  her  mortgage  for  purchase- 
money  is  invalid  becf^use  she  is  incapacitated  to  make  a  sepa- 
rate grant,  yet  it  may  be  good  in  equity.  Thus,  a  vendor 
supposing  that  a  woman  whose  husband  was  not  living  with 
her,  was  unmarried,  sold  her  a  tract  of  land  and  took  notes 
and  a  mortgage  back  for  a  part  of  her  purchase-money.  It 
was  held  that  the  deed  and  void  mortgage  were  one  transac- 
tion, and  a  subsequent  purchaser  with  notice  took  title  in  trust 
for  the  payment  of  the  mortgage  notes ;  while  the  mortgage 
was  void  and  incapable  of  correction,  yet  the  deed  and 
void    mortgage   were    evidence   of  an    agreement   for   recon- 

> Shape  V.  Schaffner  (111.),  30  N.  E.  Rep.  872. 

*  Shape  r.  Schaffner  (Ill.),;50  N.  E.  Rep.  872. 

Many  of  the  States  provide  that  if  lands  are  purchased  by  the  husband 
durintr  mai-riage,  who  gives  a  mortgage  to  secure  the  purchase-money,  the 
widow  has  dower  only  in  the  equity  of  redemption,  if  she  did  not  join  in  the 
mortgage :  Stims.  Am.  Stat.  Law,  sect.  .321.3 :  Georgia,  Oregon,  Arkansas, 
North  Carolina,  West  Virginia,  Nebraska,  Wisconsin,  Michigan,  Illinois,  In- 
diana, and  New  York.  The  same  law  holds  as  to  the  husband's  curtesy  in 
the  wife's  lands  in  some  of  the  States :  Stims.  Am.  Stat.  Law,  sect.  3113 : 
Delaware. 

'  Thompson  v.  Lyman,  28  Wis.  266 ;  Birnic  r.  Main,  29  Ark.  501 ;  Hinds  v. 
Ballon,  44  N.  H.  eio. 
46 


722  REGISTRATION    OF    THE    INSTRUMENT. 

veyaiice,  and  the  wife  was  affected  with  a  trust  for  a  reconvey- 
ance.' 

§  685.  Judgments. — A  prior  judgment  against  the  mort- 
gagor is  subordinate  to  the  mortgagee's  hen  in  a  purchase- 
money  mortgage.  Thus,  where  the  purcliase-money  mortgage 
is  executed  and  dehvered  concurrently  with  the  deed  for  the 
land,  a  judgment  obtained  against  the  mortgagor  before  the 
purchasa  does  not  take  priority  over  the  lien  of  the  mortgage, 
thougli  the  mortgage  in  Illinois  be  not  acknowledged  and  re- 
corded for  some  time  after  the  recording  of  the  deed.^  The 
mortgage  is  the  paramount  lien.^ 

It  is  a  familiar  principle  of  law  that  a  mortgage  given  for 
the  purchase-money  of  land  and  executed  at  the  same  time  the 
deed  is  executed  to  the  mortgagor,  takes  precedence  of  a  judg- 
ment against  the  mortgagor.*  So,  too,  where  in  pursuance  of 
an  executory  contract  the  same  lands  are  conveyed  at  the  same 
time  and  mortgage  thereon  given  by  the  purchaser  for  a  por- 
tion of  the  purchase-money,  the  sale  is  subject  to  the  lien  for 
the  unpaid  purchase-money  which  attaches  eo  instanti  as  a  part 
of  an  invisible  transaction  ;  and  the  purchaser  cannot  give  to 
another  a  lien  which  will  take  priority  to  such  mortgage.^  The 
lien  of  such  a  mortgage  is  prior  to  that  of  any  judgment 
against  the  purchaser.  The  same  rule  applies  where  a  third 
person,  who  holds  a  mortgage  on  the  property,  receives  from 
the  purchaser  as  a  part  of  the  same  transaction,  and  as  part  of 
the  purchase  price,  a  mortgage  on  such  property  in  place  of  a 
previous  mortgage.^ 

The  priority  over  judgments  is  not  restricted  to  a  mortgage 

t 

'  Ogle  V.  Ogle,  41  Ohio  St.  359. 

"  Roane  v.  Baker,  120  111.  308. 

'  Bradley  v.  Bryan,  43  N.  J.  Eq.  396. 

*■  Curtis  V.  Root,  20  111.  513.  It  is  true  that  this  judgment  which  was 
affirmed  in  Curtis  v.  Root,  20  111.  518,  was  afterward  reversed  in  the  same 
case  as  reported  in  28  111.  367  and  38  111.  192,  upon  other  grounds,  but  it  still 
stands  as  authority  for  the  doctrine  announced  in  this  section  when  the  deed 
for  purchase-money  is  executed  at  the  same  time. 

^Dusenbury  v.  Hulbert,  59  N.  Y.  541. 

«  Ward  V.  Carey,  39  Ohio  St.  361. 


THE    LIEN.  723 

given  to  the  grantor  of  the  land.'      It  is  not  essential  for  a 
mortgage  to  show  on  its  face  that  it  was  given   for  the  pur- 
chase-money, in  order  to  have  it  preferred,  if  the  fact  that  it  ■ 
was  so  given  was  known  to  the  mortgagors  and  mortgagees.^ 

Article  3. 

Mechanic's  Lien. 

I  686.  Creature  of  the  Statute.  |  691.  Commencement  of  the  Lien. 

l  687.  Railroad  Company's  Contracts.  §  692.  Purchase-Money  Mortgage. 

I  688.  Priority  of  Mortgage   Debt  by  §  693.  The  Lienor  Must  Bring  Him- 

Eailroad  Company  Sometimes  self    Clearly    Within    the 

Displaced.  Statute. 

?  689.  Lien  of   After- Acquired   Prop-  I  694.  Proof  of  Claim. 

erty.  I  695.  Extent  of  Mechanic's  Lien. 
§  690.  "Waiver  of  the  Lien. 

§  686.  Creature  of  the  Statute. — The  lien  of  the  me- 
chanic known  as  a  mechanic's  lien  is  exclusively  the  creature 
of  the  statute.^  Such  liens  may  be  given  priority  of  mortgages 
by  statutory  enactments,  executed  and  recorded  subsequently 
to  the  date  of  the  contract  under  which  the  lien  is  claimed.* 

The  principle  embraced  in  the  statute  is  founded  in  natural 
justice,  that  the  party  who  has  enhanced  the  value  of  the  prop- 
erty by  incorporating  therein  labor  and  materials  shall  have 
security  on  the  same,  though  changed  in  form  and  inseparable 
from  the  property.' 

But  however  equitable  the  claim  may  be,  the  lien  does  not 
exist  unless  the  party  brings  himself  within  the  provisions  t)f 
the  statute,  and  shows  a  substantial  compliance  with  all  the 
essential  requirements." 

If  the  mechanic  brings  himself  within  the  statute,  it  is  but 

'  Stewart  v.  Smith,  .3()  ]Minn.  83  ;  Cake's  Appeal,  23  Pa.  St.  186  ;  Wilson  v. 
Smith,  52  Hun  (N.  Y.),171. 
•'City  Nat.  Bank's  Appeal,  91  Pa.  St.  163. 
'Grant  v.  Vandercook,  8  Abb.  Pr.  N.  S.  (N.  Y.)  455. 

*  Dunklee  v.  Crane,  103  Mass.  470. 
''Taggard  v.  Buckmore,  42  Me.  77. 

*  Spencer  v.  Barnett,  35  N.  Y.  96 ;  Dore  v.  Sellers,  27  Cal.  588  ;  Noll  v.  Swine- 
ford,  6  Pa.  St.  187 ;  Greene  v.  Ely,  2  Greene  (Iowa),  508. 


724  REGISTRATION    OF    THE    INSTRUMENT, 

just  that  the  mechanic  should  have  the  benefit  of  his  labor 
rather  than  the  mortgagee,  who  has  taken  the  mortgage  during 
the  progress  of  the  work/ 

The  statutes  of  the  different  States  are  not  the  same.  In 
some  Slates  a  bona  fide  mortgagee  is  considered  as  a  purchaser 
wdio  is  not  affected  by  a  mechanic's  lien  unless  he  has  received 
actual  or  constructive  notice  of  it  in  a  manner  prescribed  ;  and 
the  fact  that  the  mechanic  is  working  upon  the  building  at  the 
time  of  taking  the  mortgage  is  not  actual  notice  of  his  lien.^ 
But  it  is  generally  held  that  liens  for  repairs  and  improve- 
ments on  buildings  already  covered  by  a  mortgage  or  deed  of 
trust  are  subject  to  such  prior  mortgage.^  But  after  actual  no- 
tice of  a  mechanic's  lien  optional  advances  thereafter  made 
must  be  held  inferior.* 

§  687.  Railroad  Company's  Contracts. — As  a  general  rule 
a  prior  recorded  mortgage  given  by  a  railroad  company,  cre- 
ates a  lien  whose  priority  cannot  be  displaced  thereafter  either 
directly  by  a  mortgage  given  by  the  company,  or  indirectly  by 
a  contract  between  the  comjjany  and  a  third  party  for  the  erec- 
tion of  buildings  or  other  works  of  original  construction. 
Thus,  a  mechanic's  lien  for  the  construction  of  a  dock  on  the 
property  of  a  railroad  company  is  subject  to  a  lien  of  a  mort- 
gage on  the  company's  property,  recorded  before  the  improve- 
ments were  made.^ 

Registry  of  a  mortgage  is  notice  to  the  world  of  the  lien, 
and  a  contractor  must  then  know  it.^ 

In  general  railroad  mortgages  made  to  secure  the  payment 

J  Davis  V.  Bilpland,  18  Wall.  (U.  S.)  659  ;  Equitable  Life  Ins.  Co.  v.  Slye,  45 
Iowa,  615 ;  Neilson  v.  Railroad  Co.,  44  Iowa,  71. 

^Foushee  v.  Grigsby,  12  Bush  (Ky.),  75  ;  Gere  v.  Cushing,  5  Bush  (Ky.),304. 

^Piingan  v.  Scott,  37  Mo.  App.  66.i ;  Choteau  v.  Thompson,  2  Ohio  St.  114, 
126,  127.  Compare  Wimberly  v.  Mayberry  (Ala.),  10  South.  Rep.  157;  Welch 
V.  Porter,  63  Ala.  232 

■•Finlayson  v.  Crooks,  47  Minn.  74.  See,  also,  AVetmore  r.  Marsh,  81  Iowa, 
677 ;  Reilly  v.  Williams,  47  Minn.  590 ;  Haxtun  Steam-Heater  Co.  v.  Gordon 
(N.  Dak.),  50  N.  W.  Rep.  708  ;  34  Cent.  L.  Jour.  196,  and  note. 

^Toledo,  etc..  Railroad  Co.  v.  Hamilton,  134  IT.  S.  296. 

«  Dunham  v.  Railway  Co.,  1  Wall.  (U.  S.)  254,  267. 


THE    LIEN.  725 

of  bonds  issued  for  the  purpose  of  realizing  means  with  which 
to  construct  the  road,  stand  upon  the  same  footing  as  ordinary 
mortgages  ;  the  weight  of  judicial  determination  sanctions  this 
doctrine/ 

And  the  fact  that  the  mortgagor  has  not  the  legal  title  to 
the  property  gives  no  priority  to  a  mechanic's  lien,  where  the 
mortgagor  has  the  full  equitable  title  before  the  contract  for 
the  construction  of  the  improvements  is  entered  into,  and  the 
mortgage  being  one  of  general  description,  conveyed  land  held 
by  a  full  equitable,  as  well  as  that  held  by  a  legal  title.^ 

When  the  work  is  in  original  construction,  the  prior  recorded 
mortgage  will  take  precedence  over  the  mechanic's  lien.^ 

§  688.  Priority  of  Mortgage  Debt  by  Railroad  Com- 
pany Sometimes  Displaced. — The  mechanic's  lieu  for  original 
construction  gives  no  equitable  lien  prior  in  right  to  the  lieh 
of  a  prior  recorded  mortgage,  and  does  not  furnish  any  equit- 
able reason  why  the  legal  priority  belonging  to  the  mortgage 
should  be  displaced. 

The  priority  of  a  mortgage  debt  upon  a  railroad,  says  Justice 
Brewer,  has  been  sometimes  displaced  in  favor  of  unsecured 
creditors,  when  those  debts  were  contracted  for  keeping  up  a 
railroad,  already  built,  as  a  going  concern  ;  but  these  cases  have 
no  application  to  a  debt  contracted  for  original  construction.* 

It  is  true  cases  have  arisen  in  which,  upon  equitable  reasons, 
the  priority  of  a  mortgage  debt  has  been  displaced  in  favor  of 
even  unsecured  subsequent  creditors.^ 

Justice  Blatchford  has  well  enunciated  the  doctrine  which 

'  Pierce  t'.  Emery,  32  N.  H.  484;  Pennock  v.  Coe,  23  How.  (U.  S.)  130; 
Field  V.  Mayor,  6  N.  Y.  179  ;  Seymour  v.  Railroad  Co.,  25  Barb.  (N.  Y.)  284  ; 
Lanprton  v.  Horton,  1  Hare  Ch.  549 ;  Noel  v.  Bewley,  3  Sim.  103. 

'^  Ma?sey  r.  Papin,  24  How.  (U.  S.)  302 ;  Farmers'  Loan  and  Trust  Co.  r. 
Fisher,  17  Wis.  114  ;  Lincoln  Building  A.sso.  v.  Hass,  10  Nebr.  581 ;  Laughlin 
V.  Braley,  25  Kan.  147  ;  Toledo,  etc..  Railroad  Co.  v.  Hamilton,  134  U.  s!  296, 
305. 

^Porter  v.  Pittsburgh  Steel  Co.,  120  U.  S.  649,  671. 

*  Toledo,  etc.,  Railroad  Co.  v.  Hamilton,  134  U.  S.  296. 

^  St.  Louis  &  Alton  Railroad  v.  Cleveland,  etc.,  Railroad  Co.,  125  U.  S.  058, 073 
Fosdick  V,  Schall,  99  U.  S.  235  ;  Miltenbcrger  v.  Railroad  Co.,  100  U.  S.  286; 
Union  Trust  Co.  v.  Souther,  107  U.  S.  591 ;  Burnham  v.  Bowen,  111  U.  S.  776 


726  REGISTRATION    OF    THE    INSTRUMENT. 

controls  these  cases.  He  says  :  "  The  claims  of  the  appellees 
are  for  the  original  construction  of  the  railroad.  This  is  not  a 
case  where  the  proceeds  of  the  sale  of  the  property  of  a  rail- 
road, as  a  complete  structure,  open  for  travel  and  transporta- 
tion, are  to  be  applied  to  restore  earnings  which,  instead  of 
having  been  applied  to  pay  operating  expenses  and  necessary 
repairs,  have  been  diverted  to  pay  interest  on  mortgage  bonds 
and  the  improvement  of  the  mortgaged  property,  the  debts  due 
for  the  operating  expenses  and  repairs  having  remained  unpaid 
when  a  receiver  was  appointed.  The  equitable  principles  upon 
which  the  decisions  rest,  applying  to  the  payment,  out  of  the 
proceeds  of  the  sale  of  railroad  property,  of  such  debts  for 
operating  expenses  and  necessary  repairs,  are  not  applicable  to 
claims  such  as  the  present,  accrued  for  the  original  construction 
of  a  railroad  while  there  was  a  subsisting  mortgage  upon  it. 
These  five  appellees  gave  credit  to  the  company  for  their  work. 
It  was  construction  work,  and  none  of  it  was  for  operating  ex- 
penses or  repairs,  and  none  of  it  went  toward  keeping  a  com- 
pleted road  in  operation,  either  in  the  way  of  labor  or  material. 
When  these  claims  accrued,  the  road  of  the  company  had  not 
been  opened  for  use.  The  claims  accrued,  after  the  mortgage 
had  been  executed  and  recorded,  and  after  $1,000,000  of  the 
bonds  secured  by  it  had  been  issued  and  pledged  to  innocent 
bo7ia  fide  holders  for  value.  We  are  not  aware  of  any  well- 
considered  adjudged  case,  which,  in  the  absence  of  a  statutory 
provision,  holds  that  unsecured  floating  debts  for  construction 
are  a  lien  on  a  railroad  superior  to  the  lien  of  a  valid  mort- 
gage duly  recorded,  and  of  bonds  secured  thereby,  and  held  by 
bona  fide  purchasers  for  value.  The  authorities  are  all  the  other 
way.'"' ' 

§  689.  Lien  of  After-Acquired  Property. — When  after- 
acquired  property,  when  acquired,  is  already  subject  to  a 
mechanic's  lien,  such  lien  will  take  precedence  of  the  prior 
mortgage  covering  such  property. 

Dow  V.  Memphis,  etc.,  Railroad  Co.,  124  U.  S.  652;  Union  Trust  Co.^;.  Morri- 
son, 125  U.  S.  591. 

» Porter  v.  Pittsburgh  Steel  Co.,  120  U.  S.  649,  671. 


THE    LIEN.  727 

Thus,  after  giving  a  mortgage  a  railroad  company  desired 
to  erect  a  depot  on  land  adjoining  its  track.  The  owner  of 
the  land  agreed  to  give  the  company  the  land  provided  it 
would  build  a  depot.  Upon  the  building  a  mechanic's  lien 
was  filed.  The  owner  had  never  made  a  conveyance.  Upon 
foreclosure  of  the  mortgage  the  mechanic's  lien  upon  the  build- 
ing and  the  ground  upon  which  it  was  constructed  was  held 
prior  to  the  mortgage,  because  the  full,  equitable  title  never 
passed  to  the  railroad  company  until  the  completion  of  the 
building,  and  then  it  passed,  subject  to  the  burden  of  the 
mechanic's  lien.  Therefore,  though  after-acquired  property, 
and  subject  to  the  lien  of  the  mortgage,  it  was,  when  acquired, 
already  burdened  with  a  lien.^ 

The  same  doctrine  is  held  in  New  Jersey,  In  a  New  Jersey 
case  the  defendant  railroad  company  had  executed  a  mortgage 
with  the  "  after-acquired  property  "  clause  in  it,  duly  recorded. 
It  was  also  the  owner  of  a  large  majority  of  the  stock  of  another 
railroad  company,  and  was  in  possession  of  and  operating  the 
latter  company's  road.  No  consolidation,  in  fact,  of  the  two 
companies  had  taken  place  ;  but  being  in  possession  of  the 
latter  company's  road,  it  had  contracted  for  the  building  of 
certain  docks,  walls,  and  piers,  at  the  terminus  of  that  road. 
Having  failed  to  make  payment  for  such  work,  a  me- 
chanic's lien  was  perfected  upon  the  latter  company's 
road.  Upon  a  suit  to  foreclose  the  mortgage  given  by  the 
defendant  railroad  company,  the  chancellor,  laying  hold  of 
the  fact  that  the  defendant  railroad  company  was  the  owner 
of  the  large  majority  of  the  stock  of  the  latter  company — was 
in  possession  of  and  operating  the  latter  compan3^'s  road — 
decreed  that  such  road,  with  its  property  and  franchises,  be- 
longed to  the  defendant  railroad  company,  and  that  the  after- 
acquired  property  was  subject  to  the  mortgage,  which  was  subor- 
dinate to  the  mechanic's  lien.^  On  review  in  the  Court  of  Errors 
and  Appeals,  the  decision  of  the  chancellor  was  sustained,  the 
court  saying  that  until  the  decree  was  signed,  the  right  of  the 

'Botsford  V.  New  Haven,  etc.,  Eailroad  Co.,  41  Conn.  454. 
,   '  Williamson  v.  New  Jersey,  etc.,  Eailroad  Co.,  28  N.  J.  Eq.  277, 


728  REGISTRATION    OF   THE    INSTRUMENT. 

mortgagee  in  the  lands  of  the  latter  company  under  his  mort- 
gage was  a  mere  unexecuted  equity  to  have  the  benefit  of  such 
equities  as  his  mortgage  had  in  the  premises,  without  any  legal 
title  in  himself  or  in  his  mortgagor  upon  which  his  mortgage 
as  a  conveyance  could  operate.  When  the  decree  of  the  chan- 
cellor was  signed,  which  established  the  lien  of  the  mortgage 
on  the  property  of  the  latter  company,  the  lienor  had,  by  force 
of  the  provisions  of  the  mechanic's  lien  act,  acquired  a  lien  on 
the  premises  which  related  back  to  the  commencement  of  the 
building,  and  was  entitled  to  priority  over  all  conveyances, 
mortgages,  or  incumbrances  subsequent  thereto.  This  lien  was 
not  displaced  by  the  chancellor's  decree,  which,  in  the  absence 
of  fraud,  could  be  effective  only  to  bring  under  the  mortgage 
the  lands  of  the  latter  company,  subject  to  such  liens  as  were 
lawfully  acquired  while  the  legal  estate  was  in  the  latter  com- 
pany, and  the  chancellor's  decree  was  affirmed,  giving  priority 
to  the  mechanic's  lien.^ 

§  690.  Waiver  of  the  Lien. — A  mechanic's  lien  may  be 
waived  by  taking  security  for  the  claim.  As  between  the  parties 
themselves,  the  question  of  waiver  is  largely  one  of  intention.^ 

The  fact  that  a  party  entitled  to  a  lien  for  materials  fur- 
nished in  the  construction  of  a  building  took  a  chattel  mort- 
gage security  from  the  debtor  for  a  part  of  his  claim,  does  not 
amount  to  a  waiver  of  his  lien  as  against  one  who  took  a  mort- 
gage upon  the  premises  before  the  chattel  mortgage  was  given.' 
And  where  a  duly  recorded  lien  for  a  building  erected  on  one 
of  two  lots  is  filed  against  both,  a  subsequent  mortgagee  cannot 
object  after  a  sale  under  the  lien,  that  it  was  filed  against  more 
than  was  necessary.* 

When  the  lienor  takes  a  mortgage  to  secure  his  lien  he 
waives  his  right  to  a  mechanic's  lien.^ 

^  Williamson  v.  New  Jersey,  etc.,  Railroad  Co.,  29  N.  J.  Eq.  311. 

2  Hale  r.  Railroad  Co.,  2  McCrary,  C.  C.  55S  ;  Peck  v.  Bridwell,  10  Mo.  App. 
524;  Gilcrest  v.  Gottschalk,  39  Iowa,  311 ;  McCall  v.  Eastwick,  2  Miles  (Pa.), 
45 ;  ParlDerry  v.  Johnson,  51  Miss.  291 ;  Basher  v.  Nordyke,  25  Kan.  222. 

^Howe  V.  kindred,  42  Minn.  433. 

*Harbach  v.  Kurth,  131  Pa.  St.  177. 

»  Trullinger  v.  Kofoed,  7  Oreg.  228. 


THE    LIEN.  729 

If  the  holder  of  a  first  lien  mortgage,  prior  to  a  mechanic's 
lien,  releases  it  on  taking  assignment  of  a  mortgage  subsequent 
to  a  mechanic's  lien,  he  yields  his  priority/ 

§  691.  Commencement  of  the  Lien. — There  are  two  sys- 
tems generally  adopted  in  tlie  United  States : 

The  New  York  system  and  the  Pennsylvania  system. 

The  former  gives  to  the  sub-contractor  a  lien  by  way  of  sub- 
rogation, which  is  accomplished  by  a  notice  given  to  the 
owner  by  the  sub-contractor,  which  notice  specifies  the 
probable  value  of  the  services  to  be  performed,  or  of  the 
materials  to  be  furnished,  and  the  owner  is  thereupon  en- 
titled to  withhold  from  the  contractor  money  due  to  the  latter 
to  such  an  amount  as  will  meet  the  demand. 

The  Pennsylvania  system  gives  a  direct  lien  to  the  laborer 
or  sub-contractor,  either  by  an  agency  created  by  the  statute,  or 
by  an  implied  agency  vested  in  the  original  contractor.  It  is 
well  to  take  into  consideration  these  two  systems  in  construing 
the  mechanic's  lien  laws.^ 

The  commencement  of  work,  within  the  meaning  of  the 
statutes,  is  when  the  first  labor  is  done  on  the  site  of  the  build- 
ing, which  is  necessary,  either  by  the  contractor  or  sub-con- 
tractor.^ But  the  language  of  the  statute  has  great  control  of 
this  question. 

Judge  Bach  says :  "  In  California  and  other  States  the  stat- 
utes on  this  subject  read  thus  :  '  Subsequent  to  the  commence- 
ment of  the  work.'  It  is  apparent  that  in  such  States  the  lien 
is  not  prior  to  those  mortgages  which  are  recorded  prior  to  the 
commencement  of  the  very  work  for  which  the  lien  is  filed. 
But  tliese  authorities  are  not  in  point "  in  IMontana.  The 
Montana  law  reads  that  the  lien  "  shall  be  prior  to  and  have 
precedence  over  any  mortgage  .  .  .  made  subsequent  to  the 

^Phoenix  Mut.  Ins.  Co.  v.  Batchen,  6  III.  App.  621.  See,  also,  Lipman  v. 
Jackson  Architectural  Iron  Works,  128  N.  Y.  58;  Erwin  v.  Acker,  126 
Ind.  133. 

^See  Hunter  v.  luodffe,  14  Nev.  24-33,  for  an  able  opinion  by  the  learned 
Chief  Justice  Beatty  on  this  suVyect. 

^^irooks  v.  Lester,  3G  Md.  65,  70;  Pennock  v.  Hoover,  5  Rawle  (Pa.),  291; 
Com-ad  v.  Starr,  50  Iowa,  470. 


730  REGISTRATION    OF   THE    INSTRUMENT. 

commencement  of  work  on  any  contract  for  the  erection  of 
such  building.  "  ^ 

Thus,  the  work  upon  the  building  was  commenced  by  the 
contractor  May  1,  1869,  and  the  mortgage  of  the  premises  was 
filed  on  June  9,  1869,  and  the  work  of  the  sub-contractor  for 
which  the  lien  was  filed  was  commenced  in  July,  1869.  It 
was  held  that  the  lien  dated  from  May  1,  1869,  the  date  of  the 
commencement  of  the  building,  and  was  prior  to  the  mort- 
gage.^ So  in  Montana,  a  sub-contractor's  work  dates  from  the 
time  the  principal  contractor  began  work  on  the  building, 
though  the  sub-contractor's  work  was  commenced  subsequent 
to  a  duly  recorded  mortgage.  Judge  Bach  says  that  the  mort- 
gagee knew  the  law.  He  knew,  or  could  have  known,  that  the 
work  had  been  commenced  on  a  contract  for  the  erection  of  a 
building.  He  knew  that  persons  other  than  the  original  con- 
tractor would  perform  work  and  labor  which  would  improve 
the  property  upon  which,  as  security,  he  advanced  the  money. 
He  knew  of  the  lien  which  such  sub-contractor  could  acquire. 
To  hold  otherwise  would  be  to  destroy  the  very  purpose  of  the 
law,  which  was  to  give  to  the  sub-contractor  a  direct  lien  for 
the  value  of  liis  labor,  because  it  is  evident,  if  the  contrary  was 
held,  such  liens  would  be  made  worse  than  a  farce  by  a  so- 
called  blanket  mortgage  filed  the  day  after  the  improvement 
was  commenced.^ 

The  law  that  suD-contractors  may  have  a  direct  lien,  either 

^Comp.  Stat.,  gect.  1374. 

'^  Davis  r.  Bilsland,  18  Wall.  (TJ.  S.)  659,  appealed  from  the  Montana  Su- 
preme Court. 

^Merrigan  v.  English,  9  Mont.  113.  See,  also,  Mut.  Benefit  Life  Ins.  Co.  v. 
Rowand,  26  N.  J.  Eq.  389 ;  Jean  v.  AVilson,  38  Md.  288,  296 ;  Norris's  Appeal, 
30  Pa.  St.  122 ;  Parrish's  Appeal,  S3  Pa.  St.  Ill ;  Knox  v.  Starks,  4  Minn,  20 ; 
AVarden  v.  Sabins,  36  Kan.  165 ;  Farmers'  Bank  v.  Winslow,  3  Minn.  8(5 ;  Jes- 
8up  V.  Stone,  13  Wis.  466 ;  Chapman  v.  Wadleigh,  33  Wis.  267  ;  Hall  r.  Hinck- 
ley, 32  Wis.  362;  Monroe  v.  AVest,  12  Iowa,  119;  Conrad  v.  Starr,  50  Iowa, 
470;  Hahn's  Appeal,  39  Pa.  St.  409;  Gault  v.  Deming,  3  Phila.  (Pa.)  337; 
Auptin  V.  Wohler,  5  111.  App.  300 ;  Kelly  v.  Rosenstock,  45  Md.  389. 

A  statute  declaring  that  no  incumbrance  upon  land,  created  before  or  after 
the  making  a  contract,  or  performing  laV)or  or  furnishing  material  shall  oper- 
ate upon  the  building  erected  or  material  furnished  until  the  lien  for  laborer 
material  is  satisfied,  is  unconstitutional  and  void :  Meyer  v.  Berlandi,  39 
Minn.  438.    See,  also,  Stockwell  v.  Carpenter,  27  Iowa,  119. 


Jl 


THE    LIEN.  731 

by  an  agency  created  bj^  the  statute,  or  by  an  implied  agency 
vested  in  the  original  contractor,  is  constitutional.^  But  the 
decisions  under  the  New  York  system  do  not  apply  to  a  law 
where  the  lien  of  the  sub-contractor  is  a  direct  lien,^  and  must 
be  considered  in  the  adjudication  of  the  priority  of  mechanics' 
liens. 

Clearing  away  stumps  is  not  a  commencement  of  the  build- 
ing, and  a  mortgage  given  before  the  commencement  of  the 
building  will  take  precedence.^ 

Many  statutes  provide  in  substance  that  the  mechanic's  lien 
shall  be  preferred  to  all  other  liens  and  incumbrances  made 
subsequent  to  the  commencement  of  said  building,  erection,  or 
other  improvements.* 

In  Massachusetts  the  lien  takes  priority  of  a  mortgage  made 
subsequently  to  the  contract,  though  neither  the  labor  is  per- 
formed nor  the  materials  furnished  until  after  the  making  of 
the  mortgage.^ 

§  692.  Purchase-Money  Mortgage. — A  mortgage  for  the 
purchase-money  executed  at  the  time  the  deed  of  conveyance 
was  made  takes  precedence  to  a  mechanic's  lien.^ 

Thus,  the  holder  of  a  purchase-money  mortgage  procured 
insurance  payable  to  himself,  but  in  the  name  and  upon  the 
interest  of  the  mortgagor.  The  lien  of  the  mortgage  on  the 
insurance-money  after  the  destruction  of  the  building  was 
superior  to  that  of  a  mechanic  for  lumber  and  materials  used 
in  the  rebuilding,  and  the  rights  of  the  mortgagee  was  not 
affected  by  the  fact  that  he  obtained  a  higher  price  for  the 
land.^ 

'  Parker  v.  Bell,  7  Gray  (Masf«.),429 ;  Laird  v.  Moonan,  32  Minn.  358  ;  Spof- 
ford  V.  True,  33  Me.  283  ;  Atwood  v.  Williams,  40  Me.  409 ;  Colter  v.  Frese, 
45  Ind.  9(j-103 ;  White  v.  Miller,  18  Pa.  St.  52. 

^  Merrifran  v.  English,  9  Mont.  113. 

^  Central  Trust  Co.  v.  Cameron  Iron  and  Coal  Co.,  47  Fed.  Rep.  130. 

*See  Neilson  v.  Railroad  Co.,  44  Iowa,  71;  Meyer  v.  Construction  Co., 
100  U.  S.  457 ;  Dubois  v.  Wilson,  21  Mo.  213 ;  Gordon  v.  Torrey,  15  N.  J.  Eq. 
112;  Parrish's  Appeal,  83  Pa.  St.  111. 

*  Carew  v.  Stubbs  (Mass.),  30  N.  E.  Rep.  219. 

« Campbell's  Appeal,  36  Pa.  St.  247 ;  Clark  v.  Butler,  32  N.  J.  Eq.  664. 

'  Elgin  Lumber  Co.  v.  Langman,  23  111.  App.  250. 


732  REGISTRATION    OF    THE    INSTRUMENT. 

When  the  vendor  of  land  has  subjected  his  Hen  for  the  un- 
paid purchase-money  to  the  Hen  of  the  mechanic  and  mate- 
riahncn  engaged  in  erecting  a  building  for  the  vendee,  a  sub- 
sequent mortgagee  of  tlie  premises,  whose  loan  has  been  a})}  lied 
by  thj  vendee  in  paying  otf  the  unpaid  purchase-money,  is  not 
entitL'd  to  priority  over  the  mechanic's  lien  claimants.' 

A  mechanic's  lien  is  postponed  to  a  purchase-money  mort- 
gage,^ except  where  legal  permission  has  been  given  by  the 
mortgagee  to  the  i)arty  endeavoring  to  enforce  the  mechanic's 
lien,  to  do  the  work  creating  the  lien.^ 

§  693.  The  Lienor  Must  Bring  Himself  Clearly  Within 

THE  Statute. — The  statute  relating  to  mechanic's  liens  should 
be  liberally  construed,  so  as  to  afford  the  securit}^  intended,  but 
the  lienors  must  not  only  bring  themselves  clearly  within  the 
statute,  but  they  must  be  prepared,  if  the  priority  of  their  lien 
be  disputed,  to  show  a  compliance  with  the  statute  and  to  fix 
with  certainty  the  commencement  and  completion  of  their 
work.*  Their  liens  are  paramount  to  those  put  upon  the 
property  after  the  commencement  of  the  work.  Plence,  a 
mortgage  recorded  before  the  work  is  done,  but  after  the 
commencement  of  the  building  is  inferior  to  the  vendor's 
lien.^ 

It  is  the  duty  of  the  mechanic  to  see  that  there  is  no  lien 
upon  the  premises  before  he  commences  the  work.  If  he  does 
work  upon  mortgaged  property,  his"  lien  is  subordinate  to  that 
of  the  mortgagee,  although  the  latter  knew  of  such  work  and 
did  not  object.^ 

^Finlaypon  v.  Crooks,  47  Minn.  74. 

''Lamb  r.  Cannon,  38  N  .  J.  L.  362  ;  Wallace  r.  Silsby,  42  N.  J.  L.  1 ;  Virgin 
V.  Brubaker,  4  Nev.  31 ;  Clark  v.  Butler,  32  N.  J.  Eq.  664. 

"Gibbs  V.  Grant,  29  N.  J.  Eq.  419 ;  Paul  ('.  Hoeft,  28  N.  J.  Eq.  11. 

*  Davis  V.  Alvord,  94  U.  S.  545 ;  Grant  v.  Vandercook,  8  Abb.  Pr.  N.  S.  (N. 
Y.)  455. 

5  Dubois  V.  Wilson,  21  Mo.  214;  Meyer  u.  Construction  Co.,  100  U.  S.  457; 
Getchell  r.  Allen,  34  Iowa,  559 ;  Neilson  v.  Railway  Co.,  44  Iowa,  71 ;  Con- 
rad V.  Starr,  50  Iowa,  470. 

8  Card  V.  Bank,  23  Conn.  355  ;  Hoover  v.  Wheeler,  23  Misss.  314 ;  Pride  v. 
Viles,  3  Sneed  (Tenn.),  125  ;  Tritch  v.  Norton,  10  Colo.  337  ;  Bridwell  v.  Clark, 
39  Mo.  170. 


THE    LIEN.  733 

§  694.  Proof  of  Claim. — ^Mechanics  and  laborers  asserting 
a  lien  upon  real  estate  for  their  work,  and  claiming  priority 
over  a  mortgagee  and  others  who  have  acquired  interests  in 
the  property,  must  furnish  strict  proof  of  all  that  is  essential 
to  the  creation  of  the  lien ;  therefore,  they  must  prove  when 
the  work  was  commenced,  and  the  character  of  the  work  when 
it  is  done.^ 

It  must  be  proved  that  the  work  was  done  with  the  intent 
and  purpose  then  formed  to  continue  it  to  the  completion  of  the 
work.  Work  done  on  the  ground  without  any  design  or  pur- 
pose of  constructing  the  building  at  that  time,  and  which  was 
intermitted,  is  not  sufficient.^ 

The  mortgage  must  be  recorded  before  the  work  is  com- 
menced in  order  to  have  priority.^  And  under  the  Pennsylva- 
nia act,*  which  provides  that  the  mechanic's  lien  shall  be 
preferred  to  every  other  lien  or  incumbrance  attaching  to  a 
building  or  ground-rent  after  commencement  of  such  pre- 
paratory work,  the  work  of  clearing  a  place  by  cutting  out 
stumps  and  the  like  is  not  a  commencement  of  the  build- 
ing.^ 

§  695.  Extent  of  Mechanic's  Lien. — The  extent  of  the 
mechanic's  lien  cannot  be  greater  than  the  title  of  the  owner 
who  contracted  for  the  work.  Thus,  if  owner  of  the  building  is  a 
mere  occupant  with  the  right  of  removal  of  the  building,  the 
right  of  occupancy  and  removal  would  pass  by  a  sale  under 
the  mechanic's  lien.  But  if  the  owner  of  the  building  as  be- 
tween himself  and  others  having  rights  in  the  land,  would  not 
have  the  power  to  remove  it,  a  purchaser  under  the  mechanic's 
lien  would  acquire  no  right  to  remove  it.^ 

The  right  to  remove  a  building  to  enforce  a  mechanic's  lien 
depends  upon  the  fact  as  to  whether  it  is  so  far  an  independent 

*  Davis  V.  Alvord,  94  U.  S.  545. 

Mean  v.  Wilson,  38  Md.  296 ;  Kelly  v.  Rosenstock,  45  Md.  389. 
•^  Brooks  V.  Lester,  36  Md.  65  ;  Thielman  v.  Carr,  75  111.  385. 

*  Act  of  June  16,  1836,  sect.  10. 

*  Central  Trust  Co.  v.  Cameron  Iron  and  Coal  Co.  (Pa.),  47  Fed.  Rep.  136, 
«  Jessup  V.  Stone,  13  Wis.  466. 


734  REGISTRATION    OF    THE    INSTRUMENT. 

structure  as  to  be  capable  of  being  removed  without  materially 
injuring  and  destroying  that  which  was  removed.* 

Decree  enforcing  mechanic's  lien  and  ordering  sale  where 
mortgagee  is  made  defendant,  bars  him  of  such  mortgage 
on  premises,  though  not  referring  thereto.  Mortgagee's 
remedy  in  Illinois  for  failure  of  decree  to  protect  his  rights  is 
by  appeal  and  enforcement  of  lien  on  the  funds  of  sale.^  These 
conflicting  liens  can  only  be  adjusted  in  equity.^ 


Article  4. 
After-Acquired  Title. 

I  696.  Prevailing  Doctrine.  §  702.  The  Doctrine  of  Equitable  Es- 
§  697.  Under  Government  Grants  and  toppel  is  also  Applied. 

Pre-emption — In  General.  §  703.  Who  Are  Bound. 

§  698.  The  Title  Must  Pertain  Only  to  §  704.  Tax  Title. 

the  Subject-Matter.  §  705.  The  IVIortgagor   is  Obligated 
\  699.  One  in  Possession  of  Land.  to  Pay  the  Taxes, 

i  700.  Mortgaging  Lands  Without  Ti-  |  706.  The    Rights  of  One  Among 

tie  to  Them.  Several  Owners. 

§  701.  Estoppel  of  Mortgagor. 

§  696.  Prevailing  Doctrine. — The  prevailing  doctrine  is 
that  the  after-acquired  title  inures  to  strengthen  the  mortgage 
lien,  but,  in  the  absence  of  statutory  provisions,  to  have  that 
effect  the  conveyance  must  contain  covenants  of  warranty,  or 
something  nearly  akin  to  it ;  *  and  a  subsequent  purchaser  from 
the  mortgagor  stands  in  the  same  position  as  his  vendor  of  the 
after-acquired  title,*  and  the  mortgagor's  heirs  take  only  his 
rights.^ 

Some  of  the  States  have  passed  laws  concerning  the  vesting 

1  Conrad  v.  Starr,  50  Iowa,  470 ;  O'Brien  v.  Pettis,  42  Iowa,  293. 
''Topping  V.  Brown,  63  111.  S48. 
'  Wimberly  v.  Mayberry  (AUi),  10  South.  Rep.  157. 

*Gray  v.  Franks,  86  Mich.  382 ;  Howze  v.  Dew,  90  Ala.  178  ;  Kline  v.  Rag- 
land,  47  Ark.  Ill,  opinion  by  Chief  Justice  Cockrill. 

5  King  V.  Gilson,  32  111.  348 ;  Gochenour  v.  Mowry,  33  111.  331 ;  Jones  r.  King, 
25  111.  383,  388  ;  Cockrill  r.  Bane,  94  Mo.  444 ;  Tefft  v.  Munson,  63  Barb.  (N.Y.) 
31 ;  57  N.  Y.  97 ;  M'Crackin  v.  Wright,  14  Johns.  (N.  Y.)  193, 194 ;  Hitchcock 
V.  Fortier,  65  111.  239. 

6  Somes  V.  Skinner,  3  Pick.  (Mass.)  52 ;  Wark  v.  Williard,  13  N.  H.  389. 


THE    LIEN.  735 

of  after-acquired  title.  Thus,  Arkansas  has  an  enactment 
which  declares  that  an  after-acquired  title  of  the  grantor  of  a 
fee  simple,  or  any  estate,  shall  inure  to  the  grantee.'  And  in 
California  it  is  declared  that  a  title  subsequently  acquired  by 
the  mortgagor  inures  to  the  mortgagee  as  security,  in  like  man- 
ner as  if  acquired  before  the  execution.^ 

§  697.  Under  Government  Grants  and  Pre-emption — In 
General. — Where  a  mortgagor  has  the  right  to  pre-emption  to 
certain  lands  and  mortgages  his  interest  for  a  valuable  considera- 
tion and  then  acquires  the  patent  from  the  government,  the  full 
title  in  fee  simple  thus  acquired  inures  to  the  mortgagee's 
benefit,  and  the  mortgage  is  a  valid  lien  upon  the  property.^ 

So  when  one  having  a  claim  to  land  in  Missouri,  under  a 
Spanish  grant,  before  confirmation  by  Congress,  gave  a  mort- 
gage upon  the  land,  after  which  the  grant  was  confirmed,  the 
fee  simple  thus  acquired  inures  to  the  benefit  of  the  mortgagee, 
even  over  the  claim  of  the  mortgagor's  heirs.*  And  this  rule 
is  general,  whether  the  title  comes  from  the  government  or 
other  parties.  The  after-acquired  title  inures  to  the  benefit  of 
the  mortgagor  and  his  heirs  and  assigns,  by  virtue  of  the  cove- 
nants in  the  mortgage  ^  in  tlie  absence  of  statutory  provisions.** 
But  when  the  lien  of  the  mortgage  has  been  discharged,  by  a 
judicial  sale,  it  is  not  revived  when  the  mortgagor  acquires 
subsequently  a  title  to  the  premises  through  another  as  pur- 
chaser at  such  sale.^ 

*Mansf.  Dig.,  sect.  642  ;  Kline  v.  Ragland,  47  Ark.  111. 

^  Civil  Code,  sect.  2930. 

'  Spiess  V.  Neuberg,  71  Wis.  279,  and  cases  cited. 

*Ma?sey  v.  Papin,  24  How.  (U.  S.)  362. 

"Pratt  V.  Pratt,  96  111.  184 ;  Gibbons  v.  Hoag,  95  111.  45  ;  Wells  v.  Somers,  4 
111.  A  pp.  297;  Rice  r.  Kelso,  57  Iowa,  115^  Toms  r.  Boyes,  50  Mich.  352; 
Bush  V.  Marshall,  6  How.  (U.  S.)  284  ;  Levy  v.  Lane,  38  La.  Ann.  252 ;  Flynt 
V.  Hubbard,  57  Miss.  471 ;  Parker  v.  Jones,  57  Ga.  204 ;  Brayton  v.  Merithew, 
56  Mich.  166;  Wright  v.  Shumway,  1  Biss.  C.  C.  23;  Huzzey  f.  Heffeman, 
143  Mass.  232;  Trope  v.  Kerns,  83  Cal.  553;  Vallejo  Land  Asso.  v.  Viera,  48 
Cal.  572. 

*La.  Civil  Code,  art.  3308;  Cal.  Civil  Code,  sect.  2930;    Ark.  Mansf.  Dig., 
sect.  642. 
'Ranch  v.  Dech,  116  Pa.  St.  157. 


736  registration  of  the  instrument. 

§  698.  The  Title  Must  Pertain  Only  to  the  Subject- 
Matter. — The  after-acquired  title  must  pertain  to  the  land 
which  is  the  subject-matter  of  the  mortgage.  Thus,  where  a 
co-tenant  conveys  by  mortgage  by  general  warranty  an  undi- 
vided one-seventh  interest  in  a  tract  of  land,  which  is  after- 
ward allotted  to  him  by  partition  of  an  estate,  such  mortgage 
conveys  to  the  mortgagee  title  to  a  one-seventh  interest ;  the 
title  cannot  be  extended  to  the  whole  allotment.^  And  a  hus- 
band of  an  heir  of  the  mortgagor  can  claim  and  hold  a  title 
acquired  by  himself.^ 

So  when  a  husband  and  wife  own  an  undivided  one-half  in- 
terest in  a  parcel  of  land  under  a  common  deed,  and  they  mort- 
gage the  entire  lot,  but  without  covenants  of  warranty  of  title, 
and  the  wife,  pending  foreclosure  proceedings  in  chancery  which 
culminate  in  the  sale  of  the  entire  tract,  acquires  the  remaining 
one-half  interest  to  such  land,  this  acquired  title  cannot  be  made 
to  inure  to  the  benefit  of  the  purchaser  under  the  mortgage.^ 

So,  also,  the  record  of  the  mortgage  is  notice  of  the  amount 
specified  therein.* 

§  699.  One  In  Possession  op  Land. — One  in  possession  of 
land  under  a  contract  to  purchase  may  mortgage  his  interest. 
So  a  mortgage  given  on  real  estate  in  which  the  only  interest 
of  the  mortgagor  is  a  contract  to  purchase,  attaches  to  the  free- 
hold, and  is  prior  to  a  mortgage  given  after  the  mortgagor  ob- 
tains a  fee  simple  title.''  So  when  he  mortgages  a  lot  to  which 
he  has  no  title  except  an  option  to  purchase,  and  with  the  pro- 
ceeds thereof  erects  a  warehouse  thereon,  and  afterward  ob- 
tains title,  and  gives  a  second  mortgage,  the  warehouse  is 
subject  to  the  lien  of  the  first  mortgage,  and  the  second  mort- 
gage does  not  attach  to  it  first.® 

1  Howze  V.  Dew,  90  Ala.  178.  See,  also,  Butler  v.  Roys,  25  Mich.  53 ;  Priinm 
V.  Walker,  38  Mo.  98  ;  Markoe  v.  AVakeman,  107  111.  262. 

''Rushton  r.  Lippincott,  119  Pa.  St.  12. 

SMcOlure  r.  Holbrook,  39  Mich.  42;  Brennan  v.  Eggeman,  73  Mich.  658. 

♦Youngs  V.  Wilson,  27  N.  Y.  351 ;  Bean  v.  De  Lezardi,  24  Miss.  424  ;  Hinch- 
man  v.  Town,  10  Mich.  508  ;  Lash  v.  Edgerton,  13  Minn.  210. 

"Crane  v.  Turner,  7  Hun  (N.  Y.),  357  ;  Bank  v.  Baumeister,  87  Ky.  6. 

*  Bank  ?'.  Baumeister,  87  Ky.  6. 


THE   LIEN.  737 

If  a  mortgagor  makes  a  mortgage  with  covenants  of  war- 
ranty and  then  acquires  the  legal  title  to  the  land,  such 
acquired  title  will  inure  to  the  benefit  of  the  mortgagee.^ 

A  mortgage  of  land  executed  by  the  vendor  while  his  vendee 
is  in  possession  under  a  contract  of  purchase  the  same  is  sub- 
ordinate to  the  vendee's  right  under  a  contract,  and,  unless 
actual  notice  of  the  mortgage,  the  vendee  may  safely  continue 
to  make  payments  of  the  purchase-money  to  his  vendor.^ 

§  700.  Mortgaging  Lands  Without  Title  to  Them. — 
When  a  mortgagor  gives  a  mortgage  on  land  to  which  he  has  no 
title,  the  mortgage  will  cover  the  title  afterward  acquired  by  him 
as  against  one  purchasing  from  the  mortgagor  after  his  acquisi- 
tion of  the  title,  and  before  foreclosure,  with  notice  of  the 
mortgage.^  And  when  one  in  possession  under  a  parol  agree- 
ment to  purchase,  mortgages  the  land  in  pursuance  of  an 
agreement,  whereby  a  mortgage  from  the  vendor  to  the  mort- 
gagee is  cancelled  as  part  of  the  consideration  of  purchase,  a 
subsequent  quit-claim  deed  to  the  vendee  inures  to  the  benefit 
of  his  mortgagee  as  against  his  creditors  whose  rights  accrued 
subsequently  to  the  deed,  though  the  mortgage  contained  no 
covenants  of  warranty,  because  the  title  inures  to  the  benefit  of 
the  mortgagee  as  fully  as  if  the  mortgage  had  contained  cove- 
nants of  warranty.* 

And  so  where  the  mortgagor  has  no  title  and  it  is  agreed 
that  the  mortgage  shall  not  take  effect  until  the  mortgagee  has 
procured  for  the  mortgagor  a  good  title  to  the  land,  such  title 
when  acquired  passes  under  the  mortgage,  though  containing 
no  covenants  of  warranty,  and  is,  in  effect,  a  purchase-money 
mortgage.^  And  if  one  sells  a  parcel  of  land  by  warranty  deed, 
a  part  of  which  is  covered  by  a  mortgage  and  then  becomes  a 
purchaser  at  a  foreclosure  sale  under  the  mortgage,  the  title 

^  Judd  V.  Seeking,  62  N.  Y.  266. 

*  Jseger  v.  Hardy  (Ohio),  27  N.  E.  Rep.  863. 
'Cockrill  v.  Bane,  94  Mo.  444. 

*  Clark  V.  Daniels,  77  Mich.  26. 

*  Cornish  v.  Frees,  74  Wis.  490.  See,  also,  Heffron  r.  Flanigan,  37  Mich. 
274 ;  Elder  v.  Derby,  98  lU.  228. 

47 


738  REGISTRATION    OF    THE    INSTRUMENT. 

SO  acquired  to  this  portion  will  inure  to  the  benefit  of  his 
grantee.^ 

§  701.  Estoppel  of  Mortgagor. — A  mortgagor  may  be 
estopped  from  setting  up  an  after-acquired  title  against  the 
mortgagee  because  the  mortgage  with  warranty  of  title  covers 
that  title.  So  when  he  mortgages  the  whole  land  in  fee,  he  is 
estopped  from  denying  that  the  estate  mortgaged  is  less  than 
the  estate  in  fee  simple,  and  the  sale  under  the  decree  carries 
any  subsequent  acquired  title ;  ^  such  mortgage  will  bind  a 
portion  of  any  lot  conveyed  to  a  third  person  by  a  conditional 
grant,  made  prior  to  the  mortgage,  if  the  title  reverts  to  the 
mortgagor  upon  breach  of  the  condition  at  any  time  subsequent 
to  the  date  of  the  mortgage.^ 

The  estoppel  is  limited  to  the  effect  of  the  covenant  which 
creates  it.  So  if  a  mortgagor  covenants  against  all  claims  ex- 
cept a  prior  mortgage,  and  the  lands  are  sold  under  this  prior 
mortgage,  and  he  becomes  owner  of  them  thereafter,  the  second 
mortgagee  cannot  claim  the  property,  because  the  mortgagor's 
title  comes  from  the  first  mortgage, which  was  expressly  exempted 
in  the  second  mortgage.*  When  the  covenant  of  warranty  is 
not  placed  in  the  mortgage,  but  in  the  habendum  clause,  its 
recital  that  the  land  shall  be  held  by  the  mortgagees,  their 
heirs  and  assigns,  "  against  the  lawful  claims  and  demands  of 
all  persons  whomsoever,"  is  a  sufiicient  warranty. 

Chief  Justice  Cockrill  says :  "  If  this  is  not  a  specific  war- 
ranty, it  is  at  least  a  declaration  that  the  mortgagor  purports 
to  convey  an  estate  in  fee  simple,  of  which  he  is  seized,  subject 
only  to  be  defeated  by  payment  of  the  amount  to  him,"  and  the 
after-acquired  title  inures  to  the  benefit  of  the  mortgagee  with- 
out any  further  warranty  of  title  expressed  in  the  mortgage.* 

'  Huxley  v.  Rice,  40  Mich.  73. 

*  Vallejo  Land  Asso.  v.  Viera,  48  Cal.  572 ;  Orr  v.  Stewart,  67  Cal.  275. 
3  Trope  V.  Kerns,  83  Cal.  553. 

*  Huzzey  v.  Heffernan,  143  INIass.  232. 

5  Kline  v.  Ragland,  47  Ark.  Ill ;  Crittenden  v.  Johnson,  14  Ark.  463.  The 
Arkansas  statute  must  be  considered  in  this  decision  of  Kline  v.  Ragland,  47 
Ark.  Ill,  which  declares  that  an  after-acquired  title  to  the  grantor  of  a  fee 
simple  or  any  estate  shall  inure  to  the  mortgagee :  Mansf.  Dig.,  sect.  642. 


THE    LIEN.  739 

Some  statutes  provide  that  the  after-acquired  title  shall  not 
inure  to  the  mortgagee.  Thus,  in  Louisiana/  the  statute  pro- 
vides that  future  property  can  never  be  the  subject  of  a  conven- 
tional mortgage.  Under  this  provision,  a  conventional  mortgage 
cannot  affect  land  therefore  granted  to  a  company  to  aid  in  the 
construction  of  a  railroad.^ 

Generally  when  a  party  mortgages  land  not  his,  with  cove- 
nants of  warranty,  and  afterward  acquires  a  good  title,  this 
title  comes  under  the  mortgage  by  operation  of  law.^ 

§  702.  The  Doctrine  of  Equitable  Estoppel  is  also 
Applied. — So  when  a  mortgagor  has  induced  another  to  part 
with  his  money  for  the  security,  he  cannot  then  repudiate  his 
representations  and  declare  the  mortgage  void  as  between  him 
and  the  prior  holder ;  *  but  the  representations  of  one  of  sev- 
eral mortgagors  will  not  bind  the  others.^ 

If  the  owner  of  land  represents  that  the  land  belongs  to 
another  who  gives  a  mortgage  on  it,  he  cannot  then  deny  the 
validity  of  the  lien  on  the  property.® 

§  703.  Who  Are  Bound. — Only  parties  to  the  mortgage 
and  their  privies  are  bound  by  or  can  take  advantage  of  an 
estoppel  created  by  it.  The  mortgagor  is  not  bound  to  all  the 
world  for  his  representations,  even  if  others,  not  parties  to  the 
deed,  have  relied  upon  the  recitals,  he  made  to  the  mortgagee.'^ 

^  Civil  Code,  art.  3308. 

"^  New  Orleans,  etc.,  Railroad  Co.  v.  Union  Trust  Co.,  41  Fed.  Rep.  717, 
opinion  by  Pardee,  J. 

^Jarvis  r.  Aikens,  25  Vt.  6.35;  Philly  r.  Sanders,  11  Ohio  St.  490;  AVhite  v. 
Patten,  24  Pick.  (Mass.)  324 ;  Tefft  v.  Munson,  57  N.  Y.  97 ;  Pike  v.  Galvin,  29 
Me.  183 :  Wark  v.  Willard,  13  N.  H.  389.  Compare  2  White  &  Tudor's  Lead. 
Cas.  in  Eq.  (4th  Am.  ed.),  p.  212,  pt.  1 ;  Cross  r.  Robinson,  21  Conn.  379 ; 
Kerngood  v.  Davis,  21  S.  Car.  183 ;  Fisher  v.  Milmine,  94  111.  328 ;  Lincoln  v. 
Emerson,  108  Mass.  87 ;  Usina  v.  Wilder,  58  Ga.  178 ;  Tefil  v.  Munson,  57 
N.  Y.  97  ;  Bush  v.  Person,  18  How.  (U.  S.)  82 ;  Floyd  County  v.  Morrison,  40 
Iowa,  188;  Bailey  v.  Academy,  12  Mo.  174. 

*Bush  V.  Cushman,  27  N.  J.  Eq.  131;  Cabel  v.  EUis,  86  111.  525;  Den  v. 
Baldwin,  21  N.  J.  L.  395,  403. 

*  Cabel  V.  Ellis,  86  111.  525 ;  Smyth  v.  Munroe,  84  N.  Y.  354. 

*Parlin  v.  Stone,  1  McCrary,  C.  C.  443.  See,  also,  Hartwell  v.  Blocker,  6 
Ala.  581. 

^Mershon  v.  Mershon,  9  Bush  (Ky.),  633. 


740  REGISTRATION    OF    THE    INSTRUMENT. 

A  stranger  shall  not  be  bound  or  take  advantage  of  estoppel.' 

§  704.  Tax  Title. — The  mortgagor  cannot,  as  against  the 
mortgagee,  set  up  a  tax  title  upon  a  default  in  the  condition  of 
the  mortgage.  So  long  as  the  mortgage  debt  is  unpaid,  the 
mortgagor  can  no  more  acquire  title  so  as  to  defeat  the  mort- 
gage lien  founded  upon  his  default  in  that  part  of  the  condi- 
tion, than  upon  a  default  in  any  other  part  of  it.  So  a  purchase 
of  the  premises  by  the  mortgagor  at  a  tax  sale,  would  under 
such  circumstances  as  against  the  holder  of  the  mortgage, 
operate  merely  as  a  payment  of  the  taxes.^ 

Under  a  mortgage  containing  the  usual  covenants  of  war- 
ranty, the  mortgagor  cannot  purchase  at  a  tax  sale,  the  prop- 
erty and  take  a  good  title  as  against  the  mortgagee  ;  such  title 
will  inure  to  the  mortgagee.^ 

Neither  can  a  junior  mortgagee,  by  buying  the  interest  6f  the 
mortgagor,  and  redeeming  the  same  at  a  tax  sale,  take  a  title 
superior  to  the  prior  mortgagee,  but  subordinate.^ 

Neither  can  the  mortgagor  by  collusion  with  other  jJ^rties, 
acquire  a  title  from  a  tax  sale  superior  to  that  of  the  mort- 
gagee.^ 

§  705.  The  Mortgagor  is  Obligated  to  Pay  the  Taxes. — 
The  mortgagor  cannot  claim  credit  for  paying  the  taxes.  Thus, 
where  a  mortgage  provides  that  the  taxes  shall  be  deducted 
from  the  rents,  the  taxes  constitute  a  charge  on  the  land,  and 
if  paid  by  the  mortgagor  he  cannot  claim  credit  for  such  pay- 
ment.*^    Had  the  taxes  been  paid  by  the  mortgagee,  they  would 

^Massure  v.  Noble,  11  111.  531 ;  Bigelow  on  Estop.  269  ;  7  Bac.  Abr.  620. 

As  to  mortgagee's  estoppel  see  Preble  v.  Conger,  66  III.  370. 

^  Allison  ('.  Armstrong,  28  Minn.  276 ;  McAlpine  v.  Zitzer,  119  111.  273 ;  Fair 
V.  Brown,  40  Iowa,  209 ;  McLaughlin  v.  Green,  48  Miss.  175  ;  Cooper  v.  Jack- 
son, 99  Ind.  566. 

'  Gardiner  v.  Gerrish,  23  Me.  46;  Fuller  v.  Hodgdon,  25  Me.  243  ;  Kezer^). 
Clifford,  59  N.  H.  208  ;  Stears  v.  Hollenbeck,  38  Iowa,  550 ;  Porter  v.  Lafferty, 
33  Iowa,  254. 

*  Boyd  V.  Allen,  15  Lea  (Tenn.),  81. 

5  McAlpine  v.  Zitzer,  119  111.  233.  See,  also,  Renshaw  v.  Stafford,  30  La. 
Ann.  853  ;  Conn.  Mut.  Life  Ins.  Co.  v.  Bulte,  45  Mich.  113. 

^  Kilpatrick  y.  Henson,  81  Ala.  464. 


THE    LIEN.  741 

have  become  an  additional  lien  under  the  mortgage,  and  the 
mortgagor  would  have  been  compelled  to  pay  theju  on  re- 
demption.^ 

It  must  be  presumed  that  when  the  mortgagor  purchases 
tax  titles,  they  were  so  purchased  for  the  benefit  of  the  mort- 
gagee, so  far  at  least  as  was  his  interest  in  the  mortgage 
security.^ 

A  mortgagor  holding  the  property  as  a  tenant  at  will  of 
another  who  has  acquired  a  tax  title  to  the  mortgaged  property, 
is  not  affected ;  for  the  tenant  at  will  has  no  estate  which  is 
assignable,  and  the  mortgagee  cannot  gain  by  estoppel  any 
greater  right  than  the  tenant  could  assign,  and  the  mortgagee 
would  acquire  no  right  as  against  the  holder  of  the  tax  title.^ 

In  ]\Iinnesota  a  mortgagee  may  acquire  a  tax  title  to  the 
mortgaged  premises  as  against  the  mortgagor,  where  he  is  neither 
legally  nor  equitably  bound  to  protect  the  property  against  a 
tax  for  wdiich  the  sale  is  made,  since  such  mortgagee  is  not 
among  the  persons  forbidden  by  the  statute  to  acquire  a  tax 
title.* 

§  706.  The  Rights  of  One  Among  Several  Owners. — 
As  a  general  rule,  the  law  does  not  permit  one  interested  in 
land  with  others  deriving  their  title  from  a  general  source,  to 
acquire  an  absolute  title  to  the  land  by  a  tax  deed  and  thus 
cut  off  those  in  interest  with  him.  This  rule  is  applied  to  tenants 
in  common,  mortgagor  and  mortgagee,  so  as  to  prevent  the 
mortgagor  acquiring  a  tax  title  to  the  injury  of  the  mort- 
gagee.'* 

The  payment  of  taxes  by  the  mortgagee  protects  his  inter- 
est, and  for  the  protection  of  his  interest  he  may  acquire  a  tax 
title,  but  he  cannot  set  up  that  title  to  defeat  a  prior  mortgage 
lien.^ 

^  Morrow  v.  Turney,  35  Ala.  131. 

"  Fisk  V.  Brunette,  30  Wis.  102 ;  Smith  v.  Lewis,  20  Wis.  350  ;  Sturdevant  v. 
Mather,  20  Wis.  576 ;  Avery  v.  Judd,  21  Wis.  262. 
^Coughlin  V.  Gray,  131  Mass.  56. 
*Reimer  v.  Newel,  47  Minn.  237. 

*  Fuller  V.  Hodgdon,  25  Me.  243 ;  Smith  v.  Lewis,  20  Wis.  350. 
•Bank  v.  Bachrach,  46  Conn.  513;  Woodbury  v.  Swan,  59  N.  H.  22. 


742  REGISTRATION    OF    THE    INSTRUMENT. 

A  mortgagor  who  has  given  a  mortgage  for  the  purchase- 
money,  with  covenants  of  warranty,  cannot  set  up  a  title  ad- 
versely to  an  assignee  of  this  mortgage,  although  he  acquires 
a  title  under  a  sale  for  taxes  assessed  upon  the  land  before  he 
purchased  it.^ 

Article  5, 

Covenants  of  Mortgagor. 

1 707.  Assumption  of  Incumbrances    I  708.  Construction  of  Warranty, 
by  Mortgagee. 

§  707.  Assumption  of  Incumbrances  by  Mortgagee. — 
When  the  grantee  assumes  and  agrees  to  pay  the  incumbrances 
on  the  property,  the  grantor  is  not  liable  if  such  incumbrances 
are  not  paid.  Thus,  a  grantor  conveyed  lands  covenanting 
that  the  premises  were  free  from  incumbrances,  except  two 
mortgages,  which  the  grantee  assumed  and  agreed  to  pay,  and 
that  he  would  warrant  the  same  to  the  grantee,  his  heirs  and 
assigns  forever,  against  the  lawful  claims  and  demands  of  all 
persons. 

This  warranty  did  not  include  the  claims  under  the  mort- 
gages described  therein,  it  being  the  evident  intention  of  the 
parties  to  except  them  from  the  warranty,  as  the  warranty  ap- 
plied to  the  grantor's  equity  of  redemption  only.^  But  if  the 
grantee  had  not  assumed  the  payment  of  the  mortgages,  then 
the  warranty  would  have  included  the  mortgages.^ 

Upon  the  assumption  of  the  mortgages,  the  covenants  of 
warranty  must  be  taken  in  a  limited  sense,  and  such  a  con- 
tract applied  on  to  the  equity  of  redemption.* 

§  708.  Construction  of  Warranty. — Chief  Justice  Morton 
says  that  in  construing  a  deed,  as  in  construing  other  contracts, 
the  priniary  object  and  duty  of  the  court  are  to  ascertain  what 
is  the  intention  of  the  parties,  and  to  carry  it  into  effect  unless 

1  Gardiner  v.  Gerrish,  23  Me.  46. 
=*  Lively  w.  Rice,  150  Mass.  171. 
^Estabrook  v.  Smith,  6  Gray  (Mass.),  572. 

*  Allen  V.  Holton,  20  Pick.  (Mass.)  458 ;  Sweet  v.  Brown,  12  Met.  (Mass.) 
175 ;  Howard  v.  Chase,  104  Mass.  249. 


THE    LIEN.  743 

there  are  fixed  rules  of  law  which  make  it  impossible.  If  the 
intention  can  be  clearly  discerned  and  it  is  lawful,  the  court 
will  carry  it  into  effect.  It  is  too  clear  to  admit  of  any  doubt 
that  it  is  the  intention  of  the  parties,  when  the  grantee  as- 
sumes the  payment  of  mortgages  on  the  property  purchased, 
that  the  covenant  of  warranty  in  the  deed  to  the  grantee  should 
not  apply  to  the  mortgages  sj^ecifically  excepted.  The  j)ro- 
vision  that  the  grantee  is  to  assume  and  pay  the  mortgages  is 
consistent  only  with  this  intention,  and  shows  clearly  that  the 
parties  understand  that  the  grantee  is  buying  the  equity  of  re- 
demption only,  and  not  the  land  free  from  the  mortgages.^ 

In  a  deed  where  laud  is  conveyed,  subject,  however,  to  cer- 
tain incumbrances  now  resting  thereon,  payment  of  which  is 
assumed  by  the  grantee,  mortgages  thereon,  as  well  as  unpaid 
taxes,  are  excluded  from  the  covenants  of  special  warranty 
against  all  persons  claiming  under  the  grantor.^ 

However,  when  a  deed  contains  a  covenant  against  all  in- 
cumbrances except  a  certain  mortgage  to  a  third  person,  fol- 
lowed by  a  general  covenant  to  warrant  and  defend,  the 
mortgage  is  not  excepted  from  the  latter  covenant,  and  the 
grantor  is  liable  for  an  eviction  by  the  mortgagee.^ 

The  fact  that  the  grantee  gave  back  a  mortgage  to  the 
grantor  containing  the  same  covenants  as  the  deed,  cannot 
affect  the  grantor's  liability  to  the  grantee  on  his  covenants  of 
warranty.* 

Where  a  mortgagor  gives  a  second  mortgage  with  covenants 
of  warranty  against  the  first  mortgage,  and  the  first  mortgage 
is  foreclosed,  and  the  title  obtained  by  the  forclosure  is  after- 
ward conveyed  to  the  mortgagor,  his  title  thereby  acquired 
inures  to  the  benefit  of  the  second  mortgagee.* 

'  Lively  v.  Rice,  150  Mass.  171. 

*  Keller  v.  Ashford,  1.33  U.  S.  610. 

'Estabrook  v.  Smith,  6  Gray  (Mass.),  572;  Hubbard  v.  Norton,  10  Conn. 
422  ;  Sumner  v.  Williams,  8  Mass.  162  ;  Rowe  v.  Heath,  23  Tex.  614 ;  Howell 
V.  Richards,  11  East,  633 ;  Smith  v.  Compton,  3  Barn.  &  Adol.  189  ;  Kean  v. 
Strong,  9  Irish  L.  74. 

*  King  V.  Kilbride,  58  Conn.  109. 

*  Ayer  v.  Philadelphia,  etc..  Brick  Co.  (Mass.),  31  N.  E.  Rep.  717. 


744  REGISTKATION    OF    THE    INSTRUMENT. 

/ 

Article  6. 
Extinguishment  of  the  Lien. 

I  709.  Presumption    of    Extinguish-  I  713.  Payment  by  Sureties. 

ment.  ^  714.  Waiving  of  Lien. 

§  710.  Statutory  Provisions.  §  715.  Waiving  Rights. 

?  711.  Extinguishment.  I  716.  Pleadings. 
\  712.  Efiects    of     the     Mortgagee's 

Buying  the  Property. 

§  709.  Presumption  of  Extinguishment. — The  law  will 
presume  that  the  lien  is  extinguished  when  barred  by  the  stat- 
ute of  limitations.  Thus,  in  South  Carolina,  where  more  than 
twenty  years  have  elapsed  since  the  maturity  of  the  debt,  the 
law  will  presume  that  the  mortgage  has  been  satisfied.^  And 
so  whenever  the  mortgagor  has  remained  in  possession,  with- 
out making  any  payment  whatever,  or  by  any  act  recognizing 
the  mortgage  debt,  for  the  time  required  to  bar  the  debt  under 
the  statute  of  limitations  whatever  period  that  may  be." 

Whether  or  not  a  particular  transaction  amounts  to  a  release 
of  a  lien  on  real  estate  is  a  question  of  intention  on  the  part 
of  the  releaser.  In  a  doubtful  case  such  intention  will  not  be 
implied ;  but  when  it  is  clear  that  such  was  the  intention,  a 
court  of  equity  will  enforce  the  release,  although  no  formal  re- 
lease has  been  executed.^ 

When  the  evidence  is  conflicting,  it  should  be  left  to  the 
jury  to  determine  whether  the  mortgagee  has  waived  his  lien.* 

§  710.  Statutory  Provisions. — In  South  Carolina  it  is  pro- 
vided by  statute  ^  that  no  mortgage,  judgment,  decree,  or  other 

1  Agnew  V.  Renwick,  27  S.  Car.  562 ;  Wilson  v.  Albert,  89  Mo.  537. 

2  Owings  V.  Norwood,  2  H.  &  J.  (Md.)  96  ;  Murray  v.  Fishback,  5  B.  Mon. 
(Ky.)  403;  Pattie  v.  Wilson,  25  Kan.  326;  Roberts  r.  Welch,  8  Ired.  Eq. 
(N.  Car.)  287 ;  Evans  v.  Huffman,  1  Halst.  (N.  J.)  Ch.  354 ;  Kellogg  v.  Wood, 
4  Paige  (N.  Y.),  578  ;  Lammer  r.  Stoddard,  103  N.  Y.  672;  Lynch  v.  Pfeiffer, 
110  N.  Y.  33;  Cbeever  v.  Perley,  11  Allen  (MaF?.),  584;  Inches  n  Leonard, 
12  Mass.  379 ;  Chick  v.  Rollins,  44  Me.  104 ;  Blethen  v.  Dwinal,  35  Me.  556. 

^Stribling  v.  Coal  Co.,  31  W.  Va.  82. 

*  Sibley  v.  Ross,  88  Mich.  315;  Gamble  v.  Ross,  88  Mich.  315. 

5  Gen.  Stat.  1882,  sect.  183. 


THE   LIEN.  745 

lien  on  real  estate  shall  constitute  a  lien  on  real  estate  after  the 
lapse  of  twenty  years  from  the  date  of  the  creation  of  the  same  ; 
provided  that  if  the  holder  thereof  shall,  at  any  time  during 
the  continuance  of  such  lien,  cause  to  be  recorded  upon  the 
record  of  such  mortgage,  or  filed  with  the  record  thereof,  a 
"note  of  some  payment  on  account,"  or  some  written  "ac- 
knowledgment of  the  debt,"  such  mortgage  shall  continue  to 
be  a  lien  for  twenty  years  from  the  date  of  the  record  of  such 
payment  or  acknowledgment. 

Under  this  statute,  the  recording  of  an  assignment  of  a 
mortgage  before  the  expiration  of  twenty  years,  is  not  a  "  note 
of  some  payment  on  account,"  or  an  "acknowledgment  of  the 
debt."  ' 

§  711.  Extinguishment. — The  lien  may  be  extinguished  or 
renewed.  Where  a  claim  against  an  estate  is  presented,  con- 
tested, and  disallowed,  the  mortgage  given  to  secure  it  falls 
with  it  and  cannot  afterward  be  enforced.^ 

But  the  cancellation  and  surrender  of  a  bond  secured  by  a 
mortgage,  and  the  execution  of  a  new  bond  in  extension  of  the 
loan  does  not,  in  the  absence  of  an  agreement  to  that  effect,  re- 
lease the  mortgage  lien,  but  it  will  continue  as  security  for  the 
new  bond.^  So  an  agreement  by  a  director  of  a  corporation 
that  the  proceeds  of  a  second  mortgage  should  be  paid  him 
before  the  same  was  due,  does  not  constitute  a  waiver  of  his 
prior  lien  where  such  proceeds  are  not  in  fact  paid  to  him.*  A 
mortgagor  may  renew  one  of  several  notes  held  by  his  sureties, 
and  the  sureties  will  not  lose  the  lien  of  the  mortgage  as 
against  a  junior  mortgage  existing  at  the  time.^ 

Where  the  holder  of  the  legal  title  mortgages  the  property 
in  order  to  pay  off  prior  incumbrances,  and  subsequently  pays 
the  mortgage  through  another,  in  order  to  release  his  general 
property  from  executions  issued  on  judgments  taken  on  the 

'  Curtis  V.  Renneker,  34  S.  Car.  468. 
"  Sanger  v.  Palmer,  36  111.  App.  485. 
'Cook  V.  Gilchrist,  82  Iowa,  277. 
*Mullanphy  Bank  v.  Schott,  135  111.  655. 
*  Mullins  V.  Clark  (Ky.),  15  S.  W.  Rep.  784. 


746  REGISTRATION    OF    THE    INSTRUMENT. 

mortgage  bond,  and  his  judgment  marked  to  the  use  of  the 
person  paying  it,  the  mortgage  is  not  extinguished,  but  may 
be  enforced  by  the  holder  of  the  judgment  against  the  prop- 
erty which  is  primarily  liable  for  the  payment  of  the  mortgage 
debt/ 

When  the  purchaser  takes  the  land  subject  to  a  mortgage, 
afterward  the  debt  being  ascertained  and  deducted  from  the 
purchase-money,  this  will  extinguish  the  mortgage  lien  as  to 
the  purchaser  who  was  the  mortgagee.^  But  when  one  who 
has  contracted  to  purchase  property  and  pay  off  the  mortgage 
on  it  as  part  consideration  for  the  sale,  rescinds  the  contract  for 
good  cause,  his  subsequent  purchase  of  the  mortgage  does  not 
extinguish  it.^  After  a  mortgage  is  paid  it  cannot  be  held 
thereafter  for  money  loaned  or  advanced  by  an  assignee  of  the 
mortgage  to  the  owner  of  the  land,  as  against  purchasers  for 
value  from  such  owner  before  the  advances  are  made/  And 
the  payment  'of  a  note  extinguishes  the  mortgage,  and  it  is  not 
revived  by  a  reissue  of  the  note,  and  one  who  takes  it  after  its 
maturity  is  chargeable  with  notice  of  payment  of  the  debt/ 

But  when  the  mortgagor  borrows  money  from  the  bank  to 
pay  the  mortgage,  by  agreement,  the  mortgage  may  be  turned 
over  to  the  bank  as  a  subsisting  security/ 

The  holder  of  a  third  mortgage  on  certain  real  estate  was 
made  a  party  in  foreclosure  suits  of  the  prior  mortgages,  in 
both  of  which  decrees  of  foreclosure  were  entered,  and  the 
equity  of  redemption  was  allowed  to  expire.  It  was  held  that 
the  subsequent  acquisition  by  him  of  an  equitable  interest  in 
the  property  by  agreement  with  the  owner  of  the  title,  did  not 
reinstate  his  mortgage  as  a  lien  upon  the  property  for  the 

'  Borland  v.  Meurer,  139  Pa.  St.  513. 

'^Dargan  v.  McSween,  33  S.  Car.  324.  See,  also,  Fouche  v.  Delk  (Iowa),  48 
N.  W.  Rep.  1078. 

3  Kuhlman  v.  Wood,  81  Iowa,  128. 

*  Blake  v.  Broughton,  107  N.  Car.  220. 

^  Murphy  v.  Simpson,  42  Mo.  App.  654.  See,  also,  Theisen  v.  Dayton, 
82  Iowa,  74,  distinguishing  Crosby  v.  Tanner,  40  Iowa,  136,  and  Blake  v. 
Koons,  71  Iowa,  356. 

6  Morris  v.  Alston,  92  Ala.  502. 


THE    LIEN.  747 

benefit  of  the  holder  of  the  notes  secured  thereby  which  he  had 
transferred/ 

At  the  request  of  the  mortgagor  a  certain  person  paid  a  first 
and  a  second  mortgage  of  his.  For  the  sum  so  paid  and  an 
additional  loan,  the  mortgagor  gave  him  a  fourth  mortgage, 
there  being  a  third  at  the  time  of  the  payment.  The  first  and 
second  mortgages  were  not  cancelled  but  were  assigned  to  and 
retained  by  the  person  paying  them.  There  was  no  agreement 
or  understanding  that  the  first  and  the  second  mortgage  should 
be  considered  satisfied.  It  was  held  that  the  first  and  the 
second  mortgages  were  not  extinguished,  but,  together  with  the 
remedy  thereto,  were  suspended  until  the  fourth  mortgage 
became  due  and  unpaid,  and  that  then  they  were  revived  and 
have  priority  over  the  third  mortgage.^ 

Where  the  assignee  of  a  mortgage  forecloses  the  mortgage 
before  recording  the  assignment,  a  subsequent  refusal  by  the 
assignee,  believing  that  he  had  acquired  title  by  the  foreclosure, 
to  accept  a  tender  by  the  mortgagor  of  the  amount  due  on  the 
mortgage,  exclusive  of  costs,  does  not  discharge  the  lien,  and 
the  assignee  after  recording  the  assignment,  may  maintain  a 
bill  in  equity  to  foreclose  the  mortgage.^ 

§  712.  Effect  of  Mortgagee's  Buying  the  Property. — 
Under  the  admitted  general  rule  of  law,  the  legal  effect  of  the 
mortgagee's  buying  the  property  from  the  mortgagor,  is  to 
extinguish  the  mortgagee,*  when  there  is  no  express  covenant 
inserted  in  the  deed  that  the  mortgage  shall  remain  open  to 
protect  against  claims  of  dower,  liens,  and  incumbrances;^ 
or  the  parties  have  taken  precaution  to  protect  themselves 
against  the  operation  of  the  general  rule  by  some  express  cove- 
nant." So,  when  a  mortgage,  securing  several  notes,  is  fore- 
closed for  those  falling  due  first,  and  the  property  sold  thereby, 

'  Sowles  V.  Hall,  62  Vt.  247. 
■^Tolman  v.  Smith,  85  Cal.  280. 
3  Renard  v.  Clink  (Mich.),  51  N.  W.  Rep.  692. 
*  Agnew  V.  Renwick,  27  S.  Car.  562. 
5  Agnew  V.  Railroad  Co.,  24  S.  Car.  18. 

®  Bleckeley  v.  Branyan,  26  S.  Car.  424 ;  Navassa  Guano  Co.  v.  Richardson,  26 
S.  Car.  401. 


748  REGISTRATION    OF    THE    INSTRUMENT. 

the  grantee  of  the  mortgage  may  redeem  the  same,  and  in  his 
hands  the  property  will  be  divested  of  the  lien  of  the  unsatis- 
fied portion  of  the  mortgage  debt.^ 

§  713.  Payment  by  Sureties. — Accommodation  indorsers 
having  a  mortgage  indemnity  against  loss  from  their  indorse- 
ments, may  pay  the  note  at  its  maturity  by  giving  their  indi- 
vidual obligations  therefor,  but  this  action  does  not  extinguish 
the  lien  of  the  mortgage.^ 

And  where  insurance  money  is  paid  to  the  mortgagee  accord- 
ing to  the  terms  of  the  mortgage,  it  discharges  the  mortgage 
lien  pro  to7i^o,-and  the  owner  of  the  equity  of  redemption  cannot 
revive  the  mortgage  as  against  a  junior  mortgage  then  existing, 
by  assigning  it  to  secure  a  loan  or  money  used  in  rebuilding.^ 

And  the  payment  to  the  mortgagee  and  the  balance  due  on 
the  mortgage  to  the  owner  of  the  equity  of  redemption  accord- 
ing to  agreement,  does  not  discharge  the  mortgage,  as  a  person 
who  claims  under  a  bona  fide  purchase  at  a  sale  under  such 
mortgage,  has  a  better  title  than  one  who  claims  under  the  one 
owing  the  equity  of  redemption.* 

§  714.  Waiving  op  Lien. — Some  of  the  States  have  enacted 
laws  providing  that  but  one  action  shall  be  had  in  the  re- 
covery of  a  debt  or  the  enforcing  of  any  right  secured  by  a 
mortgage.  Thus,  in  California,^  there  can  be  but  one  action 
for  any  debt  secured  by  mortgage  upon  real  estate  ;  so  where 
two  bonds  are  for  the  benefit  of  the  same  parties  and  to  secure 
the  same  debt,  though  on  different  property,  they  must  be  in- 
cluded in  the  same  action  for  foreclosure,  and  a  failure  to  in- 
clude one  of  such  deeds  in  such  action  extinguishes  the  lien 
given  by  it." 

So  in  Utah  Territory,  where  the  holder  of  a  note  secured  by 
mortgage  sues  on  the  note  and  obtains  an  attachment  on  the 

'  Harms  v.  Palmer,  73  Iowa,  446. 

^  Man  waring  v.  Jenison,  61  Mich.  117. 

3  Peiffer  v.  Bates,  45  N.  J.  Eq.  311. 

*  Hermanns  ?'.  Fanning,  151  Mass.  1. 

*  Civil  Code  of  Procedure,  sect.  726. 
«Hall  V.  Arnott,  80  Cal.  348. 


I 


THE    LIEN.  749 

creditor's  property,  the  mortgage  lien  is  extinguished/  as  there 
can  be  but  one  action  in  that  Territory  for  the  recovery  of  any 
debt  on  the  enforcement  of  any  right  secured  by  a  mortgage  or 
other  lien  on  real  estate.-  But  where  the  statute  does  not  con- 
trol, the  mortgagee  may  attach  the  j^roperty  and  obtain 
a  judgment  thereon,  and  this  action,  per  se,  is  not  a  waiver 
of  the  lien.^ 

§  715.  Waiving  Rights. — One  holding  as  first  mortgagee 
may  surrender  his  mortgage  and  note  to  a  subsequent  owner  of 
the  land,  and  take  from  such  owner  a  mortgage  securing  both 
the  sum  he  paid  for  the  assignment  of  the  first  mortgage  and 
note,  and  sums  of  money  which  he  has  advanced  to  such  sub- 
sequent owner,  and  if  he  has  the  record  of  the  mortgage  can- 
celled, and  delivers  the  note  to  the  party  making  it  and  the 
first  mortgage,  such  first  mortgage  will  be  satisfied  as  to  the 
subsequent  mortgagee  for  value  and  without  notice  actual  or 
constructive  of  the  second  mortgage.^  And  if  a  mortgage  of 
real  estate  is  executed  to  secure  the  payment  of  a  negotiable 
note  and  is  duly  recorded,  and  afterward  released  on  the  record, 
although  when  the  release  was  executed  the  mortgagee  liad 
assigned  it  and  had  no  interest  in  either  the  note  or  mortgage, 
a  bona  fide  purchaser  of  the  land  described  in  the  mortgage 
will  hold  it  free  from  the  mortgage  lien,  even  though  the  note 
and  mortgage  are  in  the  hands  of  an  innocent  holder  and 
wholly  unpaid.^ 

The  foreclosure  of  a  purchase-money  mortgage  and  the  ex- 
piration of  the  period  of  redemption,  extinguish  all  the 
estate  or  interest  of  the  mortgagor,  and  consequently  of  all 
persons  claiming  under  him.^ 

§  716.  Pleadings. — Where  in  an  action  against  the  mort- 
gagor to  subject  the  proceeds  of  a  sale  of  mortgaged  lands  to 

'  Bacon  v.  Raybould,  4  Utah,  .357. 

^  Comp.  Laws  470,  sect.  246  ;  Laws  of  1884,  p.  268,  sect.  606. 

'  Lanahan  ?'.  Lawton  (N.  J.),  2.3  Atl.  Rep.  476. 

*  Edwards  v.  Thorn,  25  Fla.  222. 

5  Lewis  V.  Kirk,  28  Kan.  497;  Fisher  v.  Cowles,  41  Kan.  418. 

*  Jacoby  v.  Crowe,  36  Minn.  93. 


750 


REGISTRATION    OF    THE    INSTRUMENT. 


the  satisfaction  of  the  mortgage,  the  complaint  contains  no 
allegation  that  the  mortgage  was  recorded,  it  need  not  affirma- 
tively show  that  the  lien  of  the  mortgage  has  been  lost.^ 

And  where  an  entire  tract  of  land,  covered  by  a  mortgage, 
is  partitioned  among  the  joint  tenants,  in  a  suit  to  which  the 
trustee,  but  not  the  beneficiary,  is  made  a  party,  and  one  por- 
tion is  set  apart  for  the  payment  of  the  mortgage,  and  is  sold 
for  that  purpose,  the  lien  on  the  balance  of  the  land  is  not 
released,  and  if  this  parcel  fails  to  satisfy  the  mortgage,  it  may 
be  enforced  against  the  rest  of  the  land.^ 

1  Parmerter  v.  Baker,  24  Abb.  N.  C.  (N.  Y.)  104. 
^  Brown  •;;.  Shurtleff,  24  111.  App.  569. 


CHAPTER  XVIII. 

construction  of  registration  laws. 
Article  1. 
The  Record. 

I  717.  Delivery  After  Record.  I  727.  Power  of  Attorney  to  Execute 

I  718.  Validity  of  After-Delivery.  a  Mortgage. 

I  719.  Doctrine  of  Relation  in  Equity.  |  728.  Defective  Record. 

I  720.  Sufficiency  of  Record.  I  729.  Other  Statutory  Provisions — 

\  721.  Time  of  Record.  Defective  Record. 

§  722.  Certificate  of  the  Register  Con-  §  730.  Indexes  — Recording   of    In- 
clusive, strument. 

§  723.  Statutory  Provisions  Requiring  §  731.  The  Index  Is  No  Part  of  the 
a  Record  Within  a  Specified  Record. 

Time.  ^  732.  Liability  of  the  Recorder  for 

I  724.  Recording  After  Assignment  of  Errors  in  the  Index. 

Mortgagor.  §  733.  Descriptive    Index — Rule  in 

I  725.  Recording    After     Mortgagor's  Some  States. 

Death.  §  734.  Defectively    Recorded    Mort- 

l  726.  Place  of  Record.  gage. 

§  717.  Delivery  After  Record. — Filing  for  record  a  mort- 
gage executed  to  secure  an  existing  debt  is  a  sufficient  delivery 
to  the  mortgagee,  provided  he  accepts  it  subsequently,  which  is 
a  ratification  of  the  act,  and  gives  the  mortgage  legal  effect 
from  the  date  of  filing  for  record.^  But  if  not  accepted  by  the 
mortgagee,  it  is  not  a  sufficient  delivery.^ 

The  doctrine  that  the  delivery  may  be  made  to  a  stranger  in 
behalf  of  the  mortgagee  is  not  a  correct  statement  of  the  law,^ 
and  should  not  be  accepted.* 

In  Missouri  the  doctrine  is  that  where  an  instrument  is  exe- 
cuted in  favor  of  the  mortgagee,  it  will  be  presumed  that  he 
assents  to  the  transaction,  until  he  manifests  his  dissent  after 

'  Hempstead  v.  Johnston,  18  Ark.  123 ;  Camall  v.  Duval,  22  Ark.  136. 
■•'  Doe  V.  Knight,  -5  Barn.  &.  Cres.  671  ;  Exton  v.  Scott,  6  Sim.  31 ;  Farmers 
and  Mechanics'  Bank  v.  Drury,  38  Vt.  426. 
'Merrills  v.  Swdft,  18  Conn.  257,  and  cases  cited. 
*See  Johnson  v.  Farley,  45  N.  H.  505. 

751 


752  REGISTRATION    OF    THE    INSTRUMENT. 

being  duly  notified ;  ^  but  this  doctrine  is  not  sustained  by  other 
courts,  and  cannot  be  followed  in  other  jurisdictions. 

§  718.  Validity  of  After-Delivery. — It  must  be  consid- 
ered as  settled  that  an  execution  and  record  of  a  mortgage,  is 
not  a  delivery  in  law,  as  there  can  be  no  delivery  until  the 
mortgagee  is  willing  to  and  does  accept  the  same  and  pays  over 
the  consideration.^ 

At  most  the  record  of  a  deed  is  only  a  presumptive  evidence 
of  delivery,^  and  when  this  is  overcome,  the  burden  is  upon  the 
party  claiming  title  under  it  to  show  an  actual  delivery  before 
a  levy  upon  the  land  by  attachment  or  execution,* 

In  general  the  recording  of  a  mortgage  without  an  acceptance 
by  the  mortgagee  is  a  nullity.  But  after  acceptance  it  becomes 
operative,  and  is  equivalent  to  a  delivery  of  a  deed  which  had 
been  recorded  in  anticipation  of  the  completion  of  the  same.^ 

A  mortgage  recorded  and  held  by  the  mortgagor  ready  for 
delivery  when  he  should  obtain  a  loan,  is  not  recorded  so  as  to 
be  notice  as  against  lien  claimants,  until  the  day  when  the  loan 
was  made  and  the  mortgage  delivered.^ 

§  719.  Doctrine  of  Relation  in  Equity. — Accepting  a 
recorded  mortgage  and  making  the  loan  upon  it  in  execution 
of  a  precedent  agreement  ratify  the  acts  of  the  mortgagor,  and 
the  subsequent  adoption  of  an  act  of  agency  relates  back  to  the 
original  transaction,  and  is  the  same  in  law  for  all  purposes  as 
if  the  authority  had  previously  been  conferred.'' 

Deeds  of  conveyance,  when  once  delivered,  shall  have  opera- 

1  Ensworth  v.  King,  50  Mo.  477. 

2  Houfes  V.  Schultze,  2  111.  App.  196 ;  Goodsell  v.  Stinson,  7  Blackf.  (Ind.) 
439 ;  Parker  v.  Hill,  8  Met.  (Mass.)  449  :  Skinner  v.  Baker,  79  111.  496. 

^  Stiles  V.  Probst,  69  111.  382. 

*  Harmon  v.  Myer,  55  Wis.  85. 

5  Warner  v.  Winslow,  1  Sandf.  Ch.  (N.  Y.)  430  ;  Foster  v.  Beardsley  Scythe 
Co.,  47  Barb.  (N.  Y.)  505 ;  Hood  v.  Brown,  2  Ohio,  266  ;  Jackson  v.  Richards, 
6  Cow.  (N.  Y.)  617. 

«  Mutual  Ben.  L.  Ins.  Co.  v.  Rowand,  26  N.  J.  Eq.  389 ;  Freeman  v.  Schroedcr, 
43  Barb.  (N.  Y.)  618. 

'  Sheldon  v.  Smith,  28  Barb.  (N.  Y.)  593 ;  Lawrence  v.  Taylor,  5  Hill  (N.  Y.), 
107. 


CONSTRUCTION    OF    REGISTRATION    LAWS.  753 

tion,  by  relation,  as  of  a  time  prior  to  delivery,  if  it  be  neces- 
sary to  effect  the  intention  of  parties,  and  be  required  for  the 
advancement  of  justice/ 

Thus,  a  mortgage  recorded  before  delivery,  in  pursuance 
of  a  prior  contract  for  a  loan  on  such  security,  and  afterward 
delivered  and  accepted  by  the  mortgagee,  will  take  priority  in 
equity  over  liens  of  mechanics  and  materialmen  for  work  and 
materials  furnished  after  the  mortgage  is  recorded,  for  the  erec- 
tion of  a  building  on  the  premises,  which  was  commenced 
between  the  recording  of  the  mortgage  and  its  delivery  ;  the 
mortgagee  having  no  knowledge  of  the  erection  of  the  build- 
ing when  he  paid  over  the  money.  In  equity,  the  mortgage, 
when  delivered,  will  have  relation  to  the  agreement  for  the  loan.^ 

But  the  doctrine  of  relation  being  a  fiction  of  law  adopted 
for  the  advancement  of  justice  will  never  be  resorted  to 
where  it  would  occasion  wrong  to  third  parties.^ 

The  Missouri  statute*  declares  that  every  instrument  certified 
and  recorded  in  the  manner  prescribed  shall,  from  the  time  of 
filing  the  same  with  the  recorder,  impart  notice.  This  statute 
gives  the  effect  of  notice,  by  relation  back  to  the  time  of  the 
filing,  only  where  the  instrument  has  been  actually  and  cor- 
rectly recorded,  thus  showing  that  the  record  is  notice  only  of 
what  it  contains.^ 

If  a  deed  be  deposited  with  instructions  not  to  file  it 
until  further  orders,  or  until  a  certain  date,  such  deposit  is 
not  notice,  and  the  filing  when  afterward  indorsed  cannot  re- 
late back  to  the  depositing.^ 

§  720.  Sufficient  Record. — In  many  States  the  registra- 
tion of  a  mortgage  is  operative  from  the  time  of  its  being  de- 

'  Johnson  v.  Stagg,  2  Johns.  (N.  Y.)  510;  Shelley's  Case,  1  Coke,  99;  Heath 
V.  Ross,  12  Johns.  (N.  Y.)  140;  Barncord  v.  Kuhn,  36  Pa.  St.  388.  Compare 
Haufes  v.  Schultze,  2  111.  App.  196. 

"  Jacobus  V.  Mutual  Ben.  L.  Ins.  Co.,  27  X.  J.  Eq.  604. 

» Butler's  Case,  2  Coke,  25  ;  Jackson  v.  Bard,  4  Johns.  (N.  Y.)  230. 

*  Rev.  Stat.,  1889,  sect.  2419. 

*  Terrell  v.  Andrew  Co.,  44  Mo.  309. 

«  Haworth  v.  Taylor,  108  111.  275 ;  Town  v.  Griffith,  17  N.  H.  165  ;  Brigham 
V.  Brown,  44  Mich.  59. 
48 


754  REGISTRATION    OF    THE    INSTRUMENT. 

posited  in  the  office  of  the  recorder  of  the  proper  county,  which 
makes  it  a  hen  effective  as  against  the  intermediate  mortgagee 
when  he  has  no  actual  notice/ 

Such  mortgages  take  effect  from  the  time  of  their  delivery 
to  the  recorder  to  be  by  him  entered  on  the  records.^ 

But  the  mere  record  cannot  constitute  that  a  mortgage  or 
contract  which  would  not  be  a  mortgage  or  contract  without  it. 
Its  delivery  is  the  creation  of  it.  Recording  may  be  some  evi- 
dence of  a  previous  delivery,  or  the  delivery  to  the  officer  for 
record  may,  by  arrangement  between  the  parties,  be  the 
delivery  to  the  grantee.^ 

When  a  conveyance  has  been  duly  recorded,  it  will  impart 
notice  from  the  time  that  it  was  filed  in  the  proper  office,  and 
subject  to  public  inspection.*  In  many  of  the  States  a  convey- 
ance is  not  notice  from  the  time  it  is  filed  in  the  proper  office 
for  record ;  so  the  effect,  under  these  statutes,  of  continued 
notice  will  not  be  given  to  the  filing  only  ;  therefore,  if  the 
instrument  be  lost,  after  its  filing  and  before  record,  the  effect 
of  notice  is  destroyed  ;  so  if  it  be  erroneously  or  defectively 
transcribed,  the  record  will  impart  notice  only  of  what  it  con- 
tains.^ 

In  the  majority  of  the  States  the  recording  aot  states  that  a 
conveyance  shall  be  notice,  or  shall  be  considered  as  recorded 
from  the  time  it  is  filed  or  delivered  for  record,  and,  hence, 
under  these  statutes  notice  is  imparted  by  the  filing  alone,  irre- 
spective of  the  actual  record.^ 

^  Leslie  v.  Hinson,  83  Ala.  266;  Brooke's  Appeal,  64  Pa.  St.  127;  Kessler^;. 
State,  24  Ind.  313 ;  Magee  v.  Beatty,  8  Ohio,  396. 

2  Brown  v.  Kirknian,  1  Ohio  St.  116 ;  Bercaw  v.  Cockerill,  20  Ohio  St.  163. 

3  Thayer  v.  Stark,  6  Gush.  (Mass.)  11 ;  Hedge  v.  Drew,  12  Pick.  (Mass.)  141 ; 
Parker  v.  Hill,  8  Met.  (Mass.)  447  ;  Barns  v.  Hatch,  3  N.  H.  304. 

*  Kcssler  v.  State,  24  Ind.  313 ;  Bigelow  v.  Topliff,  25  Vt.  274  ;  Steam  Co.  v. 
Sears,  23  Fed.  Rep.  313 ;  Nichols  v.  Reynolds,  1  R.  I.  30 ;  36  Am.  Dec.  238. 

^Pringle  v.  Dunn,  37  Wis.  449;  19  Am.  Rep.  772;  Potter  v.  Dobley,  55  Vt. 
512;  Meighen  v.  Strong,  6  Minn.  177;  Hill  v.  McMchol,  76  Me.  314;  Stead  r. 
Grosfie'd,  67  Mich.  289 ;  Smith  v.  Lowry,  113  Ind.  37 ;  Jennings  v.  Wood,  20 
Ohio,  261 ;  Shepherd  v.  Burkhalter,  13  Ga.  443  ;  58  Am.  Dec.  523;  Brydon.f. 
Campbell,  40  Md.  331 ;  Disque  v.  Wright,  49  Iowa,  538. 

«  Perkins  v.  Strong,  22  Nebr.  725;  Payne  v.  Pavey,  29  La.  Ann.  116;  Mer- 
rick V.  Wallace,  19  111.  486 ;  Glading  v.  Frick,  88  Pa.  St.  460 ;  Mutual  Life  Ins. 


1 


CONSTRUCTION   OF    REGISTRATION    LAWS.  755 

§  721.  Time  of  Record. — The  lien  of  the  mortgage  in  many- 
States  begins  from  the  time  of  its  reception  of  the  recorder 
and  entered  by  indorsement  on  the  back.  The  delay  of  the 
recorder  in  registering  it  or  indexing  it  will  not  divest  its 
lien.  It  is  not  incumbent  upon  the  mortgagee,  as  generally 
held,  to  supervise  the  registration  and  see  whether  the  mortgage 
is  recorded  or  not.^  It  must  be  considered  recorded  when  filed 
for  record.^  By  filing  the  mortgage  with  the  recorder,  the 
mortgagee  has  done  all  that  the  law  requires  him  to  do.^ 

However,  there  are  exceptions  to  the  general  rule,  though 
controlled  by  substantially  the  same  statute.  Thus,  in  Georgia 
a  mortgage  is  not  recorded  until  it  is  spread  upon  the  records,* 
though  it  will  be  valid  as  against  the  mortgagor  before  record- 
ing;^ and  when  deposited  for  record  with  the  recorder,  but 
not  spread  upon  the  records,  a  lien  of  a  judgment  rendered 
since  such  improper  record  is  prior  to  that  of  the  mortgage.® 

§  722.  Certificate  op  the  Register  Conclusive. — The 
register's  certificate  is  conclusive  as  to  the  time  of  the  receipt 
and  registry  of  the  instrument  recorded.^  And  generally  the 
certificate  of  the  register  upon  the  instrument  is  conclusive  to 
all  parties  that  it  was  recorded  at  the  time  named  therein.^  But 

Co.  V.  Dake,  87  N.  Y.  257 ;  Booth  v.  Barnum,  9  Conn.  286  ;  23  Am.  Dec.  339 ; 
Gillespie  v.  Rogers,  146  Mass.  610;  Bedford  v.  Tupper,  30  Hun  (N.  Y.),  174; 
Mangold  v.  Barlow,  61  Miss.  593 ;  Woodward  v.  Boro,  84  Tenn.  678 ;  Poplin  v. 
Mundell,  27  Kan.  158  ;  Throckmorton  v.  Price,  28  Tex.  605 ;  91  Am.  Dec.  334  ; 
Lewis  V.  Klotz,  39  La.  Ann.  259 ;  Clader  v.  Thomas,  89  Pa.  St.  343 ;  Swepson 
V.  Bank,  9  Lea  (Tenn.),  723. 

^  McCormack  v.  James,  36  Fed.  Rep.  14 ;  Woods's  Appeal,  82  Pa.  St.  116  ; 
Kiser  v.  Heuston,  38  111.  252  ;  Throckmorton  v.  Price,  28  Tex.  605. 

''Sinclair  v.  Slawson,  44  Mich.  123. 

3  Merrick  v.  Wallace,  19  111.  486  ;  Polk  v.  Cosgrove,  4  Biss.  C.  C.  437  ;  Mims 
V.  Mims,  35  Ala.  23  ;  Dubose  v.  Young,  10  Ala.  365  ;  Bank  v.  Haggin,  1  A.  K. 
Marsh.  (Ky.)  306. 

*  Code,  sects.  267, 1957 ;  Benson  v.  Green,  80  Ga.  230. 

*  Janes  v.  Penny,  76  Ga.  796. 

«  New  England  Mort.  Security  Co.  v.  Ober,  84  Ga.  294. 

'  Thorp  V.  Merrill,  21  Minn.  336 ;  Worcester  Nat.  Bank  v.  Cheeney,  87  111. 
602;  Dodge  v.  Potter,  18  Barb.  (N.  Y.)  193. 

« Tracy  v.  Jenks,  15  Pick.  (Mass.)  465 ;  Ames  v.  Phelps,  18  Pick.  (Mass.)  314 ; 
Fuller  V.  Cunningham,  105  Mass.  442 ;  Adams  v.  Pratt,  109  Mass.  59. 


756  REGISTRATION    OF   THE   INSTRUMENT. 

the  certificate  is  not  conclusive  that  the  mortgage  is  properly 
recorded ;  ^  because  recording  a  mortgage  before  authority  is 
given  is  not  effectual,^  and  when  the  record  as  entered  upon 
the  index-book,  is  wrong  upon  its  face,  it  is  invalid.^ 

The  certificate  of  record  shows  only  that  the  deed  has  proba- 
bly been  recorded  or  duly  indexed.  Such  certificate,  as  held 
by  some  courts,  does  not  release  the  grantee  from  the  responsi- 
bility of  seeing  that  the  deed  is  in  fact  properly  recorded.* 

§  723.  Statutory  Provisions  Requiring  a  Record  Within 
A  Specified  Time. — When  the  statutes  prescribe  a  certain  time 
within  which  the  mortgage  must  be  recorded  it  must  be  fol- 
lowed in  order  to  be  valid  as  against  third  parties.  If  not  so 
recorded,  a  lien  of  a  judgment  creditor  will  be  prior  to  the 
mortgage.^  If  the  mortgage  is  not  recorded  within  that  time, 
it  is  entitled  to  priority  only  over  creditors  who  were  such  at 
its  date  of  execution.^  But  such  mortgage  shall  not  in  any 
manner  affect  the  creditors  of  the  party  making  such  deed, 
who  may  trust  such  party  after  the  date  of  such  deed.^ 

Such  mortgage  is  void  against  a  bona  fide  purchaser  for 
valuable  consideration  and  without  notice  thereof  when  he 
made  the  purchase.^ 

Of  two  mortgages  of  equal  equity,  recorded  within  the  time 
specified,  the  one  first  recorded  takes  priority.^ 

If  the  statutes  specify  a  time  within  which  deeds  may  be 
recorded,  the  filing,  if  made  wdthin  that  time,  will  relate  back 

1  New  York  L.  Ins.  Co.  v.  Wliite,  17  N.  Y.  469 ;  Worcester  Nat.  Bank  v. 
Cheenej^  87  III.  602. 

2  Yerger  v.  Barz,  56  Iowa,  77 ;  Brigham  v.  Brown,  44  Mich.  59 ;  Bowen  v. 
Fassett,  37  Ark.  507. 

3  Hay  V.  Hill,  24  Wis.  235.    See,  also,  Hall  v.  Tunnell,  1  Houst.  (Del.)  320. 
*  Ritchie  v.  Griffiths,  1  Wash.  St.  429. 

^  New  England  Mort.  Security  Co.  v.  Ober,  84  Ga.  294 ;  Mowry  v.  Crocker, 
33  S.  Car.  430. 

«  Sixth  Ward  Build.  Asso.  v.  Willson,  41  Md.  506 ;  Plume  v.  Bone,  1  Green 
(N.  J.  L.),  63. 

^Nelson  v.  Bank,  27  Md.  73  ;  Cowan  v.  Green,  2  Hawks  (N.  Car.),  384  ;  Har- 
ding V.  Allen,  70  Md.  395. 

»Rootes  V.  HolUday,  6  Munf.  (Va.)  251. 

9  Dungan  v.  Am.  L.  &  Trust  Co,,  52  Pa.  St.  253. 


CONSTRUCTION   OF    REGISTRATION    LAWS.  757 

to  the  date  or  delivery  of  the  instrument,  and  give  it  priority 
from  such  date/ 

§  724.  Recording  after  Assignment  of  Mortgagor. — An 
unrecorded  mortgage  is  a  hen  as  against  an  assignment  of  the 
mortgagor  in  trust  for  the  benefit  of  creditors ;  he  is  neither  a 
creditor  nor  purchaser.^  The  mortgage  must  be  executed  and 
deHvered  before  the  assignment ;  if  valid  in  other  respects,  it  is 
valid  against  the  assignment  or  bankruptcy,  though  unrecorded 
at  the  time  of  the  assignment.^ 

§  725.  Recording  after  Mortgagor's  Death. — A  mort- 
gage not  recorded  until  after  the  death  of  the  mortgagor  is  not 
for  that  reason  inoperative  as  against  a  general  creditor  of  the 
estate.*  So  a  creditor  secured  by  a  mortgage  deed,  executed 
and  delivered  by  the  mortgagor  in  his  lifetime,  but  recorded 
after  his  death,  is  entitled  to  hold  his  security  against  all  other 
creditors  who  have  acquired  no  specific  lien  on  the  property.^ 

But  had  the  administrator  sold  the  property  before  the  record, 
to  an  innocent  purchaser,  the  purchaser's  title  would  prevail.® 

§  726,  Place  of  Record — Special  Book. — When  a  book  is 
provided  for  the  registration  of  mortgages,  as  a  general  rule,  they 
must  be  recorded  therein  in  order  to  be  constructive  notice.  So 
where  a  mortgage  is  recorded  in  the  registry  of  assignments  of 
mortgages,  and  nowhere  else,  it  is  a  nullity,  so  far  as  notice  is 
concerned.^  Under  this  rule  the  statutory  provisions  are  con- 
sidered mandatory,  and  must,  therefore,  be  fully  complied  with, 
and  unless  the  mortgage  is  recorded  in  the  book  so  provided, 
it  is  not  constructive  notice  to  subsequent  bona  fide  purchasers 
and  mortgagees,   even  if  the  mortgage  be  in  the  form  of  an 

'  Betz  V.  MuUin,  62  Ala.  365 ;  Phifer  v.  Barnhart,  88  N.  Car.  333 ;  King  v. 
Fraser,  23  S.  Car.  543 ;  Webb  on  Record  of  Title,  sect.  132. 

^  Mellon's  Appeal,  32  Pa.  St.  121. 

MVyckoflfv.  Remsen,  11  Paige  (N.  Y.),  564. 

*Gill  V.  Pinney,  12  Ohio  St.  38;  Wilson  v.  Wilson,  13  Barb.  (N.  Y.)  254; 
Covell  V.  Weston,  20  Johns.  (N.  Y.)  413,  419. 

*  Haskell  v.  Bissell,  11  Conn.  174. 

*Mix  V.  Hotchkiss,  14  Conn.  41. 

'  Parsons  v.  Lent,  34  N.  J.  Eq.  67. 


758  REGISTRATION   OF    THE   INSTRUMENT. 

absolute  deed,  but  is  in  effect  a  mortgage  given  as  a  security 
for  a  loan/ 

Under  this  rule,  mortgages  must  be  recorded  in  the  mort- 
gage-books, and  are  not  properly  recorded  in  any  other  species 
of  books  where  they  cannot  be  found  by  means  of  the  mort- 
gage index.^  Such  mortgage,  though  improperly  recorded,  is 
good  between  the  parties,^  and  becomes  operative  in  case  the 
mortgagee  afterward  acquires  the  equity  of  redemption/ 

But  in  those  jurisdictions  where  the  statute  is  merely  direc- 
tory, the  mortgage  may  be  valid  without  being  registered  in 
the  mortgage-book  of  records,  provided  it  is  so  indexed  it  can 
be  readily  found,  though  not  in  its  proper  record-book/ 

And  in  Texas  an  absolute  deed  given  as  a  mortgage,  though 
recorded  in  the  book  for  deeds,  is  valid  against  purchasers  and 
creditors  of  the  mortgagor/ 

§  727,  Power  of  Attorney  to  Execute  a  Mortgage. — 
Several  of  the  States  have  enacted  that  the  power  of  attorney 
given  to  execute  a  mortgage  shall  be  recorded  with  the  mort- 
gage in  order  to  give  constructive  notice.  When  this  is  so 
provided,  a  mortgage  executed  by  an  attorney  in  fact,  and  re- 
corded without  the  record  of  such  power,  the  record  is  not  con- 
structive notice.'^ 

But  if  is  not  required  to  be  recorded  with  the  mortgage,  a 
record  of  it  would  not  be  notice  to  any  one.^ 

§  728.  Defective  Record. — As  to  what  is  a  defective  record 
of  an  instrument  is  a  question  upon  which  the  authorities   do 

1  Clute  V.  Robison,  2  Johns.  (N.  Y.  )  595 ;  Brown  v.  Dean,  3  Wend.  (N.  Y.) 
208. 

''Luch's  Appeal,  44  Pa.  St.  519  ;  M'Lanahan  v.  Reeside,  9  Watts  (Pa.),  510, 
511 ;  Calder  v.  Chapman,  52  Pa.  St.  .359. 

*  James  v.  Morey,  6  Johns.  Ch.  (N.  Y.)  417  ;  Swepson  v.  Bank,  9  Lea  (Tenn.), 
713. 

*  Grellett  v.  Heilshorn,  4  Nev.  526 ;  Warner  v.  Winslow,  1  Sandf.  Ch.  (N.  Y.) 
430. 

8  Smith  V.  Smith,  13  Ohio  St.  532 ;  Boyle  Ice  Co.  v.  Gould,  73  Cal.  153 ;  An- 
thony V.  Butler  13  Pet.  (U.  S.)  423. 
^  Kennard  v.  Mabry,  78  Tex.  151. 
^  Cornall  v.  Duval,  22  Ark  136. 
8  Williams  v.  Birbeck,  Hoff.  (N.  Y.)  359  ;  Williams  v.  Sorrell,  4  Ves.  391. 


CONSTRUCTION   OF    REGISTRATION    LAWS.  759 

not  agree.  The  weight  of  authority  holds  that  when  a  party 
has  duly  deposited  his  deed  with  the  proper  officer  for  record, 
he  has  performed  his  duty,  and  consequently  a  subsequent 
mistake  or  malfeasance  of  the  officer  will  not  affect  the  mort- 
gage or  invalidate  his  title.^ 

However,  under  this  rule,  the  statute  generally  provides 
that  when  a  conveyance  is  delivered  to  the  recording  officer,  it 
shall  be  considered  as  recorded  from  the  time  of  such  delivery. 
Hence,  after  such  delivery  nothing  more  need  be  done  to  keep 
the  record  perfect  except  at  the  proper  time  to  record  it  in 
its  proper  order  in  the  proper  book.^  And  a  registration  of 
land  is  not  invalidated  by  a  mere  clerical  error  in  transcribing 
the  instrument  not  affecting  the  sense  or  obscuring  its  mean- 
ing.^ And  the  record  is  notice,  if  the  note  is  described,  but 
the  amount  is  not  stated.* 

§  729.  Other  Statutory  Provisions — Defective  Record. 
— Other  statutory  provisions  do  not  provide  that  an  instrument 
filed  shall  be,  considered  recorded  from  its  reception  by  the 
clerk  or  recorder ;  and  it  is  held  to  be  the  duty  of  the  party 
filing  the  instrument,  as  between  himself  and  a  subsequent 
bona  fide  purchaser  or  mortgagee,  to  see  that  all  of  the  pre- 
requisites of  validity  of  the  deed  as  to  registration  be  complied 
with.^ 

So  where  a  mortgage  is  recorded  out  of  its  order  due  to  its 

1  People  V.  Bristol,  35  Mich.  28 ;  Wolf  v.  Hunter,  10  111.  App.  32 ;  Nichols  v. 
Reynolds,  1  R.  I.  30 ;  Dubose  v.  Young,  10  Ala.  365 ;  Monaghan  r.  Longfel- 
low, 81  Me.  298 ;  Beverley  v.  Ellis,  1  Rand.  (Va.)  102 ;  Dikeman  v.  Puckhafer, 
1  Daly  (N.  Y.),  489 ;  Gorham  v.  Summers,  25  Minn.  81 ;  Chase  v.  Bennett,  58 
N.  H.  428. 

'  Mutual  L.  Ins.  Co.  v.  Dake,  87  N.  Y.  257,  264 ;  Simonson  v.  Falihee,  25 
Hun  (N.  Y.),  570;  Bedford  v.  Tupper,  30  Hun  (X.  Y.),  174;  Curtis  v.  Lyman, 
24  Vt.  338  ;  Merrick  v.  Wallace,  19  111.  486 ;  Schell  v.  Stein,  76  Pa.  St.  398. 

=•  St.  Croix  L.  &  Lum.  Co.  v.  Ritchie,  73  Wis.  409 ;  Wyatt  v.  Barwell,  19 
Ves.  435 ;  Ince  v.  Everard,  6  Term,  545 ;  Lybrand  v.  Haney,  31  Wis.  233 ; 
Lane  v.  Duchac,  73  Wis.  646 ;  Woods's  Appeal,  82  Pa.  St.  116 ;  Tousley  v. 
Tousley,  5  Ohio  St.  78. 

*Clementz  v.  Jones  Lumber  Co.,  82  Tex.  424. 

^  Frost  V.  Beekman,  1  Johns.  Ch.  (N.  Y.)  288  ;  Hibbard  v.  Zenor,  75  Iowa, 
471 ;  N.  Y.  Life  Ins.  Co.  v.  White,  17  N.  Y.  469 ;  Johns  v.  Scott,  5  Md.  81 ;  Heister 
V.  Fortner,  2  Binn.  (Pa.)  40. 


760  REGISTRATION    OF    THE    INSTRUMENT. 

date,  and  upon  a  page  which  should  have  contained  a  mort- 
gage several  years  antecedent,  it  is  not  notice  to  third  per- 
sons.^ 

So  in  some  States  a  defective  acknowledgment  will  make  a 
registration  defective  and  of  no  validity  as  a  constructive  no- 
tice to  third  persons.^ 

So  where  the  record  of  a  mortgage  is  defective  it  is  not  no- 
tice of  the  mortgage.  Thus,  where  a  mortgage  for  a  security  of 
$2,000  was  recorded  as  one  for  |200,  it  is  not  notice  of  the 
$2,000  mortgage.^ 

The  failure  of  the  mortgagee  to  have  an  agreement  referred 
to  in  the  mortgage  filed  for  record  can  be  taken  advantage  of 
only  by  third  persons.* 

§  730.  Indexes — Recording  of  Instrument. — In  the  ab- 
sence of  evidence  to  the  contrary,  it  will  be  presumed  that  the 
entry  in  the  general  index  and  the  actual  recording  of  the  in- 
strument were  simultaneous  acts  ;  and  if  the  description  of  the 
mortgaged  lands  is  not  entered  in  the  general  index,  yet  if  the 
mortgage  is  clearly  recorded,  the  defect  is  cured,  and  the  regis- 
try is  complete  from  the  time  the  instrument  is  so  transcribed.' 

Judge  Lyon  says,  though  the  entries  in  the  general  index 
are  not  made  in  the  consecutive  order  of  the  numbers  or  the 
dates  of  receipt  of  the  instruments,  and  not  entered  therein 
immediately  as  required  by  the  statute,^  that  fact  does  not  nec- 
essarily so  impeach  the  index  as  to  destroy  the  validity  of  the 
registry.  If  it  is  made  to  appear  that  the  entry  of  such  instru- 
ment was  made  at  a  later  date,  the  same  presumption  arises 
that  the  instrument  was  transcribed  upon  the  records  and  the 

1 N.  Y.  Life  Ins.  Co.  v.  White,  17  N.  Y.  469. 

MVork  V.  Harper,  24  Miss.  517  ;  White  v.  Denman,  1  Ohio  St.  100;  Bishop 
V.  Schneider,  46  Mo.  472. 

3  Hill  V.  McNichol,  76  Me.  314 ;  Stevens  v.  Bachelder,  28  Me.  218.  See,  also, 
Thompson  v.  Mack,  Harr.  (Mich.)  150  ;  Terrell  v.  Andrew,  44  Mo.  309  ;  Jen- 
nings V.  Wood,  20  Ohio,  261 ;  Gilchrist  v.  Gough,  63  Ind.  576 ;  Disque  v. 
Wright,  49  Iowa,  538. 

*  Bacon  v.  N.  W.  Mut.  L.  and  Ins.  Co.,  131  U.  S.  258. 

*  Oconto  Co.  V.  Jerrard,  46  Wis.  317.  St.  Croix  L.  &  Lum.  Co.  v.  Eetchie, 
73  Wis.  409. 

®  Wisconsin  Rev.  Stat.,  sect.  759. 


CONSTRUCTION    OF    REGISTRATION    LAWS.  761 

registry  completed  at  that  date.^  And,  in  general,  a  mistake 
of  the  recorder  in  entering  the  description  of  the  mortgaged 
premises  on  the  numerical  index,  the  mortgage  being  in  all 
other  particulars  properly  recorded,  the  index  will  not  vitiate 
the  record  as  to  subsequent  purchasers.^ 

The  index  is  not  necessary  to  the  validity  of  a  record  of  a 
mortgage ;  thus,  a  mortgage  was  recorded  but  not  indexed ; 
a  subsequent  mortgage  was  executed  and  assigned  to  another 
party,  but  without  notice ;  the  first  mortgage  took  precedence.^ 
But  the  clerk  is  liable  to  creditors  or  bona  fide  purchasers  for 
neglecting  to  record  a  duly  lodged  deed  of  the  premises  when 
such  indexing  is  required  by  statute.^ 

§  731.  The  Index  is  no  Part  of  the  Record. — The  index 
is  no  part  of  the  record  of  a  mortgage  for  the  purpose  of  con- 
structive notice.^ 

The  mortgage  is  just  as  much  an  incumbrance  upon  the 
land,  when  one  has  notice  of  it,  although  it  be  not  indexed.^ 

The  index  is  made  for  the  convenience  of  those  searching 
the  record,  and  is  not  a  part  of  the  record.^ 

It  appears  that  the  record  of  a  mortgage  supersedes  the 
necessity  of  noting  in  a  book  of  record,  at  the  time  when  it  was 
received.^ 

§  732.  Liability  of  the  Recorder  for  Errors  in  the  In- 
dex.— The  index  to  a  record  of  a  conveyance  is  not  necessary  to 

^  Lane  v.  Duchac,  73  Wis.  646. 

'  Lincoln  Build,  and  Loan  Asso.  v.  Hass,  10  Nebr.  581. 

^  Barrett  v.  Prentiss,  57  Vt.  297. 

*  Barney  v.  Little,  15  Iowa,  527  ;  Reeder  v.  State,  98  Ind.  114 ;  Green  v.  Gar- 
rington,  10  Ohio  St.  548 ;  91  Am.  Dec.  103,  109 ;  Dodge  v.  Potter,  18  Barb. 
(N.  Y.)  193  ;  Board  v.  Babcock,  5  Oreg.  472  ;  Hunter  v.  Windsor,  24  Yt.  327 ; 
Curtis  r.  Lyman,  24  Yt.  338. 

^  Fort  V.  Burch,  5  Den.  (N.  Y.)  195 ;  Chatham  v.  Bradford,  50  Ga.  327  ;  Gil- 
christ V.  Gough,  63  Ind.  576 ;  Benton  v.  Nicoll,  24  Minn.  221 ;  Board  v.  Bab- 
cock, 5  Oreg.  472  ;  Schell  v.  Stein,  76  Pa.  St.  398  ;  Throckmorton  v.  Price,  28 
Tex.  605 ;  Mut.  Life  Ins.  Co.  v.  Dake,  87  N.  Y.  257 ;  Green  v.  Garrington,  16 
Ohio  St.  548 ;  Nichol  v.  Henry,  89  Ind.  54. 

«  Board  v.  Babcock,  5  Oreg.  472 ;  Throckmorton  v.  Price,  28  Tex.  605. 

^  Mut.  Life  Ins.  Co.  v.  Dake,  1  Abb.  N.  C.  (N.  Y.)  381. 

*Head  v.  Goodwin,  37  Me.  181.    Compare  Speer  v.  Evans,  47  Pa.  St.  141. 


762  REGISTRATION    OF    THE    INSTRUMENT. 

nicake  a  record  effective  as  constructive  notice  to  a  subsequent 
purchaser,  and  generally  if  such  purchaser  has  been  misled  to 
his  injury  by  the  neglect  of  the  recorder  to  make  such  indexes, 
his  remedy  is  against  the  recorder ;  ^  the  recorder  is  liable  to 
the  party  aggrieved  for  the  amount  of  his  damages  sustained  by 
reason  of  the  failure  of  the  recorder  to  index  the  instruments.^ 
The  grantee  employs  and  pays  the  officer  to  do  the  recording 
properly,  and  to  him  the  officer  is  responsible  in  damages  for 
the  loss  resulting  from  any  mistake,  failure,  or  negligence  of 
his  own  in  the  premises.^ 

§  733.  Descriptive  Index — Rule  in  Some  States. — In 
Iowa  an  instrument  filed  for  record  does  not  impart  construct- 
ive notice  to  third  persons  until  the  entries  are  made  in  the 
index.*  The  mere  filing  of  a  conveyance  in  the  records  of  the 
office,  without  having  it  entered  in  the  index  or  recorded,  is  not 
sufficient  to  impart  constructive  notice.^ 

So  the  record,  complete  in  every  respect,  except  that  it  is  not 
properly  entered  in  the  index,  is  not  constructive  notice.*' 

The  statutes  of  Indiana,  Michigan,  and  Wisconsin  are  simi- 
lar to  the  Iowa  statute.^  These  statutes  say  that  the  indexing 
shall  be  constructive  notice.  It  is  held  in  these  States  that  an 
error  in  the  main  record  where  the  index  entries  do  not  show 
or  indicate  the  mistake,  vitiates  the  notice,  and  the  record  im- 
parts notice  only  of  what  it  contains.*  Without  the  index 
there  is  no  notice.^     The  index  and  the  full  record  together 

'  Green  v.  Garrington,  10  Ohio  St.  548. 

2  Bishop  V.  Selmeider,  46  Mo.  472 ;  Board  v.  Babcock,  5  Oreg.  472. 

3  Ritchie  v.  Griffiths,  1  Wash.  St.  429. 

*  Code,  sect.  1925 ;  Hibbard  v.  Zenor,  75  Iowa,  471. 

5  Barney  v.  McCarty,  15  Iowa,  510  ;  Whalley  v.  Small,  25  Iowa,  184  ;  Miller 
V.  Bradford,  12  Iowa,  14. 

®  Gwynn  v.  Turner,  18  Iowa,  1 ;  Howe  v.  Thayer,  49  Iowa,  154 ;  Scoles  v.  Wil- 
sey,  11  Iowa,  261 ;  Calvin  v.  Bowman,  10  Iowa,  529 ;  Bostwick  v.  Powers,  12 
Iowa,  456 ;  Noyes  v.  Horr,  13  Iowa,  570 ;  White  v.  Hampton,  13  Iowa,  259. 

'  Rev.  Stat.  Ind.  1888,  sect.  2951 ;  Public  Acts.  Mich.  1889,  p.  337.  Eev. 
Stat.  Wis.  1878,  sects.  758,  759. 

^  Lowry  v.  Smith,  97  Ind.  466 ;  Miller  v.  Bradford,  12  Iowa,  14. 

^Barneyv.  McCarty,  15  Iowa,  510;  83  Ann.  Dec.  428;  Lombard  v.  Cul- 
bertson,  59  Wis.  433 ;  Noyes  v.  Horr,  13  Iowa,  590. 


CONSTRUCTION    OF    REGISTRATION    LAWS.  763 

constitute  the  record,  and  a  mistake  in  one  does  not  usually 
vitiate  if  the  other  gives  the  matter  correctly/ 

Notice  is  not  given  where  the  record  is  not  indexed.^ 

§  734.  Defectively  Recorded  Mortgage. — A  defectively 
recorded  mortgage  in  many  States  has  no  priority  over  any 
other  indebtedness  of  the  mortgagor.  Thus,  a  mortgagee 
whose  deed  is  defectively  registered,  or  is  unrecorded,  has  no 
priority  over  any  other  creditor.^  And  in  Ohio,  as  against 
subsequent  purchasers,  mortgages  have  no  effect  either  at  law 
or  in  equity  until  delivered  to  the  register  of  the  proper  county 
for  registration.^ 

Other  courts  hold  that  such  a  mortgage  is  a  good  equitable 
lien,  and  superior  to  the  claims  of  creditors  under  subsequent 
judgments.^ 

Generally  a  purchaser  of  land  is  presumed  to  have  notice  of 
any  defect  of  title  apparent  upon  the  face  of  his  title  papers  or 
by  public  records,  and  will  be  required  to  take  notice  of  the 
title  or  claims  of  persons  in  possession  ;  but  he  is  not  required 
to  look  for  latent  defects  in  the  chain  of  conveyances,  when 
regular  on  their  face  and  apparently  conveying  legal  title.^ 
And  a  purchaser  of  land  who  has  no  notice  of  any  irregularity 
in  the  proceedings  by  which  his  vendor  acquired  title  will  be 
protected  ;  ^  so  will  a  purchaser  who  has  no  notice  that  his 
grantor's  deed  is  but  a  mortgage.^ 

Where  a  mortgage  of  2,000  acres,  more  or  less,  is  incorrectly 
recorded  "  200  acres,  more  or  less,"  but  the  boundaries  are  cor- 

^  Shove  V.  Larsen,  22  Wis.  142 ;  Sinclair  v.  Slawson,  44  Mich.  123 ;  38  Am. 
Eep.  235 ;  St.  Croix  Land  Co.  v.  Ritchie,  73  Wis.  409 ;  Webb  on  Record  of 
Titles,  sect.  143,  and  cases  cited. 

^  Ritchie  v.  Griffiths,  1  Wash.  St.  429. 

'  Henderson  v.  McGhee,  6  Heisk.  (Tenn.)  55. 

*Betz  V.  Snyder  (Ohio),  28  N.  E.  Rep.  234 ;  Bloom  v.  Nog^le,  4  Ohio  St.  45. 

^  Sixth  Ward  Build.  Asso.  v.  Willson,  41  Md.  506;  Gen^  Ins.  Co.  v.  U.  S. 
Ins.  Co.,  10  Md.  524  ;  Nelson  v.  Bank,  27  Md.  73  ;  Nice's  Appeal,  54  Pa.  St. 
200;  Abbott  v.  Godfroy,  1  Mich.  178. 

*  Robbins  v.  Moore,  129  111.  30  ;  Dickerson  v.  Evans,  84  111.  451 ;  Moore  v. 
Hunter,  1  Gilm.  (111.)  317. 

'  Jenkins  V.  Pierce,  98  111.  646;  McHany  v.  Schenk,  88  111.  357. 

*  Jenkins  v.  Rosenberg,  105  111.  157. 


764  REGISTRATION    OF    THE   INSTRUMENT. 

rectly  described,  the  record  is  sufficient,  notwithstanding  the 
mistake  in  quantity,  to  affect  a  subsequent  mortgagee  with 
notice/ 

Article  2. 
Constructive  Notice. 

^  735.  Records    Complying  with    the  ^  743.  General  Description. 

Statutes.  §  744.  Lis  Pendens. 

§  736.  Waiving  Priority  by  Agreement.  §  745.  Possession  by  One  Not  Shown 

§  737.  Waiving  Priority.  to  be  the  Owner  by  Eecord 

§  738.  Facts  and  Circumstances  May  Title. 

Control  Priority.  ^  746.  Mortgage  by  Absolute  Deed — 

§  739.  Priority  of   Several  Mortgages  Defeasance  Unrecorded. 

Simultaneously  Given.  ^  747.  Possession    of    Part   of    the 

§  740.  General  Recitals.  Premises. 

§  741.  Express  Recitals.  §  748.  Actual  Possession. 

^  742.  Estoppel  in  Pais  Against  Mort-  §  749.  Character  of  the  Possession 

gagee.  Required. 

§  735,  Records  Complying  with  the  Statutes. — When  the 
record  of  a  mortgage  comphes  with  the  conditions  of  the  stat- 
utes, then  it  is  constructive  notice  of  its  contents  to  all  subse- 
quent purchasers  and  mortgagees.^  It  is  constructive  notice  to 
subsequent  creditors.^  Every  subsequent  inquirer  is  bound  to 
know  the  existence  of  the  record.* 

The  record  of  a  mortgage  containing  a  power  of  sale  puts 
subsequent  purchasers  upon  inquiry  whether  any  proceedings 
have  been  instituted  thereunder.^ 

The  record  is  constructive  notice  to  all  the  world  that  comes 
after.®  So  when  a  purchaser  examines  the  records  and  finds  a 
good  conveyance  from  the  owner  of  the  land  to  his  mortgagor, 
he  is  not  required  to  look  further.^ 

1  Kennedy  v.  Boykin  (S.  Car.),  14  S.  E.  Rep.  809. 

2  North  V.  Knowiton,  23  Fed.  Rep.  163 ;  Tripe  v.  Marcy,  39  N.  H.  439 ;  Gran- 
din  V.  Anderson,  15  Ohio  St.  286 ;  Buchanan  v.  Bank,  78  111.  500 ;  Barbour  r. 
Nichols,  3  R.  I.  187 ;  Ogden  v.  Walters,  12  Kan.  282 ;  Banton  v.  Shorey,  77 
Me.  48. 

'  Hickman  v.  Perrin,  6  Cold.  (Tenn.)  135. 

*  Jones  V.  Smith,  1  Hare,  43,  55 ;  Ware  v.  Egmont,  4  De  Gex,  M.  &  G.  460, 
473 ;  White  &  Tudor's  Lead.  Cos.  (4th  Am.  ed.)  p.  121. 
^Heaton  v.  Prather,  84  111.  330;  Farrar  v.  Payne,  73  111.  82. 
«Hendrickson  v.  AVoolley,  39  N.  J.  Eq.  307 ;  Peters  v.  Ham,  62  Iowa,  656. 
^Connecticut  v.  Bradish,  14  Mass.  296  ;  Morse  v.  Curtis,  140  Mass.  112;  Fal- 


CONSTRUCTION    OF   REGISTRATION   LAWS.  765 

As  a  general  rule,  when  the  mortgagee  has  traced  the  title 
down  to  his  mortgagor,  the  registry  is  his  protection  as  showing 
a  good  title  ;  ^  a  registration  is  constructive  notice  and  protects 
the  mortgagee  against  any  subsequent  liens."  The  registration 
of  a  deed  is  notice  only  to  those  who  claim  through  but  under 
the  mortgagor.^ 

§  736.  Waiving  Priority  by  Agreement. — If  all  the  parties 
agree  as  among  themselves,  the  lien  of  the  first  mortgage  may 
be  subject  to  the  lien  of  a  subsequent  mortgage ;  ■*  and  some 
authorities  hold  that  such  agreement  is  valid  as  against  an  in- 
nocent assignee.^  However,  if  the  assignee  takes  with  notice, 
he  is  bound  by  the  equities  of  such  agreement."  Such  an 
agreement  in  writing  recorded  would  not  be  notice.^ 

As  among  themselves,  the  agreement  may  be  verbal,  that  a 
subsequent  mortgage  shall  take  precedence.^ 

§  737.  Waiving  Priority. — A  prior  mortgagee  may  waive 
his  right  to  priority  in  favor  of  a  subsequent  mortgagee.^      So 

lass  V.  Pierce,  30  Wis.  443  ;  Bayles  v.  Young,  51  111.  127 ;  Sims  v.  Hammond,  33 
Iowa,  368 ;  Hill  v.  McNichol,  76  Me.  314, 316 ;  Mahoney  v.  Middleton,  41  Cal.  41. 

1  Stockwell  V.  State,  101  Ind.  1 ;  Losey  v.  Simpson,  3  Stockt.  (N.  J.  Eq.)  246 ; 
Cook  V.  Travis,  20  N.  Y.  400,  402 ;  Bingham  v.  Kirkland,  34  N.  J.  Eq.  229  ; 
Tarbell  v.  West,  86  N.  Y.  280. 

"Davisu.  Milligan,  88  Ala.  523;  Childs  v.  Hurd,  32  W.  Va.  66;  Keith  & 
Perry  Coal  Co.  v.  Bingham,  97  Mo.  196 ;  Lindley  v.  Martindale,  78  Iowa,  379  ; 
Harding  v.  Allen,  70  Md.  395  ;  Use  v.  Seinsheimer,  76  Tex.  459. 

» Kaynor  v.  Wilson,  6  Hall  (N.  Y.),  469 ;  Stuyvesant  r.  Hall,  2  Barb.  Ch.  (N. 
Y.)  151 ;  Murray  v.  Ballon,  1  Johns.  Ch.  (N.  Y.)  566 ;  Keller  v.  Nutz,  5  Serg. 
&  R.  (Pa.)  246  ;  Lightner  v.  Mooney,  10  Watts  (Pa.),  412 ;  Bates  v.  Norcross, 
14  Pick.  (Mass.)  224 ;  Tilton  v.  Hunter,  24  Me.  29 ;  Crockett  v.  Maguire,  10 
Mo.  34  ;  Leiby  v.  Wolf,  10  Ohio,  83. 

*  Jones  V.  Phelps,  2  Barb.  Ch.  (N.Y.)  440;  Decker  v.  Boice,  19  Hun  (N.  Y.), 
152 ;  Beasley  v.  Henry,  6  111.  App.  485 ;  Poland  v.  Lamoille  Railroad  Co.,  52 
Vt.  144 ;  Sparks  v.  Bank,  7  Blackf.  (Ind.)  469. 

^  Conover  v.  Van  IMater,  18  N.  J.  Eq.  481 ;  Cable  v.  Ellis,  86  111.  525 ;  Free- 
man V.  Schroedcr,  43  Barb.  (N.  Y.)  618. 

«Bank  of  Savings  v.  Frank,  45  N.  Y.  Super  Ct.  404. 

''Gillig  V.  Maass,  28  N.  Y.  191. 

^  New  York  Chem.  Manf.  Co.  v.  Peck,  2  Halst.  (X.  J.  Eq.)  37 ;  Bank  r. 
Campbell,  2  Rich.  Eq.  (S.  Car.)  179 ;   Rigler  v.  Light,  90  Pa.  St.  235. 

»Clason  V.  Shepherd,  6  Wis.  369  ;  Mutual  Life  Ins.  Co.  v.  Sturges,  33  N.  J. 
Eq.  328. 


766  REGISTRATION    OP    THE    INSTRUMENT. 

a  first  mortgagee  may  covenant  with  a  third  mortgagee,  or  any- 
subsequent  one,  that  the  third  mortgage  shall  have  priority 
over  the  first/ 

But  such  covenant  does  not  give  the  subsequent  mortgage  a 
priority  of  lien  over  the  intermediate  mortgages,  because  the 
interest  of  the  parties  to  the  agreement  under  which  this  sub- 
sequent mortgage  was  taken  was  not  to  place  this  mortgage 
ahead  of  the  intermediate  mortgages,  or  to  give  its  owner  an 
interest  in  the  first  mortgage,  but  simply  that  the  liens  prior 
to  his  mortgage  should  only  be  the  amount  of  the  intermediate 
mortgages ;  and  the  agreement  would  be  fully  satisfied  by  a 
discharge  of  the  first  mortgage.^ 

And  when  the  prior  mortgagee  has  released  his  mortgage,  in 
order  to  give  the  subsequent  mortgagee  priority,,  who  had 
loaned  money  to  make  improvements  on  the  land,  he  cannot 
then  set  up  liis  prior  lien  because  the  mortgagor  used  the  money 
for  other  purposes.^  But  an  admission  by  one  of  two  mort- 
gagees whose  mortgages  were  simultaneous  and  recorded  on  the 
same  day,  that  there  is  no  priority  of  one  over  the  other,  may 
be  contradicted.*  An  admission  in  writing  that  one  mortgage 
had  priority  over  another,  will  be  admitted  in  evidence  to  show 
that  the  deeds  took  effect  at  the  same  instant.'  And  when  a 
mortgagee  releases  his  mortgage  and  takes  a  new  security,  not 
knowing  of  a  judgment  lien,  he  may  have  his  prior  mortgage 
restored.^ 

§  738.  Facts  and  Circumstances  May  Control  Priority. — 
Facts  and  circumstances  may  sometimes  control  in  determining 
priority  of  two  mortgages.  So  facts  may  show  that  the  vendor 
intended  to  waive  his  lien.^     And  this  is  the  case  where  a  ven- 

^  Raleigh  Nat.  Bank  v.  Moore,  94  N.  Car.  734 ;  Frost  v.  Yonkers  Sav.  Bank, 
70  N.  Y.  553. 

2  Taylor  v.  Wing,  84  N.  Y.  471. 

'Darst  V.  Bates,  95  111.  493. 

*  Beers  v.  Broome,  4  Conn.  247 ;  Maze  v.  Burke,  12  Phila.  (Pa.)  335. 

^  Beers  v.  Hawley,  2  Conn.  110. 

«Pearce  v.  Buell  (Oreg.),  29  Pac.  Rep.  78. 

'  Bavley  v.  Greenleaf,  7  Wheat.  (U.  S.)  46 ;  Tribble  v.  Oldham,  5  J.  J.  Marsh. 
(Ky.)  137. 


CONSTRUCTION    OP    REGISTRATION    LAWS.  767 

dee  sells  part  of  the  property  and  takes  two  mortgages  of  one 
date  for  part  of  the  consideration,  intending  that  one  of  the 
mortgages  should  be  assigned  to  his  vendor  for  the  purchase 
price,  or  to  secure  the  original  consideration  of  the  land,  and 
that  it  should  have  priority,  both  mortgages  being  registered 
concurrently,  but  the  one  intended  for  his  vendor  was  first  as- 
signed to  him,  and  afterward  the  other  assigned  to  another 
party ;  the  mortgage  assigned  to  his  vendor  will  take  priorit}".^ 

When  two  mortgages  are  given  simultaneously  upon  the 
same  property,  each  mortgagee  taking  with  notice,  neither  of 
them  is  entitled  to  a  preference  in  payment  under  the  recording 
act,  although  one  of  them  procures  his  mortgage  to  be  registered.^ 

A  different  question  might  have  been  presented  if  the  mort- 
gage which  was  first  recorded  had  been  foreclosed  under  the 
statute  or  otherwise,  and  the  premises  had  been  sold  to  a 
bona  fide  purchaser  without  notice  that  the  two  mortgages 
were  given  simultaneously.^ 

The  mortgage  first  recorded  is  prima  Jade  the  first  lien,  and 
may  be  shown  to  be  conditionally  recorded  ;  hence,  a  second 
mortgage,  recorded  before  the  condition  was  complied  with, 
may  be  entitled  to  priority.*  Where  a  mortgage  is  executed, 
and  before  the  mortgagor  acquires  title  to  the  land,  the  record 
thereof  is  not  notice  to  the  vendor  who  takes  a  subsequent 
mortgage  for  the  purchase-money.^ 

§  739.  Priority  of  Several  Mortgages  Simultaneously 
Given. — The  general  principle  is  that  mortgages  duly  recorded 
have  preference  according  to  the  order  in  which  they  were  made* 
and  executed.  This  general  rule  is  itself  subject  to  modifica- 
tions. The  priority  of  registration  gives  no  preference  of  right 
against  a  prior  mortgage,  of  which  the  junior  mortgagee  had 
notice  when  he  takes  his  mortgage.^ 

» Stafford  v.  Van  Rensselaer,  9  Cow.  (N.  Y.)  316. 
2  Rhoades  v.  Canfield,  8  Paige  (N.  Y.),  545. 
*3  Waterman's  Am.  Ch.  Dig.,  p.  40  el  seq. 

*  Freeman  v.  Schroeder,  43  Barb.  (N.  Y.)  618. 
^Schoch  V.  Birdsall  (Minn.),  51  N.  W.  Rep.  382. 

*  Rogers  v.  Jones,  8  N.  H.  2M ;  Copeland  v.  Copeland,  28  Me.  525. 


768  REGISTRATION    OF    THE    INSTRUMENT. 

Whether  one  of  several  mortgages  so  executed,  shall  have 
priority  is  a  matter  of  fact  for  the  jury  to  decide  from  the 
evidence  of  such  intention.^ 

The  mere  act  of  handing  one  mortgage  to  the  register  an 
instant  before  the  other  does  not  give  it  priority.^ 

But  if  the  mortgages  are  executed  at  the  same  time  to  secure 
debts  maturing  at  different  times,  many  courts  hold  that  is  a 
prior  lien  which  secures  the  note  first  falling  due.^ 

The  rule  is  the  same  as  it  is  when  one  mortgage  secures 
debts  maturing  at  dift'erent  times ;  *  but  other  authorities  hold 
that  the  maturity  of  the  debts  does  not  establish  priority.^ 

§  740.  General  Recitals. — A  recital  in  a  deed  of  a  prior 
unrecorded  mortgage  as  an  existing  incumbrance  is  actual 
notice  of  such  unrecorded  mortgage  to  the  grantee,  and  con- 
structive notice  of  its  existence  to  parties  claiming  under  him.^ 
The  recital  must  explain  itself  or  refer  to  some  deed  which 
will  explain  it,^  and  must  be  in  the  course  of  the  title  under 
which  the  purchaser  claims.* 

When  upon  the  face  of  the  instrument  itself,  it  is  apparent 
for  what  purpose  it  was  executed,  and  there  is  sufficient  to  j)ut 
the  purchaser  upon  inquiry  as  to  the  title  of  the  holder,  he  will 
be  bound  to  make  such  inquiry.' 

1  Gilman  v.  Moody,  43  N.  H.  239. 

^  Koevenig  r.  Schmitz,  71  Iowa,  175. 

^  Gardner  v.  Diedrichs,  41  111.  159  ;  Eoberts  v.  Mansfield,  32  Ga.  228 ;  Ma- 
rine Bank  v.  Bank,  9  Wis.  57. 

*  Isett  V.  Lucas,  17  Iowa,  503 ;  Bank  v.  Covert,  13  Ohio,  240 ;  Harris  v.  Har- 
lan, 14  Ind.  439. 

5  Gilman  v.  IVIoody,  43  N.  H.  239  ;  Granger  v.  Crouch,  86  N.  Y.  494 ;  Coller 
V.  Huson,  34  N.  J.  Eq.  38 ;  Riddle  v.  George,  58  N.  H.  26 ;  Shaw  v.  Newsom, 
78  Ind.  335. 

«Knox  County  v.  Brown,  103  Mo.  223;  Merrill  v.  Ireland,  40  Me.  569; 
George  v.  Kent,  7  Allen  (Mass.),  16;  "White  v.  Foster,  102  Mass.  375; 
Buchanan  v.  Balkum,  60  N.  H.  406 ;  Gooding  v.  Riley,  50  N.  H.  400 ;  San- 
born V.  Robinson,  54  N.  H.  239;  iElna  Life  Ins.  Co.  v.  Ford,  89  111.  252; 
United  States  Mortgage  Co.  v.  Gross,  93  111.  483 ;  Parke  v.  Neeley,  90  Pa.  St.  52 ; 
Hassey  v.  Wilke,  55  Cal.  525 ;  ^tna  Life  Ins.  Co.  v.  Bishop,  69  Iowa,  645. 

'White  V.  Carpenter,  2  Paige  (N.  Y.),  217. 

8  Boggs  v.  Varner,  6  W.  &  S.  (Pa.)  469  ;  Mueller  v.  Engeln,  12  Bush  (Ky.),  441. 

» Foster  v.  Strong,  5  111.  App.  223. 


CONSTRUCTION   OF    REGISTRATION    LAWS.  769 

The  purchaser  is  bound  to  take  notice  of  all  liens  shown  to 
exist  by  his  vendor's  title-deed.' 

Notice  coming  from  the  record  can  never  be  more  extensive 
than  the  facts  referred  to  or  stated.^ 

§  741.  Express  Recitals. — If  the  purchaser  takes  a  deed 
with  notice  that  the  premises  are  incumbered  by  a  mortgage, 
he  is  bound  by  the  recital,  though  the  mortgage  is  not  recorded.^ 
So  when  a  mortgage  refers  to  a  deed  of  conveyance  between  the 
same  parties,  and  describes  it  as  of  even  date  with  the  mort- 
gage, the  mortgagor  is  chargeable  with  notice  of  the  deed  and 
its  contents.*  And  when  the  second  mortgage  recites  that  it  is 
taken  subject  to  a  prior  mortgage,  it  cannot  take  priority, 
though  the  first  mortgage  is  corrected  as  to  a  mistake  in  the 
description  of  the  property.^ 

So  actual  notice  of  a  mortgage  binds  a  purchaser  with  the 
recitals  in  that  mortgage.®  When  the  mortgaged  premises 
have  been  sold  in  parcels  to  different  purchasers  at  different 
times,  in  the  absence  of  any  intervening  equities,  it  is  gener- 
ally held  that  the  purchasers  must  resort  to  their  liens  in  the 
inverse  order  of  alienation.^ 

In  Ohio  where  a  mortgage  takes  effect  only  from  its  delivery 
for  record,  its  priority  is  not  affected  by  notice  of  a  prior  unre- 
corded mortgage ;  so  excepting  a  prior  unrecorded  mortgage  in 
a  subsequent  mortgage  does  not  affect  the  priority  given  by 
record.^ 

But  generally  when  a  mortgage  is  excepted  from  a  covenant 

^  McRimmon  v.  Martin,  14  Tex.  318 ;  Ticrnan  r.  Thurman,  14  B.  Mon.  (Ky.) 
277 ;  Major  v.  Bukley,  51  Mo.  227 ;  Daughaday  v.  Paine,  6  Minn.  452 ;  Orrick  v. 
Durham,  79  Mo.  174. 

^  Norman  v.  Towns,  130  Mass.  52 ;  Gale  v.  Morris,  29  N.  J.  Eq.  222. 

'  Garrett  v.  Puckett,  15  Ind.  485  ;  Westervelt  v.  Wyckoff,  32  N.  J.  Eq.  188 ; 
Kitchell  V.  Mudgett,  37  Mich.  81. 

*  Hull  V.  Sullivan,  63  Ga.  126. 

*  Council  Bluff  Lodge  v.  Billups,  67  Iowa,  674. 

^  Coppin  V.  Fernyhough,  2  Bro.  C.  C.  291 ;  Howard  Ins.  Co.  v.  Halsey,  8  N.  Y. 
271. 

'Iglehart  v.  Crane,  42  HI.  261. 

« Bercaw  v.  Cockerill,  20  Ohio  St.  163  ;  Coe  r.  Eailroad  Co.,  10  Ohio  St.  372, 
406. 

49 


770  REGISTRATION    OF    THE    INSTRUMENT. 

of  warranty  in  a  deed,  this  charges  the  purchaser  with  notice, 
although  the  mortgage  be  unrecorded/ 

If  a  purchaser  rehes  on  the  statement,  and  the  statements 
are  erroneous,  he  is  bound  by  the  contents  of  the  deed,  when 
fraud  does  not  enter  into  the  transaction.^ 

But  if  the  mortgagee  makes  untruthful  steatements  touching 
a  material  fact  in  relation  to  a  security  in  the  form  of  an  abso- 
lute deed,  such  failure  to  state  the  truth  will  postpone  such 
security  to  that  of  a  subsequent  attaching  creditor.* 

But  his  mortgage  will  not  be  postponed  merely  because  he 
knew  that  the  mortgagor  was  making  a  subsequent  conveyance 
of  the  premises,  and  did  not  make  known  his  title.  In  order 
to  postpone  his  prior  lien,  there  must  be  actual  or  constructive 
fraud  on  the  mortgagee's  part.* 

In  Nebraska  the  recording  of  a  real  estate  mortgage  which 
is  not  legally  acknowledged,  does  not  operate  as  constructive 
notice.^ 

§  742,  Estoppel  in  Pais  Against  Mortgagee. — If  the 
mortgagee  does  some  act,  or  makes  some  material  representa- 
tion, to  influence  the  conduct  of  a  third  party  by  inducing  a 
belief  of  a  given  state  of  facts,  and  such  party  acts  upon  such 
belief  and  is  injured,  or  M^ould  be,  the  mortgagee  is  estopped 
to  assert  his  rights  as  against  such  third  party.® 

But  the  purchaser  is  bound  to  know  of  a  mortgage  already 
recorded.''  When  the  holder  of  one  of  two  mortgages,  exe- 
cuted on  the  same  da}^,  represents  to  a  person  who  is  to  take 
the  assignment  of  the  other  mortgage,  that  there  is  no  priority 

^  Morrison  v.  Morrison,  38  Iowa,  73. 

^  Jones  V.  Smith,  1  Hare,  43.    Compare  Drysdale  v.  Mace,  2  Sm.  &  G.  225 ; 
Short  V.  Fogle,  42  Kan.  349. 
^  Geary  v.  Porter,  17  Oreg.  465. 

*  Paine  v.  French,  5  Ohio,  336;  Palmer  v.  Palmer,  48  Vt.  69;  Pickard  v. 
Sears,  6  Ad.  &  El.  469,  471. 

*  Keehng  v.  Hoyt,  31  Nebr.  433. 

«  Heane  v.  Rogers,  9  Barn.  &  Cress.  577,  586 ;  Chester  v.  Greer,  5  Humph. 
(Tenn.)  26 ;  Piatt  v.  Squire,  12  Met.  (Mass.)  494 ;  Bailey  v.  Gould,  Walk. 
(Mich.)  478. 

^  Jones  V.  Smith,  1  Hare,  43  ;  Rice  v.  Dewey,  54  Barb.  (N.  Y.)  455. 


CONSTRUCTION    OF    REGISTRATION    LAWS.  771 

in  the  deeds,  he  is  estopped  from  claiming  a  priority  against 
such  person.^  And  an  agent  cannot  take  advantage  of  his 
principal,  where  the  agent's  negligence  would  give  him  pri- 
ority ;  he  must  hold  subject  to  his  principal.^  If  the  first 
mortgagee  combine  with  the  mortgagor  to  induce  another  to 
loan  money  upon  the  estate  mortgaged,  his  mortgage  will  be 
postponed  to  the  second.^ 

Where  a  party  having  a  mortgage  upon  land,  puts  it  in  the 
power  of  another  to  sell  or  mortgage  the  property  to  a  third 
person  without  notice,  he  is  estopped  to  assert  his  title.*  Or  if 
the  first  mortgagee  cancels  his  mortgage,  knowing  of  a  subse- 
quent incumbrance,  and  takes  a  conveyance  or  another  mort- 
gage, he  loses  his  first  lien  and  the  subsequent  incumbrance 
will  take  priority.* 

§  743.  General  Description. — The  general  rule  is  that  one 
having  knowledge  of  distinct  facts  affecting  the  title  to  land 
which  he  is  about  to  purchase,  is  not  at  liberty  to  close  his 
eyes,  and  then  screen  himself  under  a  plea  of  ignorance  of 
other  facts  connected  with  those  already  known  to  him  ;  but 
he  is  bound  in  good  faith  to  make  reasonable  inquiry,  and 
will  be  presumed  to  have  done  so,  and  will  be  affected  with 
notice  of  all  such  facts  as  he  might  learn  by  such  inquiry.^ 

So  one  who  has  knowledge  of  a  prior  unrecorded  mortgage 
upon  some  portion  of  the  premises  of  which  he  is  about  to  pur- 
chase a  part,  is  bound  as  to  the  extent  of  the  mortgage  and  its 
lien.^ 

^  Broome  v.  Beers,  6  Conn.  198.    See,  also,  Stafford  v.  Ballou,  17  Vt.  329. 

'Mitchell  V.  Aten,  37  Kan.  33. 

3  Peter  v.  Russell,  1  Eq.  Cas.  Abr.  322. 

*  Briggs  V.  Jones,  L.  R.  10  Eq.  92,  98 ;  Rice  r.  Rice,  2  Drew.  73. 

^  Keohane  v.  Smith,  97  111.  156 ;  Skeele  v.  Stocker,  11  111.  App.  143 ;  Plutch- 
inson  v.  Bramhall,  42  N.  J.  Eq.  372 ;  Holt  v.  Baker,  58  N.  H.  276 ;  Woollen  v. 
Hillen,  9  Gill  (Md.),  185.    See,  also,  Christie  v.  Hale,  46  111.  117. 

*  Jackson,  etc..  Railroad  Co.  v.  Davison,  65  Mich.  417;  Blaisdell  v.  Stevens, 
16  Vt.  179 ;  Cox  v.  Milner,  23  HI.  476 ;  Bacon  v.  O'Connor,  25  Tex.  213 ; 
Hume  V.  Franzen,  73  Iowa,  25 ;  Stokes  v.  Riley,  121  111.  116  ;  Storrs  v.  AVal- 
lace,  61  Mich.  437 ;  Converse  v.  Blumrich,  14  Mich.  109,  120. 

MVillink  v.  Morris  Can.  and  Bank.  Co.,  3  Green  (N.  J.  Eq.),  377 ;  2  White 
i&^Tudor's  Lead.  Cas.  in  Eq.  (4th  Am.  ed.),  p.  190,  pt.  1 ;  George  v.  Kent,  7 


772  REGISTRATION    OF    THE    INSTRUMENT. 

And  in  general  one  having  notice  of  a  prior  mortgage,  can 
only  acquire  an  interest  subordinate  to  it.^ 

It  is  sufficient  if  the  description  be  correct  as  far  as  it  goes 
and  full  enough  to  direct  attention  to  the  sources  of  full  and 
correct  information,  as  to  the  character  of  the  amount  to  be  se- 
cured. Judge  Lewis  says  that  it  is  generally  held  sufficient, 
if  it  appears  that  the  debt  is  secured,  and  that  the  amount  of  it 
may  be  ascertained  by  reference  to  other  instruments,  or  by 
inquiry.^  A  record  of  the  mortgage  with  a  general  description 
of  the  indebtedness  is  constructive  notice,  and  sufficient  to  put 
all  parties  interested  upon  inquiry  ;  and  they  must  inquire  in 
the  proper  quarter.^ 

One  who  takes  a  quit  claim  from  the  mortgagor  of  all  his 
interests,  takes  the  mortgagor's  equity  of  redemption.* 

The  record  of  a  purchase-money  mortgage  is  not  notice  of 
the  unrecorded  deed  by  the  vendor,^  but  is  notice  to  one  claim- 
ing under  the  mortgagee.^ 

§  744.  Lis  Pendens. — Notice  of  lis  pendens  can  only  affect 
persons  claiming  under  the  mortgagor,  and  not  those  claiming 
by  title  paramount.'^  When  an  action  in  relation  to  the  title 
of  the  mortgaged  property  has  been  commenced,  and  a  notice 
of  the  pendency  of  the  suit  has  been  filed,  according  to  the 
statute,  it  is  constructive  notice.^ 

But  the  proceedings  to  foreclose  an  unrecorded  mortgage 

Allen  (Mass.),  16;  Barr  v.  Kinard,  3  Strobh.  (S.Car.)  73;  Ijames  v.  Gaither,93 
N.  Car.  358,  362 ;  Martin  v.  Cauble,  72  Ind.  67. 

1  Wilson  V.  Vaughan,  61  Miss.  472 ;  Simons  v.  Bank,  93  N.  Y.  269. 

"Morris  v.  Murray,  82  Ky.  36. 

*  Passumpsic  Savings  Bank  v.  Bank,  53  Vt.  82 ;  Seymour  v.  Darrow,  31  Vt. 
131 ;  Babcock  v.  Lisk,  57  111.  327 ;  Heaton  v.  Prather,  84  111.  330 ;  Dargin  v. 
Beeker,  10  Iowa,  571 ;  Hamilton  v.  Nutt,  34  Conn.  501 ;  Locker  v.  Riley,  30 
N.  J.  Eq.  104. 

*  Smith  V.  Bank,  21  Ala.  125. 

6  Pierce  v.  Taylor,  23  Me.  246 ;  Losey  v.  Simpson,  3  Stockt.  (N.  J.  Eq.)  246. 

«  Center  t).  Bank,  22  Ala.  743. 

^Shaw  V.  Barksdale,  25  S.  Car.  204,  distinguishing  Witte  v.  Clarke,  17 
S.  Car.  313. 

^Ayrault  v.  Murphy,  54  N.  Y.  203;  Murray  v.  Ballon,  1  Johns.  Ch.  (N.  Y.) 
566;  Bellamy  v.  Sabine,  1  De  G.  &  J.  566,  580;  Tyler  v.  Thomas,  25  Beav.  47; 
2  White  &  Tudor's  Lead  Cas.  in  Eq.  (4th  Am.  ed.),  p.  192,  pt.  1. 


CONSTRUCTION    OF    REGISTRATION    LAWS.  773 

do  not  constitute  such  lis  pendens  as  would  be  notice  to  a  pur- 
chaser of  the  mortgaged  property.  The  notice  must  be  actual, 
such  as  would  affect  the  conscience  of  the  purchaser,  and  charge 
him  with  fraud/  But  in  Alabama  it  is  held  that  the  pendency 
of  a  foreclosure  suit,  from  the  time  when  service  is  perfected, 
is  constructive  notice  of  the  mortgage,  although  it  is  not  re- 
corded according  to  the  requisition  of  the  statute.^ 

The  general  rule  is  that  those  persons  only  are  charged  with 
notice  or  affected  by  lis  pendens  who  purchase  from  parties  to 
the  suit.^  So  a  purchaser  of  land  from  a  mortgagor  assuming 
the  mortgage  is  not  affected  by  the  pendency  of  a  suit  to  which 
this  grantor  is  not  a  party.* 

§  745.  Possession  by  One  Not  Shown  to  be  the  Owner 
BY  Record  Title. — A  party  holding  possession  of  land,  the 
record  not  showing  the  title  to  be  in  him,  is  a  circumstance  to 
put  a  purchaser  upon  inquiry.  Purchasers  are  chargeable 
with  notice  of  all  title  or  claim  under  which  the  land  pur- 
chased is  held,  or  claimed  by  an  occupant  in  possession.^  So 
after  a  reasonable  acceptance  of  an  option  to  purchase  con- 
tained in  a  lease,  the  lessee's  possession  becomes  that  of  owner 
and  gives  notice  of  his  rights  as  such  to  a  subsequent  mort- 
gagee of  the  vendor  or  the  lessor,  who  takes  his  mortgage  sub- 
ject thereto.®  And  if  the  occupant  claims  title  by  deed,  his 
possession  is  equivalent  to  the  recording  of  such  deed,  and  is, 
therefore,  constructive  notice,  as  held  by  many  authorities.^ 

^  Douglass  V.  McCrackin,  52  Ga.  596 ;  Newman  v.  Chapman,  2  Rand.  (Va.)  93. 
"^  Hoole  V.  Attorney-General,  22  Ala.  190. 

'Stuj'vesant  v.  Hone,  1  Sandf.  Ch.  (N.  Y.)  419;  Parks  v.  Jackson,  11  Wend. 
(N.  Y.)  442. 

*  Green  v.  Rick,  121  Pa.  St.  130. 

^MuUins  V.  Wimberly,  50  Tex.  457;  Stagg  v.  Small,  4  111.  App.  192;  2 
White  &  Tudor's  Lead.  Gas.  in  Eq.  (4th  Am.  ed.),  p.  180,  pt.  1. 

*  Smith  V.  Gibson,  25  Nebr.  511. 

'  Seymour  v.  McKinntry,  lOfi  N.  Y.  230  ;  Westbrook  v.  Gleason,  79  N.  Y.  23 ; 
Brainard  v.  Hudson,  103  111.  218 ;  Cowen  v.  Loomis,  91  111.  132 ;  Truesdale  v. 
Ford,  37  111.  210,  213 ;  Morrison  v.  March,  4  Minn.  422;  GrofFt;.  Ramsey,  19 
Minn.  44 ;  Emmons  v.  Murray,  16  N.  H.  385 ;  Taylor  v.  Mosely,  57  Miss.  544 ; 
Perkins  v.  West,  55  Vt.  265 ;  Taylor  v.  Stibbert,  2  Ves.  Jr.  437  ;  Moreland  v. 
Richardson,  24  Beav.  33. 


774  REGISTRATION    OF   THE   INSTRUMENT. 

So  when  a  party  has  made  permanent  improvements,  and  cul- 
tivated the  land,  his  possession  is  sufficiently  open  and  patent 
to  put  a  mortgagee  on  inquiry  and  charge  him  with  notice 
of  all  that  he  might  have  learned  by  such  inquiry.^ 

The  possession  of  land  by  a  third  person  is  notice  and  a  pur- 
chaser is  put  upon  inquiry  and  is  chargeable  with  notice,  and 
when  thus  put  upon  inquiry,  he  is  bound  to  inquire  of  the 
occupants  with  respect  to  their  ground,  source  and  right  of  pos- 
session. Anything  short  of  this  would  clearly  fail  to  be  due  and 
reasonable  inquiry,^  Actual  possession  is  constructive  notice.^ 
The  registration  of  a  mortgage  affords  no  notice  whatever  to  a 
prior  purchaser  of  land  who  is  in  possession  under  a  bond  for  a 
deed,  if  the  mortgagee  had  constructive  notice  of  his  rights.* 

When  the  vendor  confers  upon  the  vendee  apparent  owner- 
ship of  the  premises,  with  apparent  authority  to  mortgage  the 
same,  he  is  estopped  from  asserting  his  lien  as  against  a  bona  fide 
purchaser  of  the  mortgage  ;  ^  this  possession  by  the  occupant  is 
full  notice  of  all  his  equities  to  the  full  extent  of  those  equities, 
and  in  law  is  equivalent  to  actual  notice  to  a  bona  fide  purchaser.® 

§  746.  Mortgage  by  Absolute  Deed — Defeasance  Unre- 
corded.— If  the  defeasance  be  not  recorded,  when  the  mortgage 
is  by  an  absolute  deed,  the  mortgagor's  possession  and  occupa- 
tion of  the  premises,  within  the  knowledge  of  the  grantee 
of  the  mortgage,  is  a  constructive  notice,  as  held  by  some 
authorities,  of  the  mortgagor's  title.^  But  on  the  other  hand  it 
is  held  that  such  open,  notorious  possession  of  the  grantor  will 
not  be  sufficient  to  impart  notice  to  a  purchaser  of  any  unre- 
corded defeasance.* 

1  Bright  V.  Buckman,  39  Fed.  Rep.  243. 

2  Kerr  v.  Day,  14  Pa.  St.  112  ;  Witter  v.  Dudley,  42  Ala.  616. 

3  McRea  v.  McMinn,  17  Fla.  886 ;  Hyer  v.  Caro,  18  Fla.  694 ;  Bernstein  v. 
Humes,  71  Ala.  260 :  Doolittle  v.  Cook,  75  111.  354. 

*Doolittle  V.  Cook,  75  111.  354 ;  Trustees  v.  Wheeler,  61  N.  Y.  88. 

5  Moore  v.  Bank,  55  N.  Y.  41 ;  Simpson  v.  Del  Hoyo,  94  N.  Y.  189;  Sey- 
mour V.  McKinstry,  106  N.  Y.  230. 

6  Partridge  v.  Chapman,  81  111.  137  ;  Stagg  v.  Small,  4  111.  App.  192. 
'  New  V.  Wheaton,  24  Minn.  406 ;  Pell  v.  McElroy,  36  Cal.  268. 

8  Pomroy  v.  Stevens,  11  Met.  (Mass.)  244 ;  Lamb  v.  Pierce,  113  Mass.  73 ; 


CONSTRUCTION   OF    REGISTRATION   LAWS.  775 

The  great  weight  of  authority  is  to  the  effect  that  possession 
by  the  grantor  after  a  full  conveyance,  is  not  constructive 
notice  to  subsequent  purchasers  of  any  right  reserved  in  the 
land  to  the  grantor.^ 

§  747.  Possession  of  Part  of  the  Premises. — The  posses- 
sion of  part  of  a  tract  of  land  is  sufficient  to  put  a  second 
purchaser  upon  inquiry  as  to  the  prior  title.^  The  notice  given 
by  possession  is  equivalent  to  a  constructive  notice  afforded  by 
registration  of  the  deed.^  Where,  therefore,  a  tenant  is  in  pos- 
session under  a  lease,  or  an  agreement,  a  person  purchasing  part 
of  the  estate  must  be  bound  to  inquire  on  what  terms  that  per- 
son is  in  possession.*  But  if  this  notice  is  constructive,  its 
effects  cannot  be  extended  to  cover  lands  outside  the  limits  of 
the  possession.^ 

§  748.  Actual  Possession. — As  a  general  rule,  the  authori- 
ties declare  that  open,  notorious,  and  exclusive  possession  and 
occupation  of  land  by  a  stranger  to  a  vendor's  title,  at  the  time 
of  purchase  from  and  conveyance  by  such  vendor  out  of  pos- 
session, are  sufficient  to  put  such  purchaser  upon  inquiry  as  to 
the  legal  and  equitable  rights  of  the  party  so  in  possession. 
The  possession  must  be  open,  notorious,  and  exclusive,  and 
not  merely  a  constructive  possession.®  A  party  will  not  be 
allowed  to  contradict  the  force  and  effect  of  a  full  convej^ance 
by  the  mere  fact  of  his  possession  after  his  deed  has  been 

Crassen  v.  Swoveland,  22  Ind.  427 ;  Brophy  Mining  Co.  v.  Brophy  &  Dale 
Gold  and  Sil.  Min.  Co.,  15  Nev.  101 ;  Groton  Sav.  Bank  v.  Batty,  30  N.  J.  Eq. 
126 ;  Wo6ldridge  v.  Miss.  Valley  Bank,  36  Fed.  Rep.  97  ;  Sawyers  v.  Baker,  66 
ALa.  292 ;  Berryhill  v.  Kirchner,  96  Pa.  St.  489 ;  Atkins  v.  Paul,  67  Ga.  97. 
See,  also,  M'Kecknie  v.  Hoskins,  23  Me.  230  ;  Parsell  v.  Thayer,  39  Mich.  467. 

'Eylar  v.  Eylar,  60  Tex.  315;  Van  Keuren  v.  Railroad' Co.,  38  N.  J.  L. 
165. 

^  Watkins  v.  Edwards,  23  Tex.  443. 

'  McCaskle  v.  Amarine,  12  Ala.  17  ;  Dixon  v.  Lacoste,  1  Sm.  &  Mar.  (Miss.) 
70, 107. 

*  Daniels  v.  Davison,  16  Ves.  249  ;  Anthe  v.  Heide,  85  Ala.  236. 

°Daggs  V.  Ewell,  3  Woods,  C.  C.  344. 

« Brophy  Mm.  Co.  v.  Brophy  &  Dale  Gold  and  Sil.  Min.  Co.,  15  Nev.  101 ; 
Trezise  v.  Lacy,  22  Kan.  742 ;  Noyes  v.  Hall,  97  U.  S.  34. 


776  REGISTRATION    OF    THE    INSTRUMENT. 

recorded.^  When  the  occupant  places  the  title  in  another,  an 
innocent  mortgagee  from  the  nominal  owner  will  be  protected 
against  the  real  owner.^  A  vendee  under  a  contract  of  purchase, 
in  possession,  will  be  protected  against  a  mortgage  given  by  his 
vendor,^  but  the  mortgage  lien  will  cover  the  property  to  the 
extent  of  the  unpaid  purchase-money/ 

A  devisee  of  land  subject  to  a  mortgage  duly  recorded  is 
chargeable  with  notice  thereof,  and  after  a  reasonable  time, 
with  notice  of  the  open,  exclusive  possession  of  a  purchaser 
under  a  foreclosure  to  which  he  was  not  a  party .^  One  may 
be  in  possession,  but  not  sufficient  to  give  notice.  Thus,  a 
mother-in-law  lived  with  her  son-in-law,  who  worked  the  farm, 
and  resided  thereon  ;  she  claimed  title  by  an  unrecorded  deed 
from  him.     It  was  held  her  possession  was  not  notice.^ 

Open  and  exclusive  possession  is  sufficient  to  put  a  purchaser 
upon  inquiry.^ 

§  749.  Character  op  the  Possession  Required. — Though 
possession  of  land  is  notice  to  all  the  world  of  the  possessor's 
interest,  the  definition  of  the  word  is  restricted  to  an  actual, 
open,  and  visible  occupancy,  accompanied  by  improvements  of 
the  premises,  and  not  a  mere  constructive  possession.^  Posses- 
sion must  be,  at  least,  of  a  character  to  amount  to  a  disseisin ;  acts 
of  trespass  will  not  be  sufficient;^  possession  must  be  continued 

1  Eylar  v.  Eylar,  60  Tex.  315 ;  Bloomer  v.  Henderson,  8  Mich.  395,  404 ;  Koon 
V.  Traaiel,  71  Iowa,  132. 

^  Groton  Sav.  Bank  v.  Batty,  30  N.  J.  Eq.  126. 

*  Bank  v.  Flagg,  3  Barb.  Ch.  (N.  Y.)  316. 

*  Jpeger  v.  Hardy  (Ohio),  27  N.  E.  Eep.  863;  Westbrook  v.  Gleason,  14  Hun 
(N.  Y.),  245 ;  Young  v.  Guy,  87  N.  Y.  457. 

^  Jellison  v.  Halloran,  44  Minn.  199. 

« Elliot  V.  Lane,  82  Iowa,  484. 

'  Fair  v.  Stevenot,  29  Cal.  486 ;  Ely  v.  Wilcox,  20  Wis.  523. 

*  Wood  V.  Rayburn,  18  Oreg.  3  ;  Ray  burn  v.  Davisson  (Oreg.),  29  Pac.  Rep. 
738  ;  Webster  v.  Van  Steenbergh,  46  Barb.  (N.  Y.)  215  ;  Tuttle  v.  Jackson,  6 
Wend.  (N.  Y.)  226 ;  Trustees  v.  Wheeler,  50  Barb.  (N.  Y.)  585 ;  Troup  v.  Hurl- 
but,  10  Barb.  (N.  Y.)  358  ;  Bogue  v.  Williams,  48  111.  371 ;  2  White  & 
Tudor's  Lead.  Gas.  in  Eq.  (4th  Am.  ed.),  p.  185,  pt.  1 ;  Norcross  v.  Widgery,  2 
Mass.  506. 

9  M'Mechan  v.  Griffing,  3  Pick.  (Mass.)  155, 156 ;  Cook  v.  Travis,  22  Barb. 
(N.  Y.)  338  ;  20  N.  Y.  400. 


CONSTRUCTION    OP   REGISTRATION    LAWS.  777 

to  a  time  when  the  title  of  the  party  sought  to  be  charged  with 
notice  accrued/ 

It  begins  to  be  notice  only  from  the  time  the  legal  title  is 
conveyed  in  violation  of  the  trust.^  Cutting  trees  being  but  an 
act  of  trespass,  is  not  notice  of  possession ;  ^  and  making  or 
repairing  of  fences  is  not  notice.* 

So  the  entry  on  fifty  acres  of  uncultivated  land,  clearing 
fifteen  acres,  and  working  them,  building  a  house  and  a  still- 
house,  and  living  upon  and  using  the  premises  for  twenty 
years  is  not  notice  where  the  boundaries  of  the  fifty  acres  are 
not  settled.^  Possession  being  evidence  of  the  possessor's  title 
only,  the  possession  of  a  tenant  is  not  notice  of  his  landlord's 
title.' 

But  one  purchasing  or  taking  a  mortgage  of  land  in  the 
possession  of  a  tenant  is  bound  to  inquire  as  to  the  tenant's 
interest.^ 

The  possession  of  a  mortgagee,  whose  mortgage  is  recorded, 
is  not  notice  of  his  claim  under  an  agreement  to  purchase  the 
premises.*  And  the  joint  residence  of  husband  and  wife  gives 
no  notice  of  any  interest  of  the  wife  in  the  land.^ 

1  Miles  V.  Langley,  1  Russ.  &  M.  40  ;  2  Russ.  &  M.  626 ;  Hewes  v.  Wiswell,  8 
Me.  94. 

2  Scott  V.  Gallagher,  14  Serg.  &  R.  (Pa.)  333. 

3  M'Mechan  v.  Griffing,  3  Pick.  (Mass.)  155. 

^M'Mechan  v.  Griffing,  3  Pick.  (Mass.)  155;  Merritt  v.  Railroad  Co.,  12 
Barb.  (N.  Y.)  608. 

*  Billington  v.  Welsh,  5  Binn.  (Pa.)  128. 

®  Barnhart  v.  Greenshields,  28  Eng.  L.  &  E.  82  ;  Flagg  v.  Mann,  2  Sumner, 
C.  C.  557  ;  Cook  v.  Travis,  20  N.  Y.  400 ;  Hanbury  v.  Litchfield,  2  Mylne  & 
K.  629. 

^  Cunningham  v.  Pattee,  99  Mass.  248,  252. 

8  Plumer  r.  Robertson,  6  Serg.  &  R.  (Pa.)  179. 

» Neal  V.  Perkerson,  61  Ga.  345. 


778  registeation  of  the  instrument. 

Article  3. 
Actual  Notice. 

§  750.  The  General  Rule.  §  756.  Taking  Effect  of  the  Notice. 

§  751.  Exceptions  to  the  Docti'ine  of  §  757.  A   Purchaser  Without    Notice 

Notice  as  Affecting  Priority.  May  Convey  a  Good  Title  to 

§  752.  Character  of  the  Notice.  One  Having  Notice. 

§  753.  Degree,  Manner,  and  Purpose  §  758.  Acquiring  Title  from  One  Who 

of  Actual  Notice.  Has  Notice  of  an  Unrecorded 

§  754.  Burden  of  Proof  of  Notice.  Mortgage. 

I  755.  Kind  of  Proof  1 759.  Secret  Lien  or  Trust. 

§  750.  The  General  Rule. — In  a  few  of  the  States  the 
courts  have  interpreted  the  intention  of  the  legislature  as  de- 
manding that  the  personal  information  of  the  unrecorded 
instrument  should  be  proved  by  direct  evidence,  and  as  ex- 
cluding all  instances  of  actual  notice  established  by  circum- 
stantial evidence.  But  this  is  not  the  general  rule,  for  in  most 
of  the  States,  however,  where  a  statute  has  been  passed,  the 
courts  have  defined  the  actual  notice  required  by  the  legisla- 
ture as  embracing  all  instances  of  that  species  in  contradistinc- 
tion from  constructive  notice — that  is,  all  kinds  of  actual  notice 
whether  proved  by  direct  evidence  or  inferred  as  a  legitimate 
conclusion  from  circumstances.^  Hence,  actual  notice  as  ap- 
plicable to  conveyances  does  not  necessarily  mean  actual 
knowledge ;  it  may  be  embraced  or  implied.  If  the  party  has 
knowledge  of  such  facts  as  would  lead  a  fair  and  prudent  man, 
using  ordinary  caution,  to  make  further  inquiries,  and  he 
avoided  inquiry,  he  is  chargeable  with  notice  of  the  facts 
which,  b}^  ordinary  diligence,  he  would  have  ascertained. 
Actual  notice  of  facts  which,  to  a  prudent  man,  can  only  indi- 
cate notice  is  proof  of  notice.^  The  decided  preponderance  of 
authority  supports  the  position  that  the  statutory  actual  notice 
is  the  conclusion  of  facts  capable  of  being  used  by  all  grades 
of  legitimate  evidence.^  And  yet,  while  the  fact  of  notice  may 
be  inferred  from  circumstances  as  well  as  proved  by  direct  evi- 

^2  Pom.  Eq.  Jur.  596,  note. 

2  Knapp  V.  Bailey,  79  Me.  196. 

3  Speck  V.  Eiggin,  40  Mo.  405 ;  Mich.  Mut.  Ins,  Co.  v.  Conant,  40  Mich.  530. 


CONSTRUCTION   OF    REGISTRATION    LAWS.  779 

dence,  the  proof  must  be  such  as  to  affect  the  conscience  of  the 
purchaser,  and  must  be  so  strong  and  clear  as  to  fix  upon  him 
the  imputation  of  mala  fides. ^ 

Undoubtedly  the  true  rule  is  that  notice  must  be  held  to  be 
actual  when  the  subsequent  purchaser  has  actual  knowledge 
of  such  facts  as  would  put  a  prudent  man  upon  inquiry,  which, 
if  jDrosecuted  with  ordinary  diligence,  would  lead  to  actual 
notice  of  the  right  or  title  in  conflict  with  that  which  he  is 
about  to  purchase.  When  the  subsequent  purchaser  has  knowl- 
edge of  such  facts,  it  becomes  his  duty  to  make  inquiry,  and 
he  is  guilty  of  bad  faith  if  he  neglects  to  do  so,  and  conse- 
quently he  will  be  charged  with  actual  notice  he  would  have 
received  if  he  had  made  the  inquiry.^ 

The  actual  notice  required  by  the  statute  is  used  in  contra- 
distinction to  the  constructive  notice  given  by  the  record.  It 
does  not  mean  that  there  must  necessarily  be  direct  and  posi- 
tive evidence  that  the  subsequent  purchaser  knew  of  the  exist- 
ence of  the  deed.  Any  proper  evidence  tending  to  show  it, 
facts  and  circumstances  coming  to  his  knowledge  that  would 
put  a  man  of  ordinary  circumspection  upon  inquiry,  should 
go  to  the  jury  as  evidence  of  such  notice.^ 

So  actual  notice  embraces  all  degrees  and  grades  of  evidence, 
from  the  most  direct  and  positive  proof  to  the  slightest  cir- 
cumstances from  which  a  jury  would  be  warranted  in  inferring 
notice.  It  is  a  mere  question  of  fact,  and  is  open  to  every 
species  of  legitimate  evidence  which  may  tend  to  strengthen  or 
impair  the  conclusion.*  This  is  the  general  rule  adopted,  but 
the  decisions  are  not  all  under  statutes.^ 

'  Vest  V.  Michie,  31  Gratt.  (Va.)  149 ;  2  Minor's  Inst.  (2d  ed.)  887 ;  Robinson 
Law  of  Priority,  p.  27. 

■^  Brinkman  v.  Jones,  44  "Wis.  498,  519 ;  Musgrove  v.  Bonser,  5  Oreg.  313  ; 
Wilson  v.  Miller,  16  Iowa,  111. 

^  Maupin  v.  Emmons,  47  Mo.  304, 306 ;  Speck  v.  Riggin,  40  Mo.  405 ;  Vaughn 
V.  Tracy,  22  Mo.  417 ;  25  Mo.  318. 

*  Williamson  v.  Brown,  15  N.  Y.  359 ;  Hull  v.  Noble,  40  Me.  480 ;  Porter  v. 
Sevey,  43  Me.  519. 

^  Hankinson  v.  Barbour,  29  111.  80 ;  Montgomery  v.  Keppel,  75  Cal.  128 ;  Fair 
V.  Stevenot,  29  Cal.  486 ;  Smith  v.  Yule,  31  Cal.  184 ;  Pell  v.  McElroy,  36  Cal. 
272;  Burwell  v.  Fauber,  21  Gratt.  (Va.)  463;  Brush  v.  AVare,  15  Pet.  (U.  S.) 


780  REGISTRATION    OF    THE    INSTRUMENT. 

However,  this  construction  of  the  statute  is  in  conflict  with 
the  established  doctrine  of  Massachusetts  *  and  Indiana,^  and 
with  tlie  definition  given  by  Bouvier  ^  and  Story/ 

§  751,  Exceptions  to  the  Doctrine  of  Notice  as  Af- 
fecting Priority. — In  a  few  of  the  States  no  notice,  however 
full  and  formal,  will  supply  the  place  of  registration  of  a  deed 
of  trust  or  mortgage.  Thus,  in  Louisiana,  an  unrecorded 
mortgage  is  void  as  against  third  persons,  even  though  they 
have  actual  knowledge  of  such  instrument.^  These  were  early 
decisions,  but  they  have  been  followed  by  others  of  the  same 
purport.'' 

So  in  North  Carolina,^  actual  notice  of  an  unrecorded  mort- 
gage avails  nothing  as  against  a  subsequent  mortgagee  or  j^ur- 
chaser  in  good  faith.^ 

Where  one  who  knows  of  a  prior  unrecorded  mortgage  or 
deed  of  trust  procures  a  mortgage  for  his  own  benefit  on  the 
same  property,  which  is  recorded  first,  he  gets  the  first  lien  on 
the  property,  unless  he  uses  fraud  to  prevent  the  registration 

111 ;  Dugger  v.  Dagger,  84  Va.  130 ;  Mateskey  v.  Feldman,  75  Wis.  103 ;  Thomp- 
son V.  Pioche,  44  Cal.  516 ;  Jordan  v.  Pollock,  14  Ga.  157 ;  Warren  v.  Sweet,  31 
N.  H.  332 ;  Price  v.  McDonald,  1  Md.  403  ;  Hastings  v.  Cutler,  24  N.  H.  481 ; 
Whitbread  v.  Jordan,  cited  in  19  Eng.  Ch.  255 ;  Lewis  v.  Bradford,  10  Watts 
(Pa.),  67 ;  Blaisdell  v.  Stevens,  16  Vt.  179 ;  Hubbard  v.  Smith,  2  Mich.  207  ; 
Morrison  v.  March,  4  Minn.  422 ;  Groff  v.  Eamsey,  19  Minn.  44 ;  New  v. 
Wheaton,  24  Minn.  406 ;  Buck  ^;.  Halloway,  2  J.  J.  Marsh  (Ky.),  163,180; 
Daniels  v.  Davison,  16  Ves.  249 ;  Gilbert  v.  Jess,  31  Wis.  110. 

^  Parker  v.  Osgood,  3  Allen  (Mass.),  487;  Dooley  v.  Wolcott,  4  Allen  (Mass.), 
406;  Sibley  v.  Leffingwell,  8  Allen  (Mass.),  584;  White  v.  Foster,  102  Mass. 
375 ;  Lamb  v.  Pierce,  113  Mass.  72.  Compare  Curtis  t».Mundy,3  Met.  (Mass.) 
405. 

=*  Crassen  v.  Swoveland,  22  Ind.  428,  434. 

3  Law  Diet.  236. 

*  Eq.  Jur.,  sect.  399. 

^  Britton  v.  Janney,  21  La.  Ann.  204 ;  Harang  v.  Plattsmier,  21  La.  Ann.  426. 

^Levy  V.  Mentz,  23  La.  Ann.  261;  Succession  of  Simon,  23  La.  Ann.  533, 
534 ;  Gaiennie  v.  Gaiennie,  24  La.  Ann.  79 ;  Eochereau  v.  Do  la  Croix,  26  La, 
Ann.  584 ;  Villevaso  v.  Walker,  28  La.  Ann.  775 ;  Adams  v.  Daunis,  29  La. 
Ann.  315 ;  Watson  v.  Bondurant,  30  La.  Ann.  1,  11.  See,  also.  Code  Napo- 
leon, art.  2134 ;  Paul  Pont,  Privileges  et  Hypothgques,  arts,  727,  728. 

^  Code,  sect.  1254. 

8  Hinton  v.  Leigh,  102  N.  Car,  28. 


CONSTRUCTION    OF    REGISTRATION    LAWS.  781 

of  the  mortgage  which  is  first  in  date.^  No  notice,  however 
full  and  formal,  will  supply  the  place  of  registration.^ 

So  in  Ohio,  a  purchaser  from  the  mortgagor  of  lands  incum- 
bered by  an  unrecorded  mortgage  takes  title  thereto  free  from 
such  incumbrance,  even  if  he  has  full  knowledge  and  notice  of 
its  existence,  and  that  it  is  unpaid  at  the  date  of  the  pur- 
chase.^ 

As  against  third  persons,  a  mortgage  has  no  effect  either  at 
law  or  in  equity,  until  delivered  to  the  recorder  of  the  proper 
county,  even  though  such  persons  have  full  knowledge  and 
actual  notice  of  it.* 

§  752.  Character  of  the  Notice. — Actual  notice  is  all  de- 
grees and  grades  of  evidence,  from  the  most  direct  and  positive 
proof  to  the  slightest  circumstance  from  which  a  jury  would  be 
warranted  in  inferring  notice.^  It  may  be  proved  by  circum- 
stances like  any  other  fact.*' 

Actual  notice  of  the  statute  may  be  something  short  of  posi- 
tive knowledge  ; ''  it  may  be  written  or  verbal ;  ^  it  may  be  in- 
tended or  accidental ;  ^  it  affects  an  infant  or  feme  covert  as  well 
as  an  adult  man ;  ^°  notice  to  one  of  several  partners  is  notice  to 
the  partnership." 

A  cestui  que  trust  is  bound  by  the  notice  to  his  trustee.^^  So 
notice  to  one  of  several  trustees  is  generally  sufficient.^^     In  law 

1  Trader's  Nat.  Bank  v.  Woodlawn  Manufact.  Co.,  96  N.  Car.  298. 

*  Robinson  v.  Willoughby,  70  N.  Car.  ,358. 

3  Building  Asso.  v.  Clark,  43  Ohio  St.  427  ;  Rev.  Stat.,  sect.  4134  ;  82  Ohio  L. 
230 ;  L.  of  1885. 

*  Bloom  V.  Noggle,  4  Ohio  St.  45.  See,  also,  Holliday  v.  Bank,  16  Ohio,  533 ; 
Bercaw  v.  Cockerill,  20  Ohio  St.  163 ;  Mayham  v.  Coombs,  14  Ohio,  428 ;  Astor 
V.  Wells,  4  Wheat.  (U.  S.),  466. 

*  Williamson  v.  Brown,  15  N.  Y.  354. 
"  Hull  V.  Noble,  40  Me.  480. 

'Wilson  V.  Miller,  16  loAva,  111 ;  Maupin  v.  Emmons,  47  Mo.  304,  306  ;  Por- 
ter V.  Sevey,  43  Me.  519. 

8  North  British  Ins.  Co.  v.  Hallett,  7  Jur.  (N.  S.)  1263. 

9  Smith  V.  Smith,  2Cromp.  &  Mees.  231. 
1"  Fisher  on  Mort.  (3d  ed.)  p.  448. 

"  Travis  v.  Milne,  9  Hare,  141. 

^^  Wise  V.  Wise,  2  Jones  &  Lat.  403. 

^"  Meux  V.  Bell,  1  Hare,  73. 


782  REGISTRATION    OF    THE    INSTRUMENT. 

when  a  purchaser  designedly  abstains  from  making  inquiries 
for  the  purpose  of  avoiding  knowledge,  he  is  charged  with 
actual  notice  and  positive  knowledge.' 

Facts  and  circumstances  coming  to  the  knowledge  of  the 
purchaser  that  would  put  a  man  of  ordinary  circumspection 
upon  inquiry,  should  go  to  the  jury  as  evidence  of  actual 
notice.^  Notice  is  actual  when  the  purchaser  either  knows  of 
the  existence  of  the  adverse  claim  of  title,  or  is  conscious  of 
having  the  means  of  knowledge,  although  he  may  not  use 
them.^  That  actual  notice  means  direct  personal  knowledge, 
and  nothing  else,  is  no  longer  the  rule,  except  in  Massachusetts 
and  in  Indiana. 

§  753.  Degree,  Manner,  and  Purpose  of  Actual  Notice. — 
The  manner  of  the  notice  or  the  purpose  of  it  is  material.  The 
degree,  however,  may  range  from  circumstances  and  facts,  a 
formal  written  statement  of  the  lien,  or  a  mere  verbal  declara- 
tion of  the  fact  of  its  existence.*  But  a  vague  report  of  stran- 
gers or  information  of  one  not  interested,  will  not  affect  a  pur- 
chaser with  notice  ;  *  but  information  derived  from  parties  in- 
terested, and  from  reliable  sources  is  sufficient  to  charge  with 
notice.^  But  a  mere  rumor  that  some  other  person  has  an  in- 
terest in  the  property  is  not  sufficient  to  charge  a  purchaser 
with  notice.'^ 

Some  courts  hold  that  such  notice,  to  be  binding,  must  pro- 
ceed from  some  person  interested  in  the  property  ;  *  but  it  is  suffi- 
cient if  the  information  is  derived  from  some  reliable  source.^ 

^  Wilson  V.  Miller,  16  Iowa,  111. 

^  Maupin  v.  Emmons,  47  Mo.  304,  306. 

^  Spook  V.  Riggin,  40  Mo.  405  ;  Michigan  Mut.  Ins.  Co.  v.  Conant,  40  Mich.  530. 

*  Smith  v.  Smith,  2  Comp.  &  Mees.  231 ;  North  British  Ins.  Co.  v.  Hallett,  7 
Jur.  (N.  S.)  1263. 

*  Kerns  v.  Swope,  2  Watts  (Pa.),  75. 

« Connell  v.  Connell,  32  W.  Va.  319 ;  Mulliken  v.  Graham,  72  Pa.  St.  484. 

'  Jolland  V.  Stainbridge,  3  Ves.  Jr.  478 ;  Wildgoose  v.  Wayland,  Gouldsb. 
147 ;  Wilson  v.  McCullough,  23  Pa.  St.  440. 

®  Rogers  r.  Hoskins,  14  Ga.  166 ;  Barnhart  v.  Greenshields,  9  Moore,  P.  C. 
18,  36 ;  Lamont  v.  Stimson,  5  Wis.  443. 

''MuUiken  v.  Graham,  72  Pa.  St.  484;  Curtis  v.  Mundy,  3  Met.  (Mass.)  405, 
407. 


CONSTRUCTION    OF   REGISTRATION    LAWS.  783 

Notice  of  the  intention  to  give  a  mortgage  on  property  does 
not  prevent  a  party  from  taking  a  valid  lien  upon  it,  though  he 
had  notice  of  the  owner's  intention/ 

Where  it  is  the  duty  for  a  party  to  remember,  or  the  notice 
is  of  a  fact  affecting  his  interest,  he  is  charged  with  notice.^ 

§  754.  Burden  op  Proof  of  Notice. — The  burden  of  j^roof 
is  upon  the  party  who  claims  precedence,  to  make  out  affirma- 
tively that  the  other  lienor  had  notice  of  his  incumbrance.^ 

The  burden  is  upon  him  so  to  displace  a  subsequent  recorded 
deed,  and  he  must  prove  by  a  preponderance  of  evidence  that 
the  subsequent  purchaser  had  actual  notice  of  the  existence  of 
his  mortgage  when  he  received  his.*  And  to  affect  a  j^urchaser 
for  value  of  land  with  notice  of  an  unrecorded  deed  of  trust, 
the  evidence  must  be  sufficient  to  prove  him  guilty  of  fraud.^ 

§  755.  Kind  of  Proof. — The  proof  must  be  clear  and  un- 
doubted.*' When  the  facts  set  forth  make  it  incumbent  upon 
the  purchaser  or  mortgagee  to  make  inquiry,  and  enable  him 
to  prosecute  it  with  success,  he  is  charged  with  notice.'^ 

If  the  evidence  may  be  regarded  as  per  se  evidence  of  fraud, 
he  must  fail  and  be  charged  with  notice.^ 

If  the  "evidence  shows  that  the  purchaser  avoided  inquiry  in 
order  not  to  be  informed,  he  then  is  charged  with  notice,  and 
his  claim  of  priority  must  fail.^ 

^Gale  V.  Morris,  30  N.  J.  Eq.  285. 

*  Goodwin  v.  Dean,  50  Conn.  517. 

2  McCormick  v.  Leonard,  38  Iowa,  272 ;  Center  v.  Bank,  22  Ala.  743 ;  Ex  parte 
Hardy,  2  Dow  &  C.  393 ;  Van  Wagenen  v.  Hopper,  4  Halst.  (N.  J.  Ch.)  684, 
707 ;  Miles  v.  Blanton,  3  Dana  (Ky.),  525 ;  Fort  v.  Burch,  6  Barb.  (N.  Y.)  60, 78. 

*  Marshall  v.  Dunham,  66  Me.  539. 
"Xast  V.  Michie.  31  Gratt.  (Va.)  149. 

MVilson  V.  Miller,  16  Iowa,  111;  Iline  v.  Dodd,  2  Atk.  275;  Condit  r.  Wil- 
son, 36  N.  J.  Eq.  370 ;  Riley  v.  Hoyt,  29  Hun  (N.  Y.),  114 ;  West  v.  Reid,  2 
Hare,  249. 

'  Parker  v.  Kane,  4  Wis.  1 ;  SpoflFord  v.  Weston,  29  Me.  140 ;  Nute  v.  Nute, 
41  X.  H.  60. 

« Dunham  v.  Dey,  15  Johns.  (N.  Y.)  555. 

'Blaisdell  v.  Stevens,  16  Vt.  179,  186;  2  White  &  Tudor's  Lead.  Cas.  in  Eq. 
(4th  Am.  ed.)  pp.  152  et  seq.,  pt.  1.  See,  also,  Weare  v.  Williams  (Iowa),  52 
N.  W.  Rep.  328. 


784  REGISTRATION    OF    THE    INSTRUMENT. 

§  756.  Taking  Effect  of  the  Notice. — Such  notice  takes 
effect  at  any  time  before  the  completion  of  the  transaction. 
The  protection  of  the  purchaser  for  a  valuable  consideration 
stands  on  this,  that  he  has  acquired  a  legal  title,  and  paid  the 
purchase-money  before  notice  of  the  priority  of  the  other  lien. 
If  he  has  acquired  a  legal  title,  but  has  not  paid  the  purchase- 
money  before  notice  his  plea  of  having  no  notice  fails.  So  if 
he  has  paid  the  purchase-money  but  has  acquired  no  legal 
title,  and  then  received  notice  of  the  other  party's  equity,  he 
cannot  defeat  that  prior  equity  by  procuring  the  legal  title.^ 

So  a  plea  of  purchase  for  a  valuable  consideration  without 
notice  cannot  avail  unless  the  party  has  both  paid  the  purchase- 
money  and  acquired  the  legal  title  before  notice  of  the  other 
lien  or  equity.^  And  if  a  mortgagee  has  notice  of  a  jirior  un- 
recorded mortgage  before  paying  over  the  money  secured  by 
his  mortgage  he  takes  subject  to  the  unrecorded  mortgage, 
though  his  own  mortgage  has  been  recorded.^  And  if  he  has 
forgotten  the  prior  lien,  he  takes  with  notice.* 

§  757.  A  Purchaser  Without  Notice  May  Convey  a  Good 
Title  to  one  Having  Notice. — When  a  purchaser  of  real 
estate  without  notice  of  a  prior  unrecorded  deed,  for  a  valuable 
consideration,  conveys  to  one  who  has  notice  thereof,  the  title 
of  the  latter  is  not  impaired  by  the  notice.^  The  former,  having 
an  indefeasible  title,  could  convey  to  the  latter ;  otherwise  an 
innocent  purchaser  without  notice  might  be  forced  to  keep  his 
estate,  or  the  sale  of  estates  would  be  very  much  hindered.® 

1  Bush  V.  Bush,  3  Strobh.  Eq.  (S.  Car.)  134 ;  Vattier  v.  Hinde,  7  Pet.  (U.  S.) 
271 ;  Ellis  v.  Young,  31  S.  Car.  322. 

''  Lynch  v.  Hancock,  14  S.  Car.  66 ;  Beckett  v.  Cordley,  1  Bro.  C.  C.  353 ; 
English  V.  Waples,  13  Iowa,  57  ;  Syer  v.  Bundy,  9  La.  Ann.  540  ;  Jamison  v. 
Gjemenson,  10  Wis.  411. 

^Schultze  V.  Houfes,  96  111.  335. 

*  Hunt  r.  Clark,  6  Dana  (Ky.),  56. 

5  Hill  ('.  McNichol,  76  Me.  314;  Varick  v.  Briggs,  6  Paige  (N.  Y.),  323; 
Sweet  V.  Southcote,  2  Bro.  C.  C.  66 ;  Lowther  v.  Carlton,  2  Atk.  242. 

6  Harrison  v.  Forth,  Prec.  Ch.  51 ;  Pierce  v.  Faunce,  47  Me.  507  ;  Brackett  i\ 
Ridlon,  54  Me.  426 ;  Boynton  v.  Rees,  8  Pick.  (Mass.)  329  ;  Flynt  v.  Arnold, 
2  Met.  (Mass.)  619  ;  Bell  v.  Twilight,  18  N.  H.  159 ;  Harrington  v.  Allen,  48 
Miss.  492 ;  Chance  v.  McWhorter,  26  Ga.  315. 


CONSTRUCTION    OF   REGISTRATION    LAWS.  785 

A  judgment  creditor  who  buys  at  a  sheriff's  sale  the  land  of 
the  judgment  debtor,  and  receives  a  sheriff's  deed  without 
knowledge  of  a  prior  unrecorded  mortgage  given  by  the  judg- 
ment debtor  on  the  land,  must  show  that  his  sheriff's  deed  was 
first  recorded  before  he  can  claim  to  be  a  purchaser  in  good 
faith  and  for  a  valuable  consideration.^  Hence,  a  judgment 
creditor  who  has  notice  of  an  unrecorded  mortgage  holds  his 
lien  subject  to  the  mortgage.^  On  the  other  hand,  it  is  held 
that  when  a  judgment  creditor  gains  priority  over  the  mort- 
gagee, a  purchaser  at  an  execution  sale  buys  free  from  the 
incumbrance  of  the  mortgage,  notwithstanding  he  had  notice.^ 

Notice  of  an  unrecorded  mortgage  affects  a  subsequent  pur- 
chaser, though  the  mortgagee  agrees  not  to  have  his  mortgage 
recorded,  and  receives  a  written  guaranty  to  hold  him  harm- 
less by  reason  of  not  recording  the  deed.* 

§  758.  Acquiring  Title  from  One  Who  Has  Notice  of 
AN  Unrecorded  Mortgage. — A  purchaser  in  good  faith  may 
acquire  title  to  land  from  one  having  notice  of  an  unrecorded 
mortgage,  provided  he  records  his  deed  before  the  mortgage  is 
recorded.  Should  he  omit  to  record  his  deed  until  the  mort- 
gage is  recorded,  he  will  then  stand  in  the  same  position  as  his 
vendor.^ 

So  if  any  number  of  conveyances  be  made  in  the  chain  of 
title  derived  from  the  second  grantee,  each  with  like  notice  of 
the  prior  unrecorded  mortgage  deed,  the  first  grantee  will  still 
hold  the  title,  although  all  the  deeds  except  his  own  are  duly 
recorded,  and  he  can  protect  his  title  by  recording  his  deed. 
If,  however,  any  one  of  the  second  grantee's  successors  pur- 
chases without  notice  of  the  first  grantee's  prior  unrecorded 

1  Thomas  v.  Vanlieu,  28  Cal.  616. 

^  Williams  v.  Tatnall,  29  111.  553. 

'Smith  V.  Jordan,  25  Ga.  687 ;  Condit  v.  Wilson,  36  N.  J.  Eq.  370. 

*Lord  V.  Doyle,  1  Cliff.  C.  C.  453. 

*  Harrington  v.  Allen,  48  Miss.  492 ;  Westbrook  r.  Gleason,  79  N.  Y.  23,  re- 
versing 14  Hun  (N.  Y.),  245  ;  Fort  r.  Burch,  5  Den.  (N.  Y.)  187 ;  Decker  v. 
Boice,  83  N.  Y.  215  ;  Doherty  v.  Stimmel,  40  Ohio  St.  294 ;  Mertins  v.  Joliffe, 
Amb.  311,  313 ;  M'Queen  v.  Farquhar,  11  Ves.  467,  478 ;  Jackson  v.  Van  Val- 
kenburgh,  8  Cow.  (N.  Y.)  260 ;  Stroud  v.  Lockart,  4  Dall.  (Pa.)  153. 
50 


786  REGISTRATION    OF    THE    INSTRUMENT. 

deed,  and  places  his  own  on  record,  the  title  of  the  first  grantee 
in  the  unrecorded  deed  is  gone  forever/ 

An  attaching  creditor  without  notice  of  an  unrecorded  deed 
will  hold  the  property,  though  his  debtor  had  notice.^ 

§  759.  Secret  Lien  or  Trust. — Where  real  estate  is  held 
by  a  title  which  is  regular  on  its  face,  a  bona  fide  mortgagee 
thereof,  or  one  claiming  under  such  mortgagee,  is  not  liable  to 
be  affected  by  any  secret  trust  or  equity,  if  he  be  without  notice 
of  it.^ 

But  one  taking  with  knowledge  of  the  trust,  takes  it  subject 
to  the  trust.* 

When  a  husband  conveys  his  land  to  his  wife  under  the 
pretext  of  having  held  the  title  in  trust,  his  creditors  having  a 
mortgage  upon  the  land  prior  to  and  at  the  time  of  such  con- 
veyance can  show  that  no  such  trust  existed,  and  that  such 
conveyance  was  made  for  the  purpose  of  defrauding  his  cred- 
itors.^ 

So  where  a  husband  receives  money  from  his  wife  to  invest 
in  certain  lands  for  her  benefit,  purchases  other  lands  in  his 
own  name  and  mortgages  the  same  to  secure  debts  contracted 
prior  to  the  purchase,  in  the  absence  of  any  notice  of  the  wife's 
claim  by  the  mortgagee,  she  is  not  entitled  by  any  equity  to 
have  the  sum  advanced  by  her  allowed  to  her  from  the  pro- 
ceeds of  the  sale  of  the  mortgaged  premises.® 

A  person  who  acquires  a  legal  title  with  notice  that  the 
equitable  title  is  in  some  other  person  than  his  grantor  will  be 
deemed  to  hold  the  legal  title  for  the  benefit  of  the  equitable 
owner.^ 

1  Hill  V.  McNichol,  76  Me.  314  ;  Flynt  v.  Arnold,  2  Met.  (Mass.)  619. 

2  Coffin  V.  Ray,  1  Met.  (Mass.)  212. 

3  Bigley  v.  Jones,  114  Pa.  St.  510. 

*  Harwood  v.  Pearson,  122  Mass.  425  ;  Jackson  v.  Blackwood,  4  McAr.  (Dist. 
Col.)  188 ;  Saunders  v.  Dehew,  2  Vern.  271. 

*  Lehman  v.  Hawks,  121  Ind.  541. 

6  Hall  V.  Hall,  89  Ky.  514.    See,  also,  Meade  v.  Stairs,  88  Ky.  66 ;  Darnaby 
V.  Darnaby,  14  Bush  (Ky.),  485. 
'  Gale  V.  Moorie,  29  N.  J.  Eq.  222. 


construction  of  registration  laws.  787 

Article  4. 
Implied   Notice. 

§  760.  Actual    Notice  in    the   Second  I  765.  Agent  of  Two  Different  Prin- 

Degree.  cipals    in     Two     Separate 

§  761.  Agent   and  Principal — English  Transactions. 

Rule.  §  766.  The  Agent  Being  the  Mort- 

^  762.  Modification  of  the  Old  English  gagor. 

Rule.  I  767.  Agents  of  Corporations. 

§  763.  Agent's  Knowledge  of  a  Prior  I  768.  Ofiicers  Selling    Incumbered 

Lien.  Land  to  their  Corporation. 

I  764,  The  Knowledge  of  the  Agent 
Must  be  Pertinent  and  Ma- 
terial to  the  Transaction. 

§760.  Actual  Notice  in  the  Second  Degree. — Implied 
notice  imputes  notice  to  a  party  because  he  is  shown  to  be  con- 
scious of  having  the  means  of  knowledge,  though  he  does  not  use 
them.  In  other  words,  where  he  chooses  to  remain  voluntarily 
ignorant  of  the  fact,  or  is  grossly  negligent  in  not  following  the 
inquiry  which  the  known  facts  present,  he  has  implied  notice. 

Notice  by  implication  differs  from  constructive  notice  with 
respect  to  the  character  of  the  inference  upon  which  it  rests. 
Constructive  notice  being  the  creature  of  positive  law,  but  rest- 
ing upon  strictly  legal  inferences,  while  implied  notice  arises 
from  inferences  of  facts.^  So  when  an  agent  acquires  a  knowl- 
edge of  any  matter  or  instrument  affecting  land  in  which  his 
principal  is  interested,  the  law  imputes  his  knowledge  to  his 
principal.^ 

§  761.  Agent  and  Principal — English  Rule. — Lord  Chan- 
cellor Hardwicke  assumed  it  as  unquestioned  law  that  notice 
to  the  agent,  in  order  to  bind  his  principal  by  constructive  no- 
tice, should  be  in  the  same  transaction.  "  This  rule  ought  to 
be  adhered  to  ;  otherwise  it  would  make  purchasers'  and  mort- 
gagees' titles  depend  altogether  on  the  memory  of  their  coun- 

^  Wade  Notices  (2d  ed.),  sect.  5. 

*  Donald  v.  Beals,  57  Cal.  399  ;  Walker  v.  Schreiber,  47  Iowa,  529 ;  AVilham- 
8on  V.  Brown,  15  N.  Y.  354,  359 ;  Yerger  v.  Barz,  56  Iowa,  77 ;  Hovey  v. 
Blanchard,  13  N.  H.  145. 


788  REGISTRATION    OF    THE    INSTRUMENT. 

sellers  and  agents,  and  oblige  them  to  apply  to  persons  of  less 
eminence  as  counsel,  as  not  being  so  likely  to  have  notice  of 
former  transactions." ' 

Lord  Chancellor  Plunket  adverted  to  the  rule  as  to  the  neces- 
sity of  notice  in  the  same  case,  and  stated  if  it  were  notice  ac- 
quired in  the  same  transaction  necessarily  the  principal  was  to 
be  charged  with  the  knowledge  of  the  agent ;  but  if  it  were 
notice  received  by  him  in  another  transaction,  then  such  no- 
tice was  not  to  affect  the  principal  unless  he  actually  had  the 
knowledge  at  the  time  of  the  second  transaction.^ 

Lord  Langdale,  master  of  the  rolls,  held  that  where  one 
transaction  is  closely  followed  by  and  connected  with  another, 
or  where  it  is  clear  that  a  previous  transaction  was  present  to 
the  mind  of  the  solicitor  when  engaged  in  another  transaction, 
there  is  no  ground  for  a  distinction  by  which  the  rule  that  no- 
tice to  the  solicitor  is  notice  to  the  client  should  be  restricted 
to  the  same  transaction.^ 

Lord  Chancellor  Eldon  said  that  he  would  be  unwilling  to 
go  so  far  as  to  say  that  if  an  attorney  has  notice  of  a  trans- 
action in  the  morning  he  shall  be  held  in  a  court  of  equity 
to  have  forgotten  it  in  the  evening ;  that  it  must,  in  all  cases, 
depend  upon  the  circumstances.* 

§  762.  Modification  of  the  Old  English  Rule. — The 
modification  of  the  old  English  rule  is  recognized  in  late  cases. 
Justice  Bradley  states  that  the  doctrine  in  England  seems  to  be 
established  that,  if  the  agent  at  the  time  of  effecting  a  pur- 
chase has  knowledge  of  any  prior  lien,  trust,  or  fraud  affecting 
the  property,  no  matter  when  he  acquired  such  knowledge,  his 
principal  is  affected  thereby.  If  he  acquires  the  knowledge 
when  he  effects  the  purchase,  no  question  can  arise  as  to  his 
having  it  at  that  time.     If  he  acquired  it  previous  to  the  pur- 

1  Warrick  v.  Warrick,  3  Atk.  291,  294. 

^  Nixon  V.  Hamilton,  2  Dru.  &  Wal.  Irish  Ch.  364.  See,  also,  Dresser  v. 
Norwood,  17  C.  B.  (N.  S.)  466. 

^  Hargreaves  v.  Roth  well,  1  Keen  Ch.  154. 

*  Mountford  v.  Scott,  1  TUrn.  &  R.  Ch.  274.  See,  also,  RoUand  v.  Hart,  L.  R., 
6  Ch.  App.  678  ;  Boursot  v.  Savage,  L.  R.,  2  Eq.  1.34,  142 ;  Kennedy  v.  Green, 
3  Myl.  &  K.  699,  719;  Bradley  w.  Riches,  L.  R.,  9  Ch.  D.  189. 


CONSTRUCTION    OF    REGISTRATION    LAWS.  789 

chase,  the  presumption  that  he  still  retains  it  and  has  it  present 
to  his  mind  will  depend  upon  facts  and  other  circumstances. 
Clear  and  satisfactory  proof  that  it  was  so  present  seems  to  be 
the  only  restriction  required  by  the  English  rule  as  now  under- 
stood, and  the  rule  as  now  settled  by  the  English  court  is  the 
true  one,  and  is  deduced  from  the  best  consideration  of  the 
reasons  on  which  it  is  founded.^ 

§  763.  Agent's  Knowledge  of  a  Prior  Lien. — In  order  to 
bind  the  principal  with  an  agent's  knowledge,  the  agency  must 
be  shown.^ 

The  rule  that  notice  of  an  agent  is  notice  of  his  principal 
applies  only  to  knowledge  by  the  agent  in  the  particular  trans- 
action, or  which,  if  previously  acquired,  is  still  present  in  his 
mind  at  the  time  of  his  agency.^ 

So  if  an  agent,  before  the  beginning  of  his  agency  receives 
notice  of  an  unrecorded  lien  on  real  estate,  of  which  his  prin- 
cipal afterward  becomes  the  purchaser,  such  notice  of  the  agent 
will  not  be  imputed  to  the  principal  unless  there  be  very 
strong  evidence  that,  at  the  time  of  the  purchase,  the  agent  re- 
membered the  fact  that  he  had  received  such  notice.* 

Therefore,  a  principal  is  only  chargeable  with  notice  com- 
municated to  or  knowledge  acquired  by  his  agent  in  another 
transaction  at  another  time,  and  when  he  was  acting  for  another 
principal,  when  clear  proof  is  made  that  the  knowledge  or 
notice  was  present  in  the  mind  of  the  agent  at  the  time  of  the 
transaction  in  question.  Hence,  the  simple  fact  that  an  attor- 
ney who  has  taken  a  mortgage  for  his  client  and  placed  it  on 
record,  had  previously  taken  for  another  client  a  mortgage  on 
the  premises  which  was  not  recorded  do  not  charge  the  junior 
mortgagee  with  knowledge  of  the  existence  of  the  prior  mort- 
gage ;  in  order  to  charge  the  principal,  it  must  be  made  to 
appear  clearly  that  the  attorney  at  the  time  of  the  execution 
and  delivery  of  the  second  mortgage  had  in  mind  the  exist- 

^The  Distilled  Spirits,  11  Wall.  (U.  S.)  356. 

*  Caughman  v.  Smith,  28  S.  Car.  605. 
'  Yerger  v.  Barz,  56  Iowa,  77. 

*  Morrison  v.  Bausemer,  32  Gratt.  (Va.)  225. 


790  REGISTRATION    OF    THE    INSTRUMENT. 

ence  of  the  prior  one,  and  not  only  this,  but  also  that  he  knew 
it  was  still  an  existing  and  valid  lien. 

If  he  did  recollect  that  the  prior  mortgage  was  executed,  but 
honestly  believed  that  it  was  then  or  had  been  satisfied,  although 
mistaken  on  that  point,  the  second  mortgagee  would  not  be 
charged  with  notice  of  its  existence.^ 

The  knowledge  of  an  agent  can  be  charged  to  the  principal 
only  when  clear  proof  is  made  that  the  knowledge  was  present 
in  the  agent's  mind  at  the  time  of  the  transaction  which  is  the 
subject  of  consideration.^ 

A  purchaser  knowing  that  the  recorder  has  made  a 
mistake  in  the  description  of  land  in  recording  the  mortgage 
is  charged  with  notice,  and  takes  the  land  subject  to  the 
mortgage.^ 

Knowledge  communicated  to  a  purchaser  by  his  attorney, 
that  there  is  an  unrecorded  mortgage  on  the  propert}'^,  is  a  suf- 
ficient notice  to  the  principal.*  But  a  mere  rumor  that  the 
owner  is  negotiating  a  loan  is  not  a  sufficient  notice  to  charge 
a  trustee  and  cestui  que  trust  with  notice.^ 

§  764.  The  Knowledge  of  the  Agent  Must  be  Pertinent 
AND  Material  to  the  Transaction. — The  notice  of  the  agent 
must  be  of  that  kind  which  is  pertinent  to  the  transaction,  and 
of  some  thing  which  the  agent  is  in  duty  bound  to  communi- 
cate to  his  principal.®  However,  if  the  agent  acts  in  a  minis- 
terial capacity,  the  principal  is  not  afiected  with  the  notice  of 
the  agent. 

So  a  mortgagor  to  whom  a  mortgage  is  intrusted  for  record 
is  not  the  agent  of  the  mortgagee,  so  as  to  affect  the  latter  with 
notice  of  the  former's  knowledge  of  an  incumbrance.^ 

1  Constant  v.  University,  111  N.  Y.  604,  opinion  by  Peckham,  J. ;  31  N.  E. 
Rep.  26. 

"^  Slattery  v.  Schwannecke,  118  N.  Y.  543. 

^  Shoemake  v.  Smith,  80  Iowa,  655.  See,  also,  Jones  v.  Bamford,  21  Iowa, 
219 ;  Sowler  v.  Day,  58  Iowa,  252. 

*  Bunker  v.  Gordon,  81  Me.  66. 

^Connell  v.  Connell,  32  AV.  Va.  319. 

«  Wyllie  V.  Pollen,  32  L.  J.  (N.  S.)  Ch.  782. 

'  Anketel  v.  Converse,  17  Ohio  St.  11 ;  Hoppock  v.  Johnson,  14  Wis.  303. 


CONSTRUCTION    OF    REGISTRATION    LAWS.  791 

The  knowledge  on  the  part  of  an  attorney  who  makes  out  a 
writ  of  attachment  does  not  affect  his  jjrincipal.  But  notice 
to  the  officer  of  the  existence  of  an  unrecorded  mortgage  upon 
the  property,  who  levies  an  attachment  is  notice  to  the  creditor 
who  has  the  writ  issued  and  the  levy  made/ 

§  765.  Agent  of  Two  Different  Principals  in  Two 
Separate  Transactions. — When  an  agent  of  two  different 
principals,  in  two  separate  transactions,  acts  for  both  of  them_, 
his  duties  are  conflicting,  and  the  question  arises,  can  such  a 
position  bind  either  principal?  It  has  been  stated  that  in 
such  a  case  where  an  agent  owes  conflicting  duties,  the  security 
which  is  taken  or  the  act  which  is  performed  by  the  agent  may 
be  repudiated  by  his  principal  when  he  becomes  aware  of  the 
position  occupied  by  such  agent.^ 

But  when  both  parties  to  a  transaction  have  employed  the 
same  agent,  the  knowledge  of  the  agent  is  to  be  imj)uted  to 
both  of  his  principals.  If,  with  a  full  knowledge  of  the  facts 
that  his  own  agent  is  the  agent  of  the  other,  each  principal  re- 
tains him  in  his  employment,  and  his  notice  is  the  notice  of 
both  of  his  principals ;  for  each  then  notes  the  position  which 
the  agent  has  with  regard  to  the  other,  and  each  takes  the  risk 
of  having  imputed  to  him  whatever  knowledge  the  agent  may 
have  on  the  subject.^ 

§  766.  The  Agent  Being  the  Mortgagor. — Whenever  the 
agent  is  ''  the  contriver,  the  actor,  and  the  gainer  of  the  trans- 
action," his  principal  is  not  charged  with  notice.* 

So,  when  an  agent  or  attorney  of  two  principals  executed  a 
mortgage  to  one  of  them  which  was  not  recorded,  and  then 
executes  a  mortgage  to  the  other  which  was  recorded,  the  latter 

1  Tucker  v.  Tilton,  55  N.  H.  223. 

*  Storey's  Agency,  sect.  210. 

^  Le  Neve  v.  Le  isTeve,  1  Amb.  436 ;  Toulmin  v.  Steere,  3  Meriv.  210 ;  Con- 
stant V.  University,  111  N.  Y.  604,  615.  See,  also,  Nixon  v.  Hamilton,  2  Drury 
&  Walsh,  364;  Losey  v.  Simpson,  3  Stockt.  (N.  J.  Eq.)  246;  Astor  r.  Wells, 
4  Wheat.  (U.  S.)  466 ;  Fuller  v.  Benett,  2  Hare,  403 ;  Hargreaves  v.  Roth  well, 
1  Keen,  154;  Jamison  v.  Gjemenson,  10  Wis.  411. 

*  Kennedy  v.  Green,  3  Myl.  &  K.  699. 


792  REGISTRATION    OF    THE    INSTRUMENT. 

mortgage  took  priority,  because  the  last  principal  was  not 
charged  with  notice/ 

Tlie  act  of  the  agent  in  order  to  impute  notice  must  be  in 
the  scope  of  his  business  in  order  to  impute  notice.  So,  when 
an  agent  is  guilty  of  fraud,  and  the  fraud  is  concealed  in  order 
to  carry  out  the  unlawful  transaction,  the  principal  is  not 
chargeable  with  notice.^ 

If  the  agent  acts  as  a  party  to  an  independent  fraud  on  his 
principal,  it  is  not  chargeable  to  his  principal  as  an  act  done 
by  his  agent.^ 

§  767.  Agents  of  Corporations. — The  principal  is  deemed 
to  have  notice  of  whatever  is  communicated  to  his  agent  while 
acting  as  such  in  a  transaction  to  which  the  communication 
relates.  Notice  to  a  bank  director  or  knowledge  obtained  by 
him  while  not  engaged  officially  in  the  business  of  the  bank 
is  inoperative  as  notice  to  the  bank.^ 

So  when  a  director  makes  a  mortgage  to  his  company  as  a 
third  person,  on  his  own  behalf,  acting  for  himself,  the  corpora- 
tion is  not  chargeable  with  constructive  notice  of  a  prior  con- 
veyance of  it  by  the  mortgagor.^ 

Where  an  agency  is  in  its  nature  continuous  and  made  up 
of  a  long  series  of  transactions  of  the  same  general  character, 
the  knowledge  acquired  by  the  agent  in  one  or  more  of  the  trans- 
actions is  to  be  charged  as  the  knowledge  of  the  principal,  and 
will  affect  him  in  other  transactions  in  which  the  agent  as  such 

^Hope  Fire  Ins.  Co.  v.  Cambrelling,  1  Hun  (N.  Y.),  493.  See,  also, 
Anketel  v.  Converse,  17  Ohio  St.  11 ;  Hoppock  v.  Johnson,  14  Wis.  303 ; 
McCormick  v.  Wheeler,  36  Til.  114 ;  Eolland  v.  Hart,  L.  R.  6  Ch.  App.  678, 
683 ;  Winchester  v.  Railroad  Co.,  4  Md.  231 ;  Kennedy  v.  Green,  3  Myl.  &  K. 
699. 

2  Cave  V.  Cave,  L.  R.  15  Ch.  D.  639 ;  Kennedy  v.  Green,  3  Myl.  &  K.  699; 
Fulton  Bank  v.  Canal  Co.,  4  Paige  (N.  Y.),  127 ;  In  re  European  Bank,  L.  R. 
5  Ch.  App.  358 ;  Rolland  v.  Hart,  L.  R.  6  Ch.  App.  678,  682 ;  Atterbury  v. 
Walhs,  8  De  G.,  M.  &  G.  454,  466. 

3  Cave  V.  Cave,  L.  R.  15  Ch.  D.  639 ;  Espin  v.  Pemberton,  3  De  G.  &  J.  547 ; 
Thompson  v.  Cartwright,  33  Beav.  178;  Hewett  t-.  Loosemore,  9  Hare,  449, 
455 ;  Sharpe  v.  Foy,  L.  R.  4  Ch.  App.  35. 

*  Bank  v.  Davis,  2  Hill  (N.  Y.),  451. 

5  La  Farge  Fire  Ins.  Co.  v.  Bell,  22  Barb.  (N.  Y.)  54,  61. 


CONSTRUCTION    OP    REGISTRATION    LAWS.  793 

is  engaged  and  in  which  the  knowledge  is  material.^  And  it 
is  not  necessary  in  all  cases  that  the  notice  shall  be  given  to 
the  principal  in  the  identical  transaction  ;  so  notice  to  an  agent 
of  a  bank  interested  in  the  management  of  its  business  is 
notice  to  the  corporation  in  transactions  conducted  by  such 
agent,  acting  for  the  corporation  in  the  scope  of  his  authority, 
whether  the  knowledge  of  the  agent  was  acquired  in  the  course 
of  a  particular  dealing  or  on  some  prior  occasion.^ 

§  768.  Officers  Selling  Incumbered  Land  to  Their  Cor- 
poration.— When  the  officers  of  a  corporation  are  acting  for 
themselves,  and  not  for  the  corporation,  and  their  interest  is 
adverse  to  that  of  the  corporation,  the  knowledge  of  the  officers 
of  an  unrecorded  mortgage  on  property  taken  by  the  corpora- 
tion from  the  officers  is  not  chargeable  to  the  corporation.^ 

Chief  Justice  Norton  says  that  the  knowledge  of  officers  of  a 
corporation  of  a  prior  unrecorded  deed  of  trust,  acquired  while 
acting  for  themselves,  in  making  a  conveyance  of  the  land 
from  themselves  to  the  corporation,  will  not  be  regarded  as  the 
knowledge  of  the  latter.*  It  was  decided  in  this  case  that, 
though  the  officers  were  the  president  and  the  secretary  of  the 
company  who  made  the  conveyance  to  the  company,  yet  their 
knowledge  of  an  unrecorded  deed  could  not  be  chargeable  to 
the  corporation. 

1  Holden  v.  Bank,  72  N.  Y.  286.  See,  also,  Brotherton  v.  Hatt,  2  Vern.  574 ; 
Hargreaves  v.  Rothwell,  1  Keen,  154 ;  Winter  v.  Anson,  1  Sim.  St.  434. 

2  Cragie  v.  Hadley,  99  N.  Y.  131.  See,  also,  Welsh  v.  Bank,  73  N.  Y.  424  ; 
Atlantic  State  Bank  v.  Savery,  82  N.  Y.  291. 

^Innerarity  v.  Bank,  139  Mass.  332;  52  Am.  Rep.  710;  Fairfield  Savings 
Bank  v.  Chase,  72  Me.  226 ;  39  Am.  Rep.  319 ;  Wickersham  v.  Chicago  Zinc 
Co.,  18  Kan.  481 ;  26  Am.  Rep.  784 ;  Savings  Association  v.  Printing  Co., 
25  Mo.  App.  643.  See,  also,  Drand  v.  Roher  Manf.  Co.,  9  Mo.  App.  249 ;  Cor- 
net V.  Bartelsmann,  61  Mo.  118  ;  Vest  v.  Mitchie,  31  Gratt.  (Va.)  149 ;  31  Am. 
Rep.  722. 

*  Johnston  v.  Shortridge,  93  Mo.  227. 


PART  IV. 

CONTKACTS  m  YIOLATIOK  OF  LAW. 


CHAPTER  XIX. 

usurious  mortgages. 

Article  1. 

Nature  and  Effect. 

§  769.  Usury.  g  775.  Premiums  and  Exchange. 

§  770.  Statutory  Provisions.  §  776.  Taxes  and  Expenses. 

§771.  Intent  is  Essential  to  Constitute  §777.  Commission  and  Discount. 

Usury.  §  778.  Attorney's  Fees. 

§  772.  Renewal  of  a  Mortgage  Tainted  §  779.  Void  Agreements. 

with  Usury.  §  780.  Sale  of  Security. 

§  773.  Securities  Having  an  Indepen-  §  781.  Absolute  Sale  with  Agreement 

dent  Existence.  to  Repurchase. 

§  774.  Building  and  Loan  Associations 

— Mortgages  not  Usurious. 

§  769.  Usury. — The  laws  controlling  the  taking  of  illegal 
interest  are  not  as  stringent  as  formerly.  At  one  time,  in 
some  of  the  States,  it  was  a  misdemeanor  to  take  usury. 
Idaho,  North  Dakota,  South  Dakota,  New  Mexico,  and  Texas 
still  have  such  laws ;  but  the  other  States  and  Territories 
have  abolished  such  a  law  as  to  the  misdemeanor  feature, 
if  they  ever  had  one ;  New  York  repealed  the  misdemeanor 
provision  in  the  statute  in  1886.^ 

In  the  early  ages  even  interest  was  not  allowed  for  the 
use  of  money.^ 

§  770.  Statutory  Provisions. — The  statutory  provisions  as 
to  the  law  of  usury  are  frequently  changed  and   modified. 

1  Laws  of  1886,  ch.  593. 
*  Bouvier's  Law  Diet.,  tit.  "  Usury." 
794 


USURIOUS    MORTGAGES.  795 

Some  States  have  no  usury  laws,  and  there  is  no  uniformity  in 
the  laws  of  the  other  States  in  this  regard.  In  order  that  the 
following  statements  of  the  law  of  usury  and  the  application  of 
the  same  may  be  readily  understood,  it  has  been  deemed  neces- 
sary to  give  a  brief  synopsis  of  the  law  of  the  various  statutes. 

The  following  States  and  Territories  have  no  usury  laws : 
California,  Colorado,  Connecticut,  Maine,  Massachusetts,  Mon- 
tana, Nevada,  Rhode  Island,^  Washington,  Wyoming,  Arizona 
Territory,  and  Utah  Territory. 

In  the  following  States,  there  is  a  forfeiture  of  the  usury 
above  the  statutory  rate  : 

Georgia,^  Indiana,  Kansas,  Kentucky,  Maryland,  Ohio,  Penn- 
sylvania, Tennessee,^  Vermont,  and  West  Virginia.  In  the 
following  States  and  Territories  usury  forfeits  all  interest : 
Alabama,  Florida,  Illinois,  Louisiana,  Michigan,  Mississippi, 
Missouri,*  Nebraska,  New  Jersey,  North  Dakota,  South  Caro- 
lina, Virginia,  Wisconsin,^  District  of  Columbia,  and  Okla- 
homa Territory. 

In  the  following  States,  all  usurious  contracts  are  void  : 
Arkansas,  Delaware,  Indian  Territory,  Minnesota,  New  York, 
Oregon,^  and  Alaska  Territory. 

In  Idaho  the  penalty  for  taking  usury  is  three  times  the 

'  In  Rhode  Island  there  is  no  law  as  to  usury,  but  the  rate  stipulated  for 
may  be  so  unconscionable  that  a  court  of  equity  might  avoid  the  agreement. 
Thus,  five  per  cent,  a  month,  payable  monthly  in  advance,  each  instalhnent 
to  bear  interest  at  the  same  rate,  is  unconscionable  and  void  :  Brown  v.  Hall, 
14  R.  I.  249. 

*  In  Georgia,  a  waiver  of  usury  by  one  executing  a  mortgage,  of  the  right 
of  homestead  and  exemption  laws,  becomes  of  no  eflfect,  if  usury  enters 
into  the  transaction  :  Small  v.  Hicks,  81  Ga.  691.  See,  also,  Martin  v.  John- 
son, 84  Ga.  481 ;  Lewis  v.  Brown,  14  S.  E.  Rep.  881 ;  Dotterer  v.  Freeman,  88 
Ga.  479. 

'  A  stipulation  for  usury  does  not  forfeit  the  actual  debt,  but  no  paper 
showing  a  contract  for  usury  upon  its  face,  can  be  sued  on,  but  the  action 
must  be  brought  as  if  no  such  paper  was  in  existence. 

*  Penalty  for  usury  is  the  forfe  iture  of  all  interest  to  the  common  school 
fond. 

*  If  the  usurious  interest  is  paid,  the  person  taking  it  is  liable  to  an  action 
for  treble  the  amount  of  the  unlawful  interest  or  excess,  if  action  is  brought 
within  one  year. 

®The  entire  debt  is  forfeited  to  the  school  fund. 


796  CONTRACTS    IN    VIOLATION    OF    LAW. 

amount  so  paid,  and  a  fine  of  three  hundred  dollars  or  six 
months'  imprisonment,  or  both. 

In  Iowa  the  payee  shall  receive  only  the  principal,  without 
interest  and  without  costs,  and  a  judgment  rendered  against 
the  maker  of  the  contract  for  ten  per  cent,  of  the  debt,  which 
shall  be  forfeited  to  the  school  fund. 

The  New  Hampshire  laws  provide  that  the  receiver  of  usury 
shall  forfeit  three  times  the  sum  so  received  in  excess  of  the 
legal  rate  to  the  person  aggrieved,  who  shall  sue  therefor. 

In  New  Mexico  usury  is  a  misdemeanor  punishable  by  a  fine 
of  not  less  than  twenty-five  dollars  nor  more  than  one  hundred 
dollars,  with  a  forfeiture  of  double  the  amount  of  illegal  inter- 
est collected.  The  North  Carolina  statute  provides  for  the 
forfeiture  of  the  entire  interest,  and  the  one  paying  the  usury 
may  recover  double  the  amount  of  interest  paid. 

In  Texas  the  party  taking  usurious  interest  is  subject  to  a 
fine  of  not  less  than  one-third,  nor  more  than  the  whole  amount, 
of  the  money  loaned. 

In  South  Dakota  the  whole  interest  is  forfeited,  and  the  party 
receiving  usury  is  guilty  of  a  misdemeanor ;  and  a  similar  law 
is  in  force  in  North  Dakota. 

§  771.  Intent  is  Essential  to  Constitute  Usury. — ^While 
intent  is  essential  to  constitute  usury,  yet  the  intent  must  be 
deduced  from,  and  determined  by,  the  fact.  The  voluntary 
taking  or  reserving  a  greater  interest  or  compensation  for  a  loan 
than  that  allowed  by  law  is  per  se  usurious.  So  the  offense  is 
not  ordered  dismissed  by  a  want  of  intent  to  violate  the  statute 
or  by  giving  the  transaction  another  name  than  of  a  loan.^ 

Because  interest  has  been  calculated  and  included  in  the 
mortgage  debt  in  excess  of  the  strict  legal  right,  does  not  make 
a  usurious  contract ;  ^  and  an  agreement  for  the  highest  rate  of 

1  Kelley  v.  Lewis,  4  W.  Va.  456;  Culver  v.  Pullman,  59  Hun  (N.  Y.),615; 
Cooper  V.  Nock,  27  III.  301 ;  Fiedler  v.  Darrin,  50  N.  Y.  437  ;  Duvall  v.  Bank, 
7  Gill  &  Johns.  (Md.)  44 ;  Scruggs  v.  Scottish  Mort.  Co.,  54  Ark.  566 ; 
Childers  v.  Deane,  4  Rand.  (Va.)  406 ;  Stelle  v.  Andrews,  19  N.  J.  Eq.  409 ; 
Bardwell  v.  Howe,  Clarke  (N.  Y.),  281. 

2  Spencer  v.  Ayrault,  10  N.  Y.  202. 


USURIOUS    MORTGAGES.  797 

interest,  payable  semi-annually  or  quarterly,  is  not  usurious,^ 
nor  is  taking  tlie  highest  rate  in  advance  for  a  whole  year.^ 

An  agreement  by  a  borrower  upon  mortgage  to  allow  the 
lender  to  retain  part  of  the  land  mortgaged  after  being  repaid 
principal  and  interest  of  the  loan,  if  it  is  jjart  of  the  mortgage 
transaction,  is  usurious,  and  will  not  be  enforced.^  But  the 
mortgagor  may  agree  to  pay  the  taxes,  which  may  be  included 
with  the  interest,  and  the  agreement  will  not  be  usurious/ 

§  772.  Renewal  of  a  Mortgage  Tainted  with  Usury. — 
A  mortgage  free  from  usury  in  its  inception  is  not  affected  by 
a  subsequent  agreement  to  forbear  suit  in  consideration  of  the 
payment  of  illegal  interest.  When  such  interest  is  paid  it  will 
be  credited  on  the  amount  due  on  the  mortgage.^  But  a  mort- 
gage given  to  secure  a  pre-existing  debt,  which  is  tainted  with 
usury,  will  be  vitiated  by  the  original  indebtedness.^ 

So  a  renewal  mortgage  is  vitiated  by  the  taint  of  usury  in 
the  original.^  This  rule  is  otherwise  if  an  innocent  third 
person  receives  the  renewal  mortgage  from  the  mortgagor.^ 

A  mortgage  is  vitiated  by  usury  when  a  former  usurious 
mortgage  constitutes  the  greater  part  of  the  consideration  of  it.' 

1  Goodrich  v.  Reynolds,  31  111.  490,  498 ;  Meyer  v.  Muscatine,  1  Wall.  (U. 
S.)  384 ;  Mowry  v.  Bishop,  5  Paige  (N.  Y.),  98. 

^  Tholen  v.  Duffy,  7  Kan.  405 ;  Fowler  v.  Trust  Co.,  141  U.  S.  384,  408,  411 ; 
Mitchell  V.  Lyman,  77  111.  525 ;  Goodrich  v.  Reynolds,  31  111.  490  ;  McGill  v. 
Ware,  4  Scam.  (111.)  21 ;  Telford  v.  Gan-els,  132  111.  550,  554 ;  Brown  v.  Mort- 
gage Co.,  110  111.  235,  239;  Hoyt  v.  Pawtucket  Inst.,  110  111.  390,  394. 

^Gleason  v.  Burke,  20  N.  J.  Eq.  300.  See,  also,  Terwilliger  r.  Beecher,  58 
Hun  (N.  Y.),  605 ;  Lombard  v.  Gregory,  81  Iowa,  569 ;  Telford  v.  Garrels,  132 
111.  550 ;  Succession  of  Latchford,  42  La.  Ann.  529 ;  Southall  v.  Parish,  85  Va. 
403  ;  Keagy  v.  Trout,  85  Va.  390. 

*Dutton  V.  Aurora,  114  111.  138.    See  Hodgdon  v.  Davis,  6  Dak.  21. 

^Terhune  v.  Taylor,  27  N.  J.  Eq.  80 ;  Abrahams  v.  Claussen,  52  How.  Pr.  (N 
Y.)  241. 

«Bell  V.  Lent,  24  Wend.  (N.  Y.)  230 ;  Berry  v.  Thompson,  17  Johns.  (X.  Y.) 
436 ;  Vickery  v.  Dickson,  35  Barb.  (N.  Y.)  96. 

^  McCraney  v.  Alden,  46  Barb.  (N.  Y.)  272 ;  Cope  v.  AVheeler,  41  N.  Y.  303 ; 
Exley  V.  Berryhill,  37  Minn.  182. 

«Kilner  v.  O'Brien,  14  Hun  (N.  Y.),  414  ;  Shemood  v.  Archer,  10  Hun  (N. 
Y.),  73 ;  Jenkins  v.  Levis,  25  Kan.  479. 

9  McCraney  v.  Alden,  46  Barb.  (N.  Y.)  272. 


798  CONTRACTS    IN   VIOLATION    OF    LAW. 

But  a  mortgage  given  to  secure  the  payment  of  a  note  tainted 
with  usury  is  valid,  as  between  the  maker  of  the  note  and  one 
who  purchased  it  for  value,  and  without  notice  that  the  consider- 
ation was  usurious.^  It  is  not  unlawful  or  usurious  for  a  party 
to  loan  money  to  one  who  uses  it  in  paying  a  usurious  debt.^ 

§  773.  Securities  Having  an  Independent  Existence, — 
Obligations  and  securities  having  an  independent  existence, 
and  free  from  usury,  are  not  affected  by  the  statute,  although 
the  subject  of  a  contract  tainted  with  usury.  A  valid  and  sub- 
sisting debt  is  not  destroyed  because  included  in  a  security  or 
made  the  subject  of  a  prohibited  contract.  Although  formally 
satisfied  and  discharged,  and  the  security  surrendered,  it  may 
be  revived  and  enforced  in  case  the  new  security  is  avoided.* 

A  valid  mortgage  is  not  affected  by  a  subsequent  usurious 
agreement.* 

If  a  usurious  agreement  is  independent  of  the  loan  and 
mortgage,  and  not  a  condition  of  the  loan,  and  capable  of 
being  sustained  without  reference  to  them,  either  as  a  sale  on 
consideration  or  as  a  gift,  it  may  be  enforced.* 

A  usurious  mortgage  may,  by  the  acts  of  the  parties  to  it,  be 
so  purged  of  the  illegal  taint  that  it  will  stand  as  a  legal  se- 
curity against  the  mortgagor  and  all  persons  claiming  through 
him."  However,  an  agreement  between  the  holder  of  the 
mortgage  and  the  mortgagor  for  a  consideration  of  a  reduction 
allowed  in  the  settlement  of  certain  debts  due  him  from  the 
mortgagor,  that  the  mortgage  should  be  regarded  as  purged  of 
usury,  will  not  remove  the  taint  so  long  as  the  mortgage  re- 
mains in  the  same  hands.^ 

1  Coor  V.  Spicer,  65  N.  Car.  401. 

''Wilson  V.  Harvey,  4  Lans.  (N.  Y.)  507.  See,  also,  Hann  v.  Dekater  (N.  J.), 
20  At.  Rep.  657  ;  Hendrickson  v.  Godsey,  54  Ark.  155 ;  Trible  v.  Nichols,  53 
Ark.  271. 

» Patterson  r.  Birdsall,  64  N.  Y.  294 ;  21  Am.  Rep.  609;  Smith  v.  HoUiflter, 
14  N.  J.  Eq.  153. 

*  Allison  V.  Schmitz,  31  Hun  (N.  Y.),  106. 

^Gleason  v.  Burke,  20  N.  J.  Eq.  300. 

6  Warwick  v.  Dawes,  26  N.  J.  Eq.  548. 

T Warwick  v.  Marlatt,  25  N.J.  Eq.  188. 


USURIOUS   MORTGAGES.  799 

Where  one  of  the  two  separate  and  independent  loans  is 
usurious,  the  taint  does  not  adhere  to  tlie  other,  though  both 
were  between  the  same  parties,  closed  at  the  same  time,  and 
secured  by  the  same  mortgage/ 

§  774.  Building  axd  Loan  Associations — Mortgages  Not 
Usurious. — A  mortgage  given  to  a  building  and  loan  associa- 
tion by  a  holder  of  its  stock  is  not  usurious  because  it  requires 
monthly  payments  of  interest,  besides  fines  and  impositions, 
in  accordance  with  provisions  of  the  constitution  of  the  asso- 
ciation.^ 

In  Pennsylvania  a  building  association  can  recover  on  its 
mortgage  only  the  money  actually  advanced  to  its  stockholder, 
with  legal  interest.^  • 

All  loans  must  conform  strictly  with  the  terms  of  the 
statute.*  But  if  a  party  is  not  a  member,  or  claims  he  is  not, 
he  is  not  estopped  to  deny  such  membership,  and  such  ques- 
tion must  be  determined  by  a  jury  as  any  other  question  of 
fact.' 

The  installments  which  a  mortgagor  has  contracted  to  pay 
cease  at  the  dissolution  of  the  association,  or  at  the  time  of 
appointment  of  a  receiver.® 

When  there  is  actual  usury  in  the  transaction  between  a 

^  Jackson  v.  May,  28  111.  App.  305 ;  Crippen  v.  Heermance,  9  Paige  (N.  Y.), 
211. 

2  Red  Bank  Mut.  Build.  &  Loan  Asso.  v.  Patterson,  27  N.  J.  Eq.  223.  See, 
also,  City  Build.  &  Loan  Co.  v.  Fatty,  1  Abb.  App.  Dec.  (N.  Y.)  347 ;  Silver  v. 
Barnes,  6  Bing.  (N.  C.)  180 ;  McComb  v.  Apartment  Asso.  (N.  Y.)  31  N.  E. 
Rep.  719  ;  Building,  Loan  &  Sav.  Asso.  v.  Vandevere,  3  Stockt.  (N.  J.  Eq.) 
382 ;  Hekelnkgemper  v.  German  Build.  Asso.,  22  Kan.  549 ;  Citizens'  Mut. 
Loan  Asso.  v.  Webster,  25  Barb.  (N.  Y.)  263 ;  Shannon  v.  Dunn,  43  N.  H.  194, 
Compare  Citizens'  Security  &  Land  Co.  v.  Uhler,  48  Md.  455. 

^  Link  V.  Grermantown  Build.  Asso.,  89  Pa.  St.  15. 

*  Birmingham  v.  Association,  45  Md.  541 ;  Williar  v.  Association,  45  Md. 
546,  See,  also,  Peter's  Build.  Asso.  v.  Jaecksch,  51  Md.  198 ;  McCahan  v.  Co- 
lumbian Build.  Asso.,  40  Md.  226 ;  Johnston  v.  Association,  104  Pa.  St.  .394. 

^Building  Asso.  I'.  Thompson,  19  Kan.  321.  See,  also,  Juniata  Build.  & 
Loan  Asso.  v.  ^lixell,  84  Pa.  St.  313  ;  Lincoln  Build.  &  Sav.  Asso.  v.  Graham, 
7  Nebr.  173  ;  Wolbach  v.  Build.  Asso.,  84  Pa.  St.  211. 

*  Peter's  Building  Asso.  v.  Jaecksch,  51  Md.  198  ;  Low  Street  Build.  Asso.  v. 
Zucker,  48  Md.  449. 


800  CONTRACTS    IN   VIOLATION    OF   LAW. 

building  association  and  a  subscriber,  the  association  cannot 
protect  itself  by  a  provision  in  its  charter  that  "  no  dues,  pre- 
miums, interest,  or  fines  that  may  accrue  to  the  association  in 
accordance  with  its  charter  shall  be  deemed  usurious."  ^ 

§  775.  Premiums  and  Exchange. — The  sale  of  mortgage 
securities  at  a  premium  cannot  subject  the  party  to  an  action 
to  recover  back  the  premium  on  the  ground  of  usury  ;  whether 
the  premium  was  computed  in  the  contract  of  sale  at  a  certain 
percentage  in  excess  of  the  legal  rate  for  the  time  past,  or  stated 
at  a  gross  sum,  or  as  compound  interest,  is  immaterial.^ 

The  payment  of  exchange  is  not  usury,  unless  it  appears 
that  this  allowance  was  a  mere  device  on  the  part  of  the  mort- 
gagee to  evade  the  usury  laws.^ 

And  paying  a  premium  on  gold  in  buying  an  exchange  to 
pay  a  mortgage  held  in  a  foreign  country^  where  gold  is  the 
basis  of  currency,  is  not  usurious.* 

The  premium  paid  upon  three  distinct  loans  will  not  render 
wholly  ursurious  a  mortgage  given  to  secure  such  loans.  Only 
the  excess  of  the  interest  thereto  must  be  deducted,  in  New 
Jersey.^  And  where  distinct  the  forfeiture  will  be  confined  to 
the  one  which  is  usurious." 

§  776.  Taxes  and  Expenses. — An  agreement  to  pay  the 
insurance  premiums  on  the  mortgaged  property  in  addition  to 
the  highest  legal  interest  is  not  usurious ;  ^  or  to  pay  taxes  on 
the  mortgaged  debt.^ 

So  the  payment  by  the  borrower,  in   addition  to  full  legal 

^  Henderson  Build  &  Loan  Asso.  v.  Johnson,  88  Ky.  191  ;  Burlington  Mut. 
L.  Asso.  V.  Holder,  55  Iowa,  424  ;  Association  v.  Wilcox,  24  Conn.  147 ;  Forest 
City  Loan  Asso.  v.  Gallagher,  25  Ohio  St.  208 ;  Gordon  v.  Association,  12 
Bush  (Ky.),  110. 

2  Culver  V.  Bigelow,  43  Vt.  249. 

MVilliams  v.  Hance,  7  Paige  (N.  Y.),  581. 

*  Oliver  v.  Shoemaker,  35  Mich.  464. 

^Mahn  v.  Hussey,  28  N.  J.  Eq.  546. 

« Crippen  v.  Heermance,  9  Paige  (N.  Y.),  211 ;  Jackson  v.  May,  28  111.  App. 
305. 

■'New  England  Mort.  Sec.  Co.  v.  Gay,  33  Fed.  Rep.  636. 

8  Banks  v.  McClellan,  24  Md.  62 ;  Kidder  v.  Vandersloot,  114  111.  133. 


USURIOUS    MORTGAGES.  801 

interest,  of  the  costs  of  drawing  the  mortgage  and  examining 
the  title  to  the  security  does  not  constitute  usury/  Because 
the  note  and  mortgage  are  made  out  and  the  note  draws  inter- 
est several  days  before  the  transaction  is  completed  does  not 
constitute  usury.^  But  if  the  money  had  been  withheld  on 
purpose  to  evade  the  usury  law,  it  would  have  been  usury .^ 

§  777.  Commission  and  Discount. — An  agent  for  loaning 
money  may  take  a  reasonable  commission  from  the  borrower, 
even  with  the  knowledge  of  the  lender,  and  such  transaction 
will  not  be  usurious,  though  the  amount  of  interest  reserved  to 
the  lender  be  full  lawful  interest.  But  an  executor  cannot  be 
such  an  agent.* 

Where  an  agent  sells  a  note  and  mortgage  of  his  principal 
for  a  greater  rate  of  discount  than  allowed  by  law,  and  the 
vendee  takes  in  good  faith,  the  transaction  is  not  usurious.^ 

An  agent  can  take  a  commission  for  securing  the  loan,  but 
it  must  be  on  his  own  account,  and  not  connected  with  the 
principal.  It  is  not  usurious  when  the  principal  derives  no 
benefit  from  the  commission.*^ 

When,  however,  the  agent  has  the  general  oversight  of  his 
principal's  money,  and  loans  it  without  any  special  authority, 
and  in  such  sums  and  at  such  times  as  he  pleases,  and  is  only 
restricted  as  to  the  least  amount  of  interest  to  be  taken,  if  the 
agent  exacts  usury  upon  his  loans,  the  principal  is  affected  and 
the  transaction  is  usurious.^ 

^Ammondson  v.  Ryan,  111  111.  506;  Ellenbogen  v.  Griflfey,  55  Ark.  268; 
Daley  v.  Association,  43  Minn.  517 ;  Dayton  v.  Moore,  30  N.  J.  Eq.  543. 

^ Daley  v.  Association,  43  Minn.  517. 

5  Barr  v.  Church  (N.  J.),  10  At.  Rep.  287. 

*  Landis  v.  Saxton,  89  Mo.  375. 

^Jackson  v.  Travis,  42  Minn. 438. 

8  Gray  v.  Van  Blarcom,  29  N.  J.  Eq.  454 ;  Spring  v.  Reed,  28  N.  J.  Eq.  345  ; 
Van  AVyck  v.  Watters,  81  N.  Y.  352 ;  Guggenheimer  v.  Griszler,  81  N.  Y.  293  • 
Rogers  v.  Buckingham,  33  Conn.  81 ;  Eslava  v.  Crampton,  61  Ala.  507  ;  Jennings 
V.  Hunt,  6  111.  App.  523;  Phillips  r.  Roberts,  90  111.  952;  New  England  Mort. 
Security  Co.  v.  Gay,  33  Fed.  Rep.  636 ;  Estevez  v.  Purdy,  66  N.  Y.  446 ;  Jordan 
V.  Humphrey,  31  Minn.  495. 

'Payne  v.  Newcomb,  100  HI.  611 ;  Stevens  r.  Mcers.  11  111.  App.  138;  Fow- 
ler V.  Trust  Co.,  141  U.  S.  384,  408,  411 ;  Banks  v.  Flint,  54  Ark.  40. 
61 


802  CONTRACTS    IN    VIOLATION    OF    LAW. 

But  an  agent  of  an  insurance  company  to  procure  insur- 
ance does  not  become  the  general  agent  of  the  company  by 
sending  to  it  for  loans  of  money,  so  as  to  render  the  insurance 
company  liable  for  usury  by  reason  of  commissions  taken  by 
such  agent  from  the  borrower.  He  is  not  the  general  loan 
agent  of  the  company,  and,  his  exaction  of  usury  by  taking 
commissions,  does  not  affect  the  company.^ 

An  agent  generally  may  loan  money  and  take  commission 
where  there  is  no  arrangement  to  this  effect  between  the  agent 
and  the  lender.^  But  when  the  principal  ratifies  the  agent's 
usurious  contract,  then  the  principal  becomes  affected  with  the 
usury  and  must  abide  the  consequences.^  Because  the  accept- 
ance of  the  mortgage  with  the  knowledge  of  such  unlawful 
origin,  or  with  such  notice  as  would  cause  a  prudent  person  to 
make  inquiry,  is  a  ratification  of  the  usurious  contract,  and 
equivalent  to  prior  authority  to  make  it.*  But  when  the 
principal  accepts  an  absolute  deed  as  security  for  the  amount 
of  his  money  actually  loaned  by  his  agent,  with  legal  interest, 
he  does  not  thereby  ratify  the  act  of  the  agent  in  exacting 
usury,  without  the  knowledge  or  authority  of  his  principal.* 
A  loan  of  money  at  legal  interest,  secured  by  note  and  mort- 
gage, is  not  rendered  usurious  because  a  commission  was  paid 
to  the  agent  negotiating  the  loan,  where  it  is  not  shown  that 
the  lender  had  knowledge  of  the  fact,  or  participated  in  the 
commission  paid  ;  ^  nor  would  it  be  usurious  even  if  the  agent 
acted  for  the  lender,  and  deducted  his  commissions  from  the 
amount    lent,  unless   this  was   done  with  the  knowledge  or 

1  Cox  V.  Ins.  Co.,  11.3  111.  382 ;  Masgachusetts  Mut.  L.  Ins.  Co.  v.  Boggs,  121 
111.  119. 

2  Callender  v.  Roberts,  17  111.  App.  539 ;  Hoyt  v.  Pawtucket  Inst.,  110  111. 
390, 394 ;  Telford  v.  Garrels,  132  111.  550,  554 ;  Sanford  v.  Kane,  133  111.  199, 
205 ;  Ginn  v.  New  England  Sec.  Co.,  92  Ala.  135 ;  May  v.  Flint,  54  Ark. 
573 ;  Weems  v.  American  Mort.  Co.,  86  Ga.  760.  See,  also,  Bliven  v.  Ly- 
decker,  130  N.  Y.  102. 

3  Bliven  v.  Lydecker,  130  N.  Y.  102. 

*  Hyatt  V.  Clark,  118  N.  Y.  563 ;  Uoytv.  Thompson,  19  N.  Y.  207. 
5  Nye  V.  Swan  (Minn.),  52  N.  W.  Rep.  39. 

«Am.  Freehold  L.  Mort.  Co.  v.  Sewell,  92  Ala.  163;  Call  v.  Palmer,  116  IT. 
S.  98. 


USURIOUS    MORTGAGES.  803 

consent  of  the  lender,  or  he  derived  some  benefit  from  it  in 
addition  to  legal  interest ;  nor  is  it  usurious  because  separate 
notes  are  taken  for  the  accruing  interest,  each  bearing  interest 
from  maturity  ;  nor  because  the  mortgage  contained  a  stipula- 
tion for  the  payment  of  an  attorney's  fee  on  foreclosure/ 

§  778.  Attorney's  Fees. — Generally  a  stipulation  in  a 
mortgage  for  the  payment  of  attorney's  fees  in  addition  to 
legal  interest,  in  case  the  holder  is  compelled  to  sue,  does  not 
render  the  mortgage  usurious,^  provided  the  fee  is  reasonable.^ 

But  a  provision  in  a  mortgage  for  the  "  expenses  of  the  sale  " 
does  not  include  attorney's  fees.*  But  attorney's  fees  are  not 
allowed  in  all  the  States.  Kentucky,  Ohio,  and  Michigan  hold 
that  the  stipulation  in  a  mortgage  for  attorney's  fees  is  void 
as  against  public  policy.^  It  is  generally  held  reasonable 
attorney's  fees  may  be  provided  for  in  case  the  mortgagee  has 
to  foreclose  the  mortgage.  Such  a  contract  of  itself  does  not 
make  the  contract  usurious.^  But  the  statute  cannot  be  avoided 
by  any  shift  or  device  which  may  be  resorted  to  by  the  parties.'' 

§  779.  Void  Agreements. — Where  a  claim  to  subrogation 
grows  out  of  an  agreement  which  is  void  by  reason  of  usury, 
it  furnishes  no  basis  for  the  equitable  doctrine  of  subrogation.* 

So  in  Arkansas  where  to  secure  a  loan  a  party  conveys  land 

iGinn  v.  New  Eng.  Mortg.  Sec.  Co.,  92  Ak.  135. 

^Matzenbaugh  v.  Troup,  36  111.  App.  261;  Williams  v.  Flowers,  90  Ala. 
136;  Fowler  v.  Trust  Co.,  141  U.  S.  384,  408,  411 ;  Siegel  v.  Drumm,  21  La. 
Ann.  8 ;  Weatherby  v.  Smith,  30  Iowa,  131 ;  6  Am.  Rep.  663 ;  Gambril  v.  Doe, 
8  Blackf.  (Ind.)  140 ;  Hunter  v.  Linn,  61  Ala.  492 ;  Billingsley  v.  Dean,  11  Ind. 
331 ;  Huling  v.  Drexell,  7  Watts  (Pa.);  126. 

=*  Hunter  v.  Linn,  61  Ala.  492 ;  Clawson  v.  Munson,  55  111.  394. 

*  Thomas  v.  Jones,  84  Ala.  302. 

^Thomasson  v.  Townsend,  10  Bush  (Ky.),  114;  Rilling  v.  Thompson,  12 
Bush  (Ky.),  310;  State  v.  Taylor,  10  Ohio,  378;  Van  Marter  v.  McMillan,  39 
Mich.  .305.  But  in  Michigan  a  statute  makes  provision  for  paying  the  attor- 
ney in  case  of  foreclosure  :  Session  Laws,  1885,  art.  133. 

«  Barton  v.  Nat.  Bank,  122  111.  352,  355  ;  Clawson  v.  Munson,  55  111.  394, 397; 
Haldeman  v.  Mut.  Life  Ins.  Co.,  120  111.  390,  393  ;  Telford  v.  Garrels,  132  111. 
550,  555  ;  Mclntyre  v.  Yates,  104  111.  491,  503. 

'  Leonard  v.  Patton,  106  111.  99,  104. 

» Perkins  v.  Hall,  105  N.  Y.  539. 


804  CONTRACTS   IN   VIOLATION    OF    LAW. 

by  absolute  deed,  and  subsequently,  in  order  to  pay  the  loan, 
borrows  money  from  another  party  at  a  usurious  rate  of  interest 
and  procures  the  vendee  to  convey  the  land  to  the  lender  by 
absolute  deed,  the  last  conveyance  is  void  and  the  vendee  will 
not  be  subrogated  to  the  rights  of  the  first  vendee.* 

If  a  note  secured  be  void  for  usury,  the  deed  of  trust  is  void 
also.^ 

And  in  Georgia  a  waiver  by  one  executing  a  mortgage,  of 
the  right  of  homestead  and  exemptions  laws,  becomes  of  no 
effect  if  usury  enters  into  the  transaction  ;  ^  and  so  a  deed  of 
land  given  to  secure  a  usurious  note,  being  tainted  by  usury, 
is  void  as  a  conveyance.*  But  where  land  is  conveyed  by 
absolute  deed  intended  as  a  mortgage,  such  deed  will  not  be 
rendered  void  by  usury  in  the  last  of  several  renewal  notes, 
there  being  no  usury  in  the  loan  nor  in  the  contract  between 
the  parties  to  the  deed  itself.^ 

It  is  well  settled  that  the  parties  to  a  usurious  contract  can  do 
nothing  which  will  have  the  effect  to  validate  it,  so  as  to  deprive 
the  debtor  of  his  right  to  defend  on  the  ground  of  usury, 
except  by  expunging  its  usurious  elements.^  If  the  immedi- 
ate parties  to  the  transaction,  by  mutual  consent,  surrender  the 
usurious  contract,  and  substitute  a  new  promise  to  pay  the 
sum  loaned,  with  legal  interest,  this  may  then  be  enforced  on 
the  principle  that  the  parties  have  purged  the  transaction  of 
the  usury.  But  as  between  the  parties  to  the  usurious  mort- 
gage, or  as  against  a  subsequent  holder  with  knowledge  of  the 
defect,  the  original  taint  attaches  to  all  substituted  obligations 
or  securities,  however  remote,  unless  the  original  vice  be  re- 
moved by  expunging  the  usurious  element.^ 

The  doctrine  is  well  settled  that  the  purchaser  of  the  equity 

1  Trible  v.  Nichols,  53  Ark.  27L 
^  Central  Trust  Co.  v.  Burton,  74  Wis.  329. 
3  Small  V.  Hicks,  81  Ga.  691. 

*  Martin  v.  Johnson,  84  Ga.  481-    See,  also,  Lewis  v.  Brown  (Ga.),  14  S.  E. 
Rep.  881. 
^  Dotterer  v.  Freeman,  88  Ga.  479. 
^Ti-usdell  V.  Dowden,  47  N.  J.  Eq.  396. 
'Taylor  v.  Morris,  22  N.  J.  Eq.  606,  609. 


USURIOUS   MORTGAGES.  805 

of  redemption  in  mortgaged  premises,  who  takes  title  subject 
to  such  mortgage,  cannot  set  up  the  defense  of  usury/ 

The  reason  of  tliis  is  ably  stated  by  A^ice-Chancellor  Van 
Fleet,  who  saj^s  that  this  doctrine  does  not  at  all  rest  on  the 
theory  that  the  taint  of  the  conveyance  has,  as  between  the 
original  parties,  been  purged  from  the  mortgage,  but  the  doc- 
trine rests  on  the  ground  that  the  purchaser  by  taking  title  sub- 
ject to  the  mortgage  and  retaining  out  of  the  price  he  agreed 
to  pay  sufficient  money  to  pay  the  mortgage,  places  himself  in 
a  position  where  he  cannot  allege  usury  without  attempting  to 
keep  back  part  of  the  money  which  he  agreed  to  pay  for  the 
mortgaged  lands.  Having  retained  enough  of  the  purchase- 
money  to  pay  the  mortgage,  under  a  promise  that  he  would 
apply  the  money  to  the  payment  of  the  mortgage,  it  is  plain 
that  if  he  were  allowed  to  make  the  defense  of  usury,  and 
should  make  it  successfully,  he  would  defraud  both  his  grantor 
and  the  mortgagee.  He  would  be  permitted  to  speculate  on  a 
violation  of  law  that  had  done  him  no  harm,  and  to  keep  back 
money  to  which  he  has  no  right  whatever,  and  to  do  so  in 
direct  violation  of  his  promise.  To  prevent  this,  equity  says 
that  he  shall  not  make  the  defense  of  usury,  but  it  says  so,  not 
because  the  mortgage  has  been  purged  of  its  taint,  but  because 
he  kept  back  enough  of  the  purchase-money  to  pay  the  mort- 
gage under  a  promise  that  if  the  money  was  left  in  his  hands 
he  would  pay  the  mortgage  debt.  "  This  is  the  foundation  on 
which  the  doctrine  just  mentioned  rests,  and  it  has  no  other."  ^ 

§  780.  Sale  of  Security. — ^Where  a  trust  deed  gives  power 
to  sell  the  property  for  any  amount  that  may  be  due  on  the 
secured  note,  a  trustee  sale  is  not  rendered  invalid  by  the  exist- 
ence of  usury  in  the  loan,  when  the  sum  for  which  the  land  is 
sold  is  less  than  the  amount  due  after  deducting  the  usurious 
interest.^  As  a  general  rule  a  mortgage  once  issued  may  be 
sold  without  affecting  an  innocent  purchaser  in  any  of  the  con- 

1  Pinnell  v.  Boyd,  3.3  N.  J.  Eq.  600,  602  ;  Conover  v.  Hobart,  24  N.  J.  Eq.  120, 
123 ;  Lee  v.  Stiger,  30  N.  J.  Eq.  610,  611. 
'Trasdell  v.  Dowden,  47  N.  J.  Eq.  396. 
^Ammondson  v.  Ryan,  111  111.  506. 


806  CONTRACTS    IN    VIOLATION    OF    LAW. 

sequences  of  taking  usurious  interest.^  The  mortgagee  may 
sell  the  mortgage  at  a  discount  before  taken,  if  it  be  not  a  plan 
to  cover  up  usury .^  And  a  corporation  may  sell  its  bonds 
at  a  discount  and  not  violate  the  law  as  to  usury .^ 

A  purchaser  under  a  junior  mortgage  has  the  right  to  remove 
the  lien  of  the  prior  usurious  mortgage  by  discharging  only  so 
much  of  the  debt  secured  thereby  as  the  law  recognizes  as 
valid  ;  and  this  right  is  not  defeated  by  a  conveyance  subse- 
quently made  by  the  mortgagor  to  the  prior  mortgagee.* 

§  781.  Absolute  Sale  with  Agreement  to  Repurchase. — 
In  Georgia,^  all  titles  to  property  made  as  a  part  of  a  usurious 
contract  are  void.  So  when  a  deed  is  infected  with  usury 
it  is  void  as  title.  And  if  void  as  title,  it  cannot  have  effect 
as  an  equitable  mortgage,  because  unless  title  passes  an 
equitable  mortgage  is  not  created  by  the  conveyance  of  the 
land." 

When  land  is  sold  and  the  transaction  is  apparently  a  con- 
ditional sale,  it  will  not  be  sustained  as  such  unless  it  clearly 
appears  that  it  is  not  a  scheme  to  cover  usury .'^ 

If  the  mortgagee  knowingly  and  voluntarily  takes  or  re- 
serves a  greater  interest  than  is  allowed  by  law,  his  securit}'' 
is  aifected  with  usury.^ 

Neither  can  usury  be  covered  up  by  pretended  sale  of  land 
with  a  lease  back  to  the  vendor.® 

^  Jackson  v.  Travis,  42  Minn.  438 ;  Sickles  v.  Flanagan,  79  N.  Y.  224 ;  Smith 
V.  Cross,  90  N.  Y.  549 ;  Dunham  v.  Cudhpp,  94  N.  Y.  129 ;  Mix  v.  IVIadison 
Ins.  Co.,  11  Ind.  117. 

''Armstrong  v.  Freeman,  9  Nebr.  11. 

3  Traders'  Nat.  Bank  v.  Woodlawn  Manuf.  Co.,  96  N.  Car.  298. 

*Maloney  v.  Eaheart,  81  Tex.  281.  See,  also,  Hann  v.  Dekater  (N.  J.),  20 
At.  Rep.  657 ;  Trible  v.  Nichols,  53  Ark.  271. 

5  Code,  sect.  2057  (f.) 

« McLaren  v.  Clark,  80  Ga.  423  ;  Broach  v.  Smith,  75  Ga.  159;  Morrison  v. 
Markham,  78  Ga.  161 ;  Baggett  v.  Trulock,  77  Ga.  369;  Pope  v.  Marshall,  78 
Ga.  635. 

■'  Gleason  v.  Burke,  20  N.  J.  Eq.  300. 

8  Fiedler  v.  Darrin,  50  N.  Y.  437  ;  Fitzsimmons  v.  Baum,  44  Pa.  St.  32 ;  An- 
drews V.  Poe,  30  Md.  486 ;  Birdsall  v.  Patterson,  51  N.  Y.  43. 

9  Gaither  v.  Clark,  67  Md.  18 ;  Grand  United  Order  v.  Merklin,  65  Md.  579 ; 
Morrison  v.  Markham,  78  Gra.  161. 


usurious  mortgages.  807 

Article  2. 
Defense. 

I  782.  Parties  that  Can  Set  Up  the  De-  §  785.  Seeking  Rehef  in  Equity. 

fense  of  Usury.  g  786.  After  Judgment, 

g  783.  "Waiver  of  Usury  by  Mortgagor.  I  787.  Bonus  for  Extension  of  Time 
\  784.  Burden  of  Proof.  After  Maturity. 

§  782.  Parties  that  Can  Set  Up  the  Defense  of  Usury. — 
One  class  of  decisions  holds  that  the  plea  of  usury  as  a  defense 
is  personal  to  the  mortgagor,  his  privies  in  blood,  estate,  or 
contract,^  and  that  a  subsequent  purchaser  cannot  set  it  up.^ 

Another  line  of  decisions  holds  that  not  only  the  mortgagor, 
but  any  person  who  is  seized  of  his  estate  and  vested  with  his 
rights,  where  he  has  not  assumed  the  payment  of  the  mortgage, 
may  interpose  this  defense,  although  a  mere  stranger  cannot.^ 
But  a  purchaser  at  a  sale  by  an  assignee  in  bankruptcy  cannot 
set  up  usury  in  the  mortgage.*  Under  this  class  of  cases  a  judg- 
ment creditor  of  the  mortgagor  may  plead  usury .^ 

So  any  one  in  legal  privity  under  this  doctrine,  with  the 
mortgagor,  may  set  up  this  defense.^ 

The  defense  of  usury  in  the  notes  secured  by  a  trust  deed 
may  be  interposed  in  an  action  by  the  trustee  to  foreclose  the 
trust  deed,  although  the  holders  of  the  notes  are  not  parties,^ 
under  the  Wisconsin  statute.^ 

'Holladay  v.  Holladay,  13  Oreg.  523. 

"^  Ready  v.  Huebner,  46  Wis.  692 ;  Darst  v.  Bates,  95  111.  493  ;  Sellers  v.  Bots- 
ford,  11  Mich.  59 ;  Butts  v.  Broughton,  72  Ala.  294 ;  Mason  v.  Pierce  (111.),  31 
N.  E.  Rep.  503 ;  Union  Nat.  Bank  v.  Bank,  123  111.  510 ;  Lamoille  County 
Nat.  Bank  v.  Bingham,  50  Vt.  105 ;  Cheney  v.  Dunlap,  27  Nebr.  401. 

» Westerfield  v.  Bried,  26  N.  J.  Eq.  357 ;  Mason  v.  Lord,  40  N.  Y.  476 ;  Pear- 
sail  V.  Kingsland,  3  Edw.  (N.  Y.)  195. 

*  Nance  v.  Gregory,  6  Lea  (Tenn.),  343. 

^Steinr.  Swensen,  44  Minn.  218;  Carow  v.  Kelly,  59  Barb.  (N.  Y.)239; 
Thompson  v.  Van  Vechten,  27  N.  Y.  568  ;  Gunnison  v.  Gregg,  20  N.  H.  100; 
Spengler  v.  Snapp,  5  Leigh  (Va.),  478  ;  Chaffe  v.  Wilson,  59  Miss.  42  ;  Greene 
V.  Tyler,  39  Pa.  St.  361.  Compare  Powell  v.  Hunt,  11  Iowa,  430;  Gaither  v. 
Clarke,  67  Md.  18. 

« Shufelt  V.  Shufelt,  9  Paige  (N.  Y.),  137, 145 ;  Stein  v.  Swensen,  44  Minn.  218. 

'Central  Trust  Co.  r.  Burton,  74  Wis.  329. 

8Rev.  Stat.,  sect.  2607. 


808  CONTRACTS    IN    VIOLATION    OF    LAW. 

In  Illinois  it  is  well  settled  that  one  who  has  voluntarily- 
paid  usurious  interest  cannot  recover  it  back  in  an  action  at 
law.'  But  this  rule  does  not  apply  where  the  transaction  has 
been  settled,  and  the  lender  sues  to  recover  a  balance  due  on 
the  principal  sum.  In  such  case  the  borrower,  being  sued, 
may  have  all  payments  made  by  him  on  account  of  interest 
applied  in  diminution  of  such  part  of  the  principal  as  remains 
unpaid.^ 

A  purchaser  of  the  equity  of  redemption  who  takes  a  usurious 
mortgage  cannot  defend  on  account  of  usury,  when  he  keeps 
back  enough  of  the  purchase  price  of  the  mortgage  to  pay  the 
mortgage  ;  for  such  a  defense  would  be  an  attempt  to  defraud 
the  grantor  and  the  mortgagee.^ 

An  answer  setting  up  the  defense  of  usury  is  not  sufficient 
if  it  merely  alleges  that  the  bond  sued  on  "  was  given  in  pay- 
ment of  usurious  interest  by  a  contract  for  the  payment  of  the 
same,"  but  should  state  the  particular  facts  of  the  alleged 
agreement,  so  that  the  court  may  see  whether  it  was  in  viola- 
tion of  the  statute.^ 

The  mere  presence  of  the  mortgagor  when  the  mortgage 
was  assigned,  without  informing  the  assignee  of  the  usurious 
transaction  on  which  the  debt  is  based,  does  not  estop  him 
from  setting  up  the  usury  against  the  assignee  when  it  is  not 
shown  that  the  mortgagor  was  informed  of  the  character  of 
the  transaction,  and  where  it  does  not  appear  that  the  assignee 
relied  exclusively  on  the  mortgagee's  assurance  as  to  the  val- 
idity and  sufficiency  of  the  mortgage.^ 

Where  a  usurious  note,  secured  by  a  mortgage,  is,  at  the  re- 
quest of  the  principal,  paid  by  the  surety  by  giving  of  his  own 

1  Riddle  v.  Rosenfield,  103  111.  fiOO,  603;  Hadden  v.  Innes,  24  111.  381,  384; 
Town  V.  Wood,  37  111.  512,  516 ;  Carter  v.  Moses,  39  111.  539,  542 ;  Tompkins  v. 
Hill,  28  111.  519. 

2  Harris  v.  Bressler,  119  111.  467,  472  ;  Payne  v.  Newcomb,  100  111.  611,  623 ; 
Hamill  v.  Mason,  51  111.  489;  Hefner  v.  Vandolah,  62  111.  483,  486;  Saylor  i-. 
Daniels,  37  111.  331. 

3  Trusdell  v.  Dowden,  47  N.  J.  Eq.  396. 

*  Anglo- Am.  Land,  Mortg.  &  Agency  Co.  v.  Brohman  (Nebr.),  50  N.  W. 
Rep.  271. 
6  Morris  v.  Alston,  92  Ala.  502. 


USURIOUS   MORTGAGES.  809 

note  which  he  afterward  pays,  the  surety  cannot,  in  an  action 
to  foreclose  the  mortgage,  be  made  responsible  by  junior 
mortgagees  for  the  amount  of  the  usury.^ 

The  law  in  force  at  the  time  of  bringing  the  suit  will  con- 
tinue in  force  as  to  the  relief  afforded  by  it.^ 

A  statement  in  a  second  mortgage  that  the  mortgaged  prem- 
ises were,  when  it  was  given,  subject  to  a  prior  mortgage,  will 
not  prevent  the  second  mortgagee,  in  a  suit  founded  on  the  first, 
from  showing  either  that  the  first  is  usurious  or  has  been  paid.^ 

One  who  voluntarily  pays  unlawful  interest  upon  a  usurious 
contract  cannot  recover  it  back  by  suit.* 

It  is  no  reason  for  enjoining  a  sale  under  a  deed  of  trust  that 
the  notes  secured  reserve  usurious  interest  or  include  it  except 
in  those  States  where  usury  renders  the  contract  void.  Where 
usury  does  not  invalidate  the  mortgage,  a  sale  under  the  power 
will  not  be  enjoined  by  reason  of  it  unless  the  debtor  brings 
into  court  the  principal  and  the  legal  interest  due.^ 

§  783.  Waiver  of  Usury  by  Mortgagor. — A  mortgagor 
may  waive  usury,  and  then  those  in  privity  with  him  cannot 
avail  themselves  of  this  defense.  Thus,  when  he  sells  the  land 
subject  to  the  mortgage,  the  purchaser  cannot  set  up  usury  in 
the  mortgage  note  as  a  defense.^ 

Judge  Robinson  says  that,  where  one  purchases  property 
subject  to  an  incumbrance  which  was  usurious,  and  the  nomi- 
nal amount  of  such  incumbrance  enters  into  and  forms  part  of 
the  price  or  consideration  to  be  paid  for  the  property,  he  will 
not  be  allowed  to  set  up  usury  in  reduction  of  the  amount  ap- 
pearing due  on  the  face  of  the  mortgage.^ 

'Foard  v.  Grinter  (Ky.),  18  S.  W.  Rep.  1034. 

2  Edmunds  v.  Bruce  (Va.),  14  S.  E.  Rep.  840. 

3  Trusdell  v.  Dowden,  47  N.  J.  Eq.  396. 

*Kirkpatrick  v.  Smith,  55  Mo.  389  ;  Ransom  v.  Hays,  39  Mo.  445. 

^Tooke  V.  Newman,  75  111.  215;  Powell  v.  Hopkins,  38  Md.  1;  Walker  v. 
McConkey,  38  Md.  75 ;  Eslava  v.  Crampton,  61  Ala.  507 ;  Ferguson  v.  Soden 
(Mo.),  19  8.  W.  Rep.  727. 

^Stigerr.Bent,  111  111.  328;  Log-Cabin  Permanent  Build.  Asso.  v.  Gross,  71 
Md.  456;  Fulford  v.  Keerl,  71  Md.397. 

'Log-Cabin  Permanent  Build.  Asso.  v.  Gross,  71  Md.  456,  457.    See,  also, 


810  CONTRACTS    IN    VIOLATION    OF    LAW. 

The  mortgagor  is  estopped  to  set  up  usury  when  he  sells  his 
equity  of  redemption  subject  to  the  mortgage,  which  grantee 
assumes  as  part  payment,  and  such  estoppel  binds  grantee.' 
The  rule  is  different  as  to  the  grantee  when  he  takes,  without 
deduction,  on  account  of  the  incumbrance.^  And  sureties 
signing  with  their  principal  a  promissory  note,  containing  a 
waiver  of  homestead  and  exemption,  are  not  bound  by  the 
instrument,  where  this  waiver  on  the  part  of  the  principal  is 
void,  by  reason  of  usury  in  the  note  of  which  they  had  no 
notice.  The  secret  taint  in  the  note  rendered  the  risk  of  the 
sureties  greater  than  it  would  have  been  if  the  note  had  been 
pure.^ 

A  mortgagor  who  has  conveyed  the  mortgaged  land  to  the 
mortgagee,  in  consideration  of  a  release  from  personal  liability 
on  the  mortgage  debt  cannot  afterward  attack  the  mortgage 
on  the  ground  of  usury,  since  the  conveyance  constitutes  a 
voluntary  payment  of  the  entire  debt.^ 

§  784.  Burden  of  Proof. — The  burden  of  proof  that  the 
mortgage  is  usurious  is  upon  the  mortgagor.  He  must  estab- 
lish the  fact  of  usury  beyond  a  reasonable  doubt  by  a  clear 
preponderance  of  the  testimony.^ 

In  a  mortgage  for  purchase-money,  the  fact  that  the  sum 

secured  is  greater  than  that  named  in  the  consideration  of  the 

conveyance  to  the  mortgagor,  with  interest,  is  no  evidence  of 

u'sury.^     A  mortgagor  in  defending  may  avail  himself  of  the 

defense  of  usury  under  the  statute  before  tender  of  the  amount 

legally  due.'' 

Hough  V.  Horsey,  36  Md.  181,  184  ;  Bridge  v.  Hubbard,  15  Mass.  103;  Morris 
V.  Floyd,  5  Barb.  (N.  Y.)  135 ;  Mason  v.  Lord,  40  N.  Y.  485 ;  Hardin  v.  Hyde, 
40  Barb.  (N.  Y.)  435  ;  Freeman  v.  Auld,  44  N.  Y.  51 ;  Warwick  v.  DaAves,  26 
N.  J.  Eq.  548  ;  Barnett  v.  Zacharias,  24  Hun  (N.  Y.),  304. 

lEssley  v.  Sloan,  116  111.  391 ;  16  111.  App.  63. 

^  Flanders  v.  Doyle,  16  111.  App.  508. 

"Lewis  V.  Brown  (Ga.),  14  S.  E.  Rep.  881. 

*  Mason  v.  Pierce  (111.),  31  N.  E.  Rep.  503. 

5  Hotel  Co.  V.  Wade,  97  U.  S.  13 ;  Conover  r.  Van  Mater,  18  N.  J.  Eq.  481 ; 
New  England  Mort.  Security  Co.  v.  Gay,  33  Fed.  Rep.  636. 

fi  Vesey  v.  Ockington,  16  N.  H.  479. 

'  Clark  V.  Finlon,  90  111.  245  ;  Tooke  v.  Newman,  75  111.  215. 


USURIOUS   MORTGAGES.  811 

Burden  of  proof  is  on  the  party  alleging  usury .^ 

§  785.  Seeking  Relief  in  Equity. — When  a  mortgagor 
seeks  relief  in  equity,  he  must  first  do  equity  and  must 
therefore  pay  the  debt  with  legal  interest.^  And  in  somfe  of 
the  States  the  mortgagor  must  tender  the  amount  legally  due 
in  availing  himself  of  the  plea  of  usury .^ 

But  where  the  amount  really  due  is  unknown,  and  offering 
to  redeem  by  tendering  an  amount  so  due  is  impracticable,  the 
only  equitable  requirement  is  to  express  a  willingness  to  allow 
whatever  is  due.* 

Usury  must  be  specially  pleaded.^ 

The  plea  of  usury  at  the  common  law,  and  the  answer  set- 
ting up  that  defense  under  the  codes,  must  set  forth  the  usuri- 
ous agreement,  the  names  of  the  parties  between  whom  it  was 
made,  the  amount  loaned,  the  amount  of  usury  agreed  to  be 
paid,  the  length  of  time  for  which  the  loan  was  agreed  to  be 
made,  and  that  agreement  was  in  violation  of  the  statute,^  and 
the  facts  should  be  shown  in  an  answer  in  equity.^ 

An  averment  that  the  mortgagee  loaned  the  mortgagor 
$2,000,  and  "  exacted  and  extorted  "  a  bond  and  mortgage  for 
$2,195,  cannot  avail  as  a  defense.  It  precludes  the  idea  of 
consent,  and  there  can  be  no  usury  without  a  contract.^ 

However,  usury  may  be  set  up  by  allegations  showing  that 
an  unlawful  rate  of  interest  was  agreed  upon.^ 

iPuterbaugh  v.  Farrell,  73  111.  213  ;  Kihlholz  v.  Wolflf,  103  111.  362. 

''Sanner  v.  Smith,  89  111.  123, 125 ;  Carter  v.  Moses,  39  111.  539, 542 ;  Hender- 
son V.  Bellew,  45  111.  322,  324  ;  Clark  v.  Finlon,  90  111.  245,  248 ;  Tooke  v. 
Newman,  75  111.  215,  217. 

3  Carver  v.  Brady,  104  N.  Car.  219  ;  Powell  v.  Hopkins,  38  Md.  1 ;  Walker  v. 
Cockey,  38  Md.  75. 

*Gaitlierv.  Clarke,  67  Md.  18. 

^Paddock  v.  Fish,  10  Fed.  Rep.  125;  Kilpatrick  v.  Henson,  81  Ala,  464; 
Whatly  V.  Barker,  79  Ga.  790 ;  Frank  v.  Morris,  57  111.  138  ;  11  Am.  Rep.  4 ; 
Pilsbury  v.  McNally,  22  Ark.  409  ;  Morford  v.  Davis,  28  N.  Y.  481 ;  Newell  v. 
Nixon,  4  Wall.  (U.S.)  572. 

8 Nat.  Bank  v.  Lewis,  10  Hun  (N.  Y.),  468 ;  Siesel  v.  Harris,  48  Ga.  652. 

'  Crane  v.  Ins.  Co.,  27  N.  J.  Eq.  484 ;  Stark  v.  Sperry,  2  Tenn.  Ch.  304 ;  Han- 
nas  V.  Hawk,  24  N.  J.  Eq.  124. 

nVesterfield  v.  Bried,  26  N.  J.  Eq.  357. 

»  Kurz  V.  Holbrook,  13  Iowa,  562. 


812  CONTRACTS    IN    VIOLATION   OF    LAW. 

A  plea  to  an  action  of  ejectment  which  attacks  a  conveyance 
from  the  defendant  to  the  plaintiff,  as  being  part  of  a  usurious 
contract,  is  not  an  equitable,  but  a  strictly  legal  defense,  and, 
to  make  it  available,  no  tender  or  offer  to  pay  the  debt  which 
the  conveyance  was  intended  to  secure  is  necessary,  even 
though  the  deed  may  be,  in  equity,  a  mortgage/ 

Where  a  certain  sum  of  money  is  due,  and  the  creditor 
agrees  to  take  a  lesser  sum,  provided  that  sum  is  secured  in  a 
certain  way  and  paid  at  a  certain  day,  but  if  any  of  the  stipu- 
lations of  the  arrangement  are  not  performed  as  agreed  upon, 
the  creditor  is  to  be  entitled  to  recover  the  whole  of  the  origi- 
nal debt,  such  refnitter  to  his  original  rights  does  not  consti- 
tute a  penalty,  and  equity  will  not  interfere  to  prevent  its 
observance.^  The  equitable  rule  that  a  mortgagor  seeking  re- 
lief should  pay  the  sum  owed  with  legal  interest  does  not 
apply.^ 

§  786.  After  Judgment. — In  any  litigation  after  judgment 
of  foreclosure  of  a  mortgage  the  mortgagor  cannot  plead  usury 
in  the  mortgage  debt,  unless  it  is  averred  that  the  judgment  was 
procured  by  accident,  fraud,  or  mistake,  or  the  usury  appears 
on  the  face  of  the  judgment.* 

After  foreclosure  a  mortgage  contract  is  regarded  as  exe- 
cuted, and  usury  cannot  then  be  set  up  in  defense  ;  ^  but  if  the 
mortgagee  himself  buys  the  property,  his  title  may  still  be  im- 
peached for  usury  in  the  mortgage.^  And  the  same  rule  applies 
to  a  purchaser  with  notice.^ 

^  Suijart  V.  Mays,  5-4  Ga.  554. 

^  2  White  &  Tudor's  Lead.  Cas.  in  Eq.,  p.  2025 ;  Pomeroy's  Eq.  Jur.,  sect. 
438 ;  Thompson  v.  Hudson,  L.  R.  4  H.  L.  1 ;  Coote  on  Mort.  (4th  ed.)  883 ; 
Powell  on  ISIort.  {6th  ed.)  900  ;  Adams  on  Eq.  (7th  ed.)  109 ;  Reeves  v. 
Stipp,  91  111.  609  ;  United  States  Mortg.  Co.  v.  Sparry,  138  U.  S.  313,  348. 

» Gore  V.  Lewis,  109  N.  Car.  539. 

*  McLaws  V.  Moore,  83  Ga.  177. 

s  Cuthbert  v.  Haley,  8  Term  R.  390 ;  Jackson  v.  Henry,  10  Johns.  (N.  Y.) 
196, 197 ;  Tyler  v.  Mass.  Mat.  Ins.  Co.,  108  111.  58 ;  Carter  v.  Moses,  39  111. 
539 ;  Perkins  v.  Conant,  29  111.  184. 

«  Jackson  v.  Dominick,  14  Johns.  (N.  Y.)  435;  Welsh  v.  Coley,  82  Ala.  363; 
McLaughlin  v.  Cosgrove,  99  Mass.  4. 

'Bissell  V.  Kellogg,  65  N.  Y.  432. 


USURIOUS   MORTGAGES.  813 

In  New  Jersey  a  subsequent  mortgagee  may  set  up  usury  under 
his  petition  for  the  surpKis  money  remaining  after  the  satisfac- 
tion of  the  prior  mortgage.^ 

In  Minnesota  only  a  bona  fide  purchaser  for  value  without 
notice  is  protected.^ 

Generally  where  the  debt  is  merged  in  a  judgment  or  decree, 
the  contract  ceases  to  exist,  and  the  rate  of  interest  is  thereafter 
controlled  by  the  statute.^ 

The  act  of  Arkansas,*  providing  that  every  lien  created  or 
arising  by  mortgage,  deed  of  trust,  or  othermse  "  to  secure  the 
payment  of  a  contract "  for  usur}^  and  every  conveyance  made 
"  in  furtherance  of  any  such  lien,"  shall  be  void,  and  may  be 
annulled  at  the  suit  of  the  maker  of  the  usurious  contract,  does 
not  apply  to  a  judgment  by  confession  in  an  action  to  foreclose 
a  usurious  mortgage.^ 

§  787.  Bonus  for  Extension  of  Time  After  Maturity. — 
By  paying  a  bonus  for  the  extension  of  time  for  the  payment 
of  the  debt,  though  usurious,  does  not  make  the  original  trans- 
action usurious.  Thus,  the  payment  of  usurious  interest  on 
renewal  note  for  the  extension  of  time  on  the  first  notes  is  no 
defense  to  a  foreclosure  of  a  vendor's  lien.^  Subsequently  pay- 
ing usurious  interest  for  an  extension  of  time  does  not  affect  the 
original  mortgage  debt.'^  However,  if  the  usurious  contract 
goes  back  to  the  original  contract  it  is  affected  by  usury .^ 

Such  agreement,  if  usurious,  is  affected  by  the  usury  laws.® 
And  it  is  held  that  no  one  but  the  borrower  and  his  represen- 
tatives can  take  advantage  of  the  defense  of  usury  in  such 

1  Plutchinson  v.  Abbott,  33  N.  J.  Eq.  379. 

=  Jordan  v.  Humphrey,  31  Minn.  495;  Exley  v.  Berryhill,  37  Minn.  182. 

^Palmer  r.  Harris,  100  111.276,  280;  Conn.  Mut.  L.  Ins.  Co.  v.  Cushman, 
108  U.  S.  51,  54 ;  Mason  v.  Eakle,  Breese  (111.),  52;  Tindall  v.  Meeker,  1  Scam. 
(111.)  137 ;  White  v.  Haffaker,  27  111.  349 ;  AVayman  v.  Cochrane,  35  HI.  152. 

*  Act  March  3,  1887. 

5  Bell  V.  Ferjrus,  55  Ark.  536. 
«Woodall  r.  Kelly,  85  Ala.  368. 

'  Terhime  v.  Taylor,  27  N.  J.  Eq.  80  ;  Mahoney  v.  :Mackubin,  54  Md.  268 ; 
Lindsay  v.  Hill,  66  Me.  212 ;  Hawhe  v.  Snydaker,  86  111.  197. 

*  Smith  V.  Hathom,  88  N.  Y.  211,  reversing  25  Hun,  159. 
'Church  V.  Maloy,  70  N.  Y.  63, 


814  CONTRACTS    IN    VIOLATION    OF    LAW. 

contracts  for  extension  of  time ;  that  the  lender  is  bound.*  But 
it  is  held  that  in  such  cases  the  court  will  not  help  either  party 
to  enforce  the  contract  while  it  remains  executory.^ 

It  is  also  held  that  while  the  contract  is  binding  upon  the 
mortgagee  when  the  contract  is  actually  executed,  it  is  not 
binding  when  the  contract  is  executory.^ 

Taking  bonus  by  creditor  for  accepting  new  security  with 
additional  risk  is  not  usury/ 

Article  3. 
Interest   Upon  Interest. 

§  788.  Compound  Interest.  §  791.  Executory  Agreements. 

§  789.  When  Can    the    Payment  of  ^  792.  Taking  Interest  in  Advance. 

Usurious  Interest  be  Recov-  ^  793.  Interest  Coupons. 

ered  Back.  |  794.  Computation  of  Interest. 
§  790.  Statutory  Provisions. 

§  788.  Compound  Interest. — An  agreement  to  pay  interest 
on  accrued  interest  is  not  invalid.^  So  when  a  mortgagor, 
with  full  knowledge,  and  not  under  oppression,  agrees  to  pay 
compound  interest,  it  is  a  valid  agreement.^  A  contract  to  pay 
money  at  a  subsequent  period,  with  interest  to  be  paid  annu- 
ally, and  if  the  interest  be  not  paid  annually,  then  the  interest 
to  become  principal,  is  neither  usurious,  unconscionable,  nor 
contrary  to  public  policy  'J  but  some  courts  have  held  that  such 
is  usury ,^  and  when  the  interest  is  to  be  compounded  annually, 
it  is  usurious.^ 

1  BiUington  v.  Wagoner,  33  N.  Y.  31.    Compare  Church  v.  Maloy,  70  N.  Y.  63. 

^  Jones  V.  Trusdell,  23  N.  J.  Eq.  121,  554. 

3  BiUington  v.  Wagoner,  33  N.  Y.  31 ;  Jones  v.  TrusdeU,  23  N.  J.  Eq.  121,  554. 

*  Hall  V.  Edwards,  15  111.  App.  369. 

*  Quimby  v.  Cook,  10  Allen  (Mass.),  32 ;  Hale  v.  Hale,  1  Coldw.  (Tenn.)  233  ; 
Stewart  v.  Petree,  55  N.  Y.  621 ;  14  Am.  Rep.  352. 

6  Culver  V.  Bigelow,  43  Vt.  249. 

■^  Scott  V.  Saffold,  37  Ga.  384  ;  Columbia  County  v.  King,  13  Fla.  451 ;  Stew- 
art V.  Petree,  55  N.  Y.  621 ;  Hill  v.  Meeker,  23  Conn.  592. 

« Waring  v.  Cunliffe,  1  Ves.  Jr.  99  ;  Chambers  v.  Goldwin,  9  Ves.  254,  271 ; 
Barnard  v.  Young,  17  Ves.  44,  47  ;  Thornhill  v.  Evans,  2  Atk.  330  ;  Leith  v. 
Irvine,  1  Myl.  &  K.  277. 

»  Cox  V.  Brookshire,  76  N.  Car.  314.    See,  also,  Leonard  v.  Villars,  23  111.  377 ; 


I 


usueious  mortgages.  815 

§  789.  When  Can  the  Payment  of  Usurious  Interest  be 
Recovered  Back. — In  many  States,  money  paid  as  usurious 
interest  is  allowed  to  be  recovered  back  on  the  theory  that  the 
law  regards  the  payment  as  made  under  duress.^  But  the 
general  rule  is  that  money  voluntarily  paid,  with  full  knowl- 
edge of  all  the  material  facts,  cannot  be  recovered  back,  even 
though  made  upon  illegal  consideration,  which  the  laW  would 
not  enforce.^ 

An  agreement  made  after  interest  is  due  to  make  it  a  prin- 
cipal sum  does  not  render  the  transaction  usurious.^  In  Illi- 
nois in  case  of  usury  the  debtor  is  entitled  to  have  all  pay- 
ments on  account  of  interest  applied  in  diminution  of  such 
part  of  the  principal  as  remains  unpaid.* 

§  790.  Statutory  Provisions. — Some  of  the  States  have 
enacted  laws  as  to  the  taking  of  compound  interest. 

In  Arkansas,  when  a  payment  falls  short  of  paying  the 
interest  due  at  the  time  of  making  such  payment,  the  bal- 
ance of  interest  must  not  be  added  to  the  principal.^  In 
California  the  interest,  by  written  agreement,  if  not  paid 
when  due,  may  be  added  to  the  principal.^  But  otherwise 
in  Louisiana.^ 

In  Idaho  compound  interest  is  not  allowed  to  be  contracted 
for  in  the  original  agreement.^  Interest  cannot  be  compounded 

Barker  r.  Bank,  80  111.  96 ;  Cromwell  v.  Sac  County,  96  U.  S.  51  ;  Broughton 
V.  Mitchell,  64  Ala.  210  ;  Wilson  v.  Davis,  1  Mont.  183  ;  Denver  Brick  Manuf. 
Co.  V.  McAllister,  6  Colo.  261 ;  Force  v.  Elizabeth,  28  N.  J.  Eq.  403 ;  Ferry  v. 
Ferry,  2  Cush.  (Mass.)  92 ;  Stokely  v.  Thompson,  34  Pa.  St.  210 ;  Union 
Bank  r.  Williams,  3  Coldw.  (Tenn.)  579 ;  Mason  v.  CoUander,  2  Minn.  350 ; 
72  Am.  Dec.  102;  Connecticut  v.  Jackson,  1  Johns.  Ch.  (N.  Y.)  13;  7 
Am.  Dec.  471 ;  Doe  v.  Warren,  7  Me.  48 ;  Drury  v.  Wolfe,  134  111.  294. 

^  Albany  v.  Abbott,  61  N.  H.  158. 

^Caldwell  V.  Wentworth,  14  N.  H.  431. 

'  Hawnrth  r.  Hulinpr,  87  111.  23  ;  Gilmore  v.  Bissell,  124  111.  488  ;  Drury  v. 
Wolfe,  134  111.294;  Thayer  v.  Star  Mining  Co.,  105  111.  540,  553;  McGovern 
V.  Ins.  Co.,  109111.  151. 

*  Fowler  r.  Trust  Co.,  141  U.  S.  384,  408,  411. 

^Dig.  of  Stat.,  1884,  sect.  4738. 

« Civil  Code,  1885,  sect.  1919, 

^Rev.  Code,  1870,  art.  1939. 

8  Rev.  Stat.,  1887,  sect.  1265. 


816  CONTRACTS    IN    VIOLATION    OF    LAW. 

in  Minnesota.^     In  Missouri  parties  may  contract  to  pay  inter- 
est upon  interest,  computed  annually.^ 

In  Wisconsin,  by  written  agreement,  parties  may  compound 
interest.^ 

§  791.  Executory  Agreements  to  Pay  Compound  In- 
TEREST^ — It  is  generally  held  that  so  long  as  the  contract  is 
executory  to  pay  compound  interest,  the  courts  will  not  enforce 
it.  But  after  the  interest  has  accrued  an  agreement  to  pay 
interest  upon  it  is  not  usurious.*  Thus,  adding  overdue  inter- 
est into  the  principal  of  a  new  note  is  not  usurious.^ 

Courts  of  equity  refuse  to  allow  compound  interest  when 
their  aid  is  invoked  to  collect  a  debt.^ 

In  some  of  the  States  when  the  interest  is  payable  at  stated 
periods,  it  becomes  principal  from  the  time  it  is  due,  with  in- 
terest.'' The  rate  of  interest  will  control  which  is  stipulated 
for  in  the  mortgage,^  and  when  no  rate  is  stated,  the  legal  rate 
will  control.^ 

§  792.  Taking  Interest  in  Advance. — Taking  the  legal 
rate  of  interest  in  advance  is  not  usury.^'^  But  if  the  mortgagor 
gives  the  mortgagee  a  new  note  for  the  amount  of  the  debt, 
adding  in  the  interest  for  a  year,  and  also  interest  on  such  in- 
terest for  that  period,  the  transaction  may  be  regarded  as 
usurious."     But  the  adding  in  to  the  principal  the  overdue  in- 

1  Laws  of  1879,  ch.  66. 

2  Rev.  Stat.,  1879,  ch.  41,  sect.  2728. 

3  Rev.  Stat.,  1878,  sect.  1689. 

*  Force  v.  Elizabeth,  28  N.  J.  Eq.  403. 

^McGovern  v.  Union,  etc.,  Ins.  Co.,  109  111.  151. 

*Cox  V.  Smith,  1  Nev.  161.  Compare  Clarkson  v.  Henderson,  L.  R.  14 
Ch.  D.  348. 

^Cramer  v.  Lepper,  26  Ohio  St.  59;  20  Am.  Rep.  756;  Mann  v.  Cross, 
9  Iowa,  327;  Preston  v.  Walker,  26  Iowa,  205 ;  Borrows  v.  Stryker,  47  Iowa,  477; 
Watkinson  v.  Root,  4  Ohio,  373. 

^Diinlap  V.  Wiseman,  2  Disney  (Ohio),  398. 

^Cramer  v.  Lepper,  26  Ohio  St.  59. 

iOHoyt  r.  Pawtucket,  110  111.  390  ;  Bloomer  v.  Mclneraey,  30  Hun  (N.  Y.), 
201  ;  Mitchell  v.  Lyman,  77  111.  525. 

"  First  Nat.  Bank  v.  Davis,  108  111.  633. 


USURIOUS   MORTGAGES.  817 

terest,  and  giving  a  note  for  the  whole  amount,  without  taking 
interest  in  advance  upon  the  whole,  is  no  usury.' 

§  793.  Interest  Coupons. — Many  money  loaners  now  take 
notes  with  coupons  attached  for  the  payment  of  a  specified 
sum  at  certain  periods,  and  if  not  paid  at  the  time  stated,  the 
amount  stated  in  the  coupon  draws  interest  from  the  date  of 
its  maturity.^ 

Such  coupons  are  in  effect  promissory  notes  and  draw  inter- 
est after  maturity,  and  although  they  are  detached  from  the 
note,  the  lien  of  the  mortgage  still  covers  them.^ 

There  is  no  difference  between  coupons  payable  to  bearer  for 
a  sum  certain  and  a  bank  bill  ;  they  pass  alike  by  delivery,*  and 
are  admissible  under  the  money  counts.* 

Overdue  coupons,  so  drawn  as  to  be  negotiable  securities  ac- 
cording to  the  general  commercial  law,  bear  interest  after 
maturity  at  the  lawful  rate  of  interest,  and  taking  such  interest 
is  not  usury .^  However,  interest  upon  interest,  as  represented 
by  coupons,  must  be  allowed  or  refused,  as  may  be  required  by 
the  statute  of  the  State.^  In  general,  in  case  of  interest  cou- 
pons annexed  to  commercial  paper,  such  coupons  bear  interest 
after  maturity.^ 

Interest,  in  such  case,  is  not  compounded  indefinitely.  It 
is  simply  payable  upon  the  amount  of  the  face  of  the  coupon  ; 
and  that  the  coupon  bears  interest  is  solely  because  of  the 
character  given  it  by  commercial  usage.^ 

'McGovern  v.  Union,  etc.,  In?.  Co.,  109  111.  151. 

2  Columbia  County  v.  King,  1.3  Fla.  451 ;  Gelpcke  v.  Dubuque,  1  Wall.  (U. 
S.)  175,  206 ;  Harper  v.  Ely,  70  111.  581 ;  Hollingsworth  v.  Detroit,  3  McLean, 
C.  C.  472. 

'  Miller  v.  Railroad  Co.,  40  Yt.  399. 

*  Mercer  County  r.  Hubbard,  45  111.  139. 

*  Johnson  v.  Stark  County,  24  111.  75;  Mercer  County  r.  Hubbard,  45  111. 
139. 

*  United  States  Mortg.  Co.  r.  SpeiTv,  138  U.  S.  313. 

'Ohio  V.  Frank,  103  U.  S.  697  ;  Phinncy  v.  Baldwin,  16  111.  108  ;  Chicago  v. 
Allcock,  86  111.  384  ;  United  States  Mortg.  Co.  v.  Sperry,  138  U.  S.  313. 

^Benneson  r.  Savage.  1.30  HI.  352. 

'Aurora  v.  West,  7  Wall.  (U.  S.)  82,  105;  Mercer  Co.  r.  Hacket,  1  Wall.  (U. 
S.)  83 ;  Meyer  v.  Muscatine,  1  Wall.  (U.  S.)  384. 
^       52 


818  CONTRACTS    IN    VIOLATION    OF    LAW. 

Coupons  signed  by  the  guardian  according  to  law  are  addi- 
tional evidence  of  the  interest  agreed  to  be  paid,  but  are  not  in- 
dependent obligations,  nor  strictly  commercial  securities,  upon 
which  he  can  be  held  liable,  when,  by  the  express  contract  be- 
tween the  parties,  recited  in  the  bond  and  mortgage,  he  and  his 
estate  are  exempt  from  all  liability  for  the  money  borrowed. 
And  as  the  ward  is  not  personally  liable  for  the  money,'  the 
bonds  as  well  as  the  cou[)ons  are,  in  effect,  payable  out  of  par- 
ticular funds,  under  the  order  of  the  court,  and  not  absolutely 
and  at  all  events  as  in  the  case  of  commercial  paper.  The 
guardian  cannot,  without  leave  of  court,  make  an  allowance  of 
interest  upon  past-due  coupons  that  are  not  negotiable  securi- 
ties.^ But  generally  the  execution  of  a  coupon  is  the  execut- 
ing of  an  instrument  which,  ex  vi  termini,  bears  interest  after 
maturity — if  no  rate  is  expressed,  at  the  legal  rate ;  and,  at  the 
date  of  the  executing  the  coupons,  any  rate  not  exceeding  the 
lawful  rate  may  be  fixed  by  agreement  of  the  parties.^  These 
coupons  are,  in  effect,  promissory  notes,  and  no  reason  exists 
why  interest  should  not  be  compounded  upon  them  after  they 
become  due.^ 

§  794.  Computation  of  Interest. — When  the  payments  are 
in  installments  with  interest  at  certain  times,  the  interest  begins 
from  the  making  of  the  contract,  and  the  interest  falls  due  on 
the  specified  intervals.^  If  the  mortgage  provides  that  the 
whole  debt  shall  fall  due  if  the  interest  is  not  paid  when  due, 
the  mortgagee  can  enforce  the  payment  of  the  interest  alone  or 
the  whole  debt  at  his  election.^     When  no  payments  have 

1  Story  on  Bills,  sects.  74,  75 ;  Forster  v.  Fuller,  6  Mass.  58 ;  1  Daniel  on 
Nego.  Instr.,  sect.  271 ;  1  Parsons  on  Notes  and  Bills,  89,  90. 

^United  States  Mortg.  Co.  v.  Sperry,  138  U.  S.  31.3,  343,  349. 

^Benneson  v.  Savage,  130  111.  352,  367;  Harper  v.  Ely,  70  111.  581,586; 
Humi)hreys  v.  Morton,  100  111.  592. 

*  Gelpcke  v.  Dubuque,  1  Wall.  (U.  S.)  175,  206 ;  Hollingsworth  v.  Detroit, 
3  McLean,  C.  C.  472 ;  Dunlap  ?'.  Wiseman,  2  Disney  (Ohio),  398.  See,  also, 
Clark  V.  Iowa  City,  20  Wall.  (U.  S.)  583;  Genoa  t;.  AVoodruff,  92  U.  S.  502 ; 
Amy  V.  Dubuque,  98  U.  S.  470,  473. 

^Conners  v.  Holland,  113  Mass.  50 ;  Hastings  v.  Wiswall,  8  Mass.  455. 

«  Waples  V.  Jones,  02  Mo.  440. 


1 


USURIOUS    MORTGAGES.  819 

been  made  on  the  mortgage,  the  interest  must  be  computed 
from  the  date  of  the  note  until  the  rendition  of  the  decree.  It 
must  not  then  be  compounded.^  And  intermediate  pay- 
ments made  on  the  interest,  but  not  yet  due,  should  be 
deducted  at  the  end  of  the  year,  without  allowing  interest 
upon  them.^ 

Interest  on  note  with  interest  coupons  at  a  greater  rate  than 
the  legal  rate  should  be  computed  at  agreed  rate  to  time  of 
decree.^  A  settlement  and  payment  of  a  debt,  with  compound 
interest,  where  there  has  been  contract  to  pay  interest  at  stated 
periods,  or  to  pay  interest  in  that  manner,  is  a  usurious  trans- 
action.* 

In  Illinois,  under  the  statute,  a  guardian  having  obtained 
leave  of  the  county  court  to  borrow  the  sum  of  $95,000  and 
mortgage  the  ward's  estate  to  secure  its  payment,  allowed  the 
mortgagee,  in  the  settlement  of  the  loan,  but  without  the  assent 
of  that  court,  the  sum  of  $7,219.27  in  payment  of  interest  on 
overdue  coupons  upon  previous  loans,  and  received  from  the 
mortgagee  only  $87,780.73.  It  was  held  :  1.  That  this  was  not 
a  contract  within  the  meaning  of  the  statute,  that  the  mort- 
gagee should  receive  usurious  interest,  for  no  such  contract 
had  been  attempted  to  be  authorized  by  the  county  court  ;  2. 
That  as  the  allowance  by  the  guardian  of  interest  upon  interest 
was  under  a  mistaken  view  of  the  obligations  of  the  coupons 
in  that  regard,  the  remedy  was  to  treat  the  loan  as  one  for  only 
$87,780.73,  making  the  calculation  of  interest  at  the  contract 
rate  upon  that  basis,  and  not  to  forfeit  the  interest  upon  the 
sum  actually  received  by  the  guardian  from  the  mortgagee,  as 
would  be  required  under  a  usurious  contract.^ 

Where  the  mortgagee  has  in  fact  paid  the  notes  which  he 
gives  to  the  mortgagor  to  negotiate  for  him,  interest  may  be 
computed  from  their  date.® 

^  Barker  v.  Bank,  80  111.  96. 

^  Townsend  v.  Riley,  46  N.  H.  300. 

'Starne  v.  Farr,  17  111.  App.  491. 

*Ward  V.  Brandon,  1  Heit^k.  (Tenn.)  490. 

5  United  States  Mort,.  Ck).  v.  Sperry,  138  U.  S.  313,  349,  351. 

\Baxter  v.  Blodgett,  63  Vt.  629. 


820  contracts  in  violation  of  law. 

Article  4. 
Conflict  of  Laws. 

I  795.  Law  of  Place — Lex  Loci  Con-  §  798.  Lex  Loci  Rei  Sitae  Determines 

tractus.  the  Validity  of  the  Mortgage. 

§  796.  Payment  May  be   Controlled  I  799.  The  Law  of  Another  State  Must 

by  Contract.  be  Pleaded. 

§  797.  The  Mortgage  is  affected  with 
the  Usury  of  the  Note. 

§  795.  Law  of  Place — Lex  Loci  Contractus. — The  rights 
of  parties  to  a  contract  are  to  be  judged"  of  by  that  law  which 
they  intended,  or,  rather,  by  which  they  may  justly  be  pre- 
sumed to  have  bound  themselves.^ 

The  general  rule  established,  ex  comitate  et  jure  gentium,  is 
that  the  place  where  the  contract  is  made,  and  not  where  the 
action  is  brought,  is  to  be  considered  in  expounding  and 
enforcing  the  contract ;  but  this  rule  admits  of  exceptions 
when  the  parties,  at  the  time  of  making  the  contract,  had  a 
view  to  a  different  jurisdiction.^ 

The  law  of  the  country  where  the  contract  is  made  governs 
as  to  the  nature,  the  obligation,  and  the  interpretation  of  it,^ 
unless  the  contracting  parties  clearly  appear  to  have  had  some 
other  law  in  view.* 

The  place  where  the  loan  is  to  be  paid  will  govern  the  con- 
tract, though  the  land  mortgaged  be  in  another  State.^  So  a 
corporation  of  New  York,  being  authorized  by  its  charter  to 
loan  money  on  bond  and  mortgage  on  real  estate  within  the 
United  States,  or  upon  any  hypothecation  of  such  real  estate 
for  any  period  of  credit,  can  contract  in  Illinois  to  lend  money 
there  upon  bond  and  mortgage  of  real  estate  at  the  lawful  rate 

1  Lloyd  V.  Guibert,  6  Best  &  S.  100 ;  Central  Trust  Co.  v.  Burton,  74  Wis.  329. 

^  Robinson  v.  Bland,  1  W.  Bl.  234,  256,  258  ;  2  Burr,  1077,  1078. 

3  Peninsular,  etc.,  Co.  v.  Shand,  3  Moore,  P.  C.  (N.  S.)  272,  290. 

*Cox  -y.  United  States,  6  Pet.  (U.S.)  172;  Scudder  i-.  Bank,  91  U.S.  406; 
Pritchard  v.  Norton,  106  U.  S.  124;  Lamar  v.  Micou,  114  U.  S.  218;  Watts  r. 
Camors,  115  U.  S.  353, 362  ;  Liverpool  Steam  Co.  v.  Ins.  Co.,  129  U.  S.  397,  453. 

*  Newman  v.  Kershaw,  10  Wis.  333 ;  Kennedy  v.  Knight,  21  Wis.  340 ; 
Mills  V.Wilson,  88  Pa.  St.  118;  Cope  v.  Wheeler,  41  N.  Y.  303;  Dobbin  v. 
Hewett,  19  La.  Ann.  513 ;  Cubbedge  v.  Napier,  62  Ala.  518. 


USURIOUS   MORTGAGES.  821 

of  interest,  although  the  highest  rate  of  interest  permitted  by 
the  law  of  Xew  York  was  less  than  that  rate,  and  although  the 
charter  of  the  company  provided  that  no  loan  or  advance  of 
money  should  be  made  by  it  "  at  a  rate  of  interest  exceeding 
the  legal  rate."  ^ 

Loans  made  in  other  States  may  be  at  the  rate  of  interest 
allowed  by  the  State  where  the  contract  or  loan  is  made, 
although  such  rate  is  in  excess  of  that  fixed  by  the  law  of  the 
loaner's  residence.^ 

§  796.  Payment  May  be  Controlled  by  Contract. — The 
parties  may  contract  where  the  payment  of  the  note  secured 
shall  be  made.  Thus,  the  parties  may  agree  that  the  notes 
shall  be  paid  in  a  State  other  than  that  where  the  land  lies, 
and  in  such  case  the  place  where  the  contract  is  to  be  fulfilled 
will  govern,  as  to  the  legal  effect  of  the  contract.^ 

If  the  mortgagee  resides  in  the  State  where  the  land  lies, 
and  the  mortgagor  in  another  State,  if  no  place  of  payment  is 
named,  then  the  law  of  the  mortgagee's  State  will  govern.* 
The  parties  may  stipulate  for  interest  in  either  State,  so  long 
as  it  be  not  a  plan  to  cover  up  a  usurious  transaction.^  But  if 
made  payable  in  another  State  to  cover  up  usury,  the  note  will 
be  declared  usurious.® 

Michigan  has  a  law  providing  that  the  interest  taken  shall  not 
be  affected  by  the  laws  of  the  place  w^here  payment  is  to  be  made.^ 

When  the  contract  does  not  control,  in  determining  what 
law  governs,  the  true  inquiry  is  as  to  the  intention  of  the 
parties.     The  fact  that  the  contract  would  not  be  held  invalid 

1  United  States  Mortga^re  Co.  v.  Sperry,  138  U.  S.  313. 

2  Sheldon  v.  Haxtun,  91  N.  Y.  124;  Tilden  v.  Blair,  21  Wall.  (U.  S.)  241 ; 
Scudder  v.  Union  Nat.  Bank,  91  U.  S.  406,  412 ;  Pratt  v.  Adams,  7  Paige  (N. 
Y.),615;  Wayne  County  Savings  Bank  v.Low,  81  N.  Y.  566. 

^Slacum  V.  Pomery,  6  Cranch  (U.  S.)  221 ;  Duncan  v.  Helm,  22  La.  Ann. 
418 ;  Fitch  v.  Remer,  1  Flippin,  C.  C.  15. 

*  Mills  V.  Wilson,  88  Pa.  St.  118 ;  6  Week.  N.  Cas.  23. 

^Townsend  v.  Riley,  46  N.  H.  300;  Peck  v.  Mayo,  14  Vt.  33,  38. 

« Cope  V.  Wheeler,  41  N.  Y.  303 ;  Williams  v.  Fitzhugh,  37  N.  Y.  444  ;  Lock- 
wood  V.  Mitchell,  7  Ohio  St.  387.  See,  also,  Andrews  v.  Pond,  13  Pet.  (U.  S.) 
65,  78 ;  Mix  v.  Ins.  Co.,  11  Ind.  117. 

\Com.  Laws,  1871,  pp.  541,  542. 


822  CONTRACTS    IN    VIOLATION    OF    LAW. 

by  the  laws  of  the  State  where  the  land  lies  where  the  mort- 
gagor resides,  and  where  the  money  is  intended  to  be  used, 
furnishes  ground  for  the  presumption  that  the  law  there  will 
govern  as  intended  by  the  parties.^  So  a  loan  made  in  New 
Hampshire,  upon  land  in  the  State,  may  be  m.ade  payable  in 
New  York,  and  at  a  higher  rate  than  allowed  by  the  New 
Hampshire  law.^ 

The  law  of  the  place  of  contract,  or  of  the  place  of  perform- 
ance, determines  the  question  of  usury,  irrespective  of  the 
place  where  the  land  is  situated.^  The  general  principles  in 
relation  to  contracts  made  in  one  place,  to  be  performed  in 
another,  are  well  settled.  They  are  to  be  governed  by  the  law 
of  the  place  of  performance,  and,  if  the  interest  allowed  by  the 
place  of  performance  is  higher  than  that  permitted  at  the  place 
of  contract,  the  parties  may  stipulate  for  the  higher  interest 
without  incurring  the  penalties  of  usury.  The  converse  of  this 
proposition  is  also  well  settled.  If  the  rate  of  interest  be 
higher  at  the  place  of  contract  than  at  the  place  of  perform- 
ance, the  parties  may  lawfully  contract  in  that  case  also  for 
the  higher  rate.  These  rules,  however,  are  subject  to  the  qualifi- 
cation that  the  parties  act  in  good  faith,  and  that  the  form  of 
the  transaction  is  not  adopted  to  disguise  its  real  character. 
So  when  the  parties,  in  good  faith,  agree  upon  a  rate  of  interest 
which  is  lawful  at  the  place  where  the  agreement  is  to  be  per- 
formed, the  contract  is  valid.* 

§  797.  The  Mortgage  is  Affected  with  the  Usury  of 
THE  Note. — Usury  invalidating  notes  is  a  defense  to  the  fore- 
closure of  the  mortgage  given  to  secure  such  notes.     Thus, 

1  Newman  v.  Kershaw,  10  Wis.  333 ;  Richards  v.  Globe  Bank,  12  Wis.  697 ; 
Vliet  V.  Camp,  13  Wis.  208 ;  Fisher  v.  Otis,  3  Pin.  (Wis.)  78 ;  Chapman  v. 
Robertson,  6  Paige  (N.  Y.),  627. 

2  Townpend  v.  Riley,  46  N.  H.  300. 

3  Campion  v.  Kille,  U  N.  J.  Eq.  229;  DeWolf  v.  Johnson,  10  Wheat.  (U.  S.) 
367 ;  Cotheal  v.  Blydenburgh,  1  Halst.  (N.  J.  Eq.)  17, 631 ;  Dolman  v.  Cook,  14 
N.  J.  Eq.  56. 

*  Brown  v.  Finance  Co.,  31  Fed.  Rep.  516  ;  Kilgore  v.  Dempsey,  25  Ohio  St. 
413;  Townsend  v.  Riley,  46  N.  H.  300;  Miller  v.  Tiffany,  1  Wall.(U.  S.)  298; 
Coad  V.  Home  Cattle  Co.,  32  Nebr.  761. 


USURIOUS    MORTGAGES.  823 

where  notes  are  negotiated  in  New  York,  and  the  trust  deed 
was  delivered  to  the  trustee  there,  and  that  was  the  j^lace  of 
performance  of  the  contract,  the  laws  of  New  York  must  con- 
trol. The  fact  that  the  trust  deed  included  lands  in  Wisconsin 
and  in  Illinois,  and  that  the  borrower  was  a  resident  of  Wis- 
consin, and  used  the  money  at  the  place  of  his  residence,  does 
not  make  it  a  contract  of  the  latter  State  ;  such  notes  being 
controlled  by  the  law  of  New  York  and  being  usurious,  are 
void,  and  the  debt  is  thus  extinguished  and  also  the  trust  deed 
given  to  secure  it.  Because  if  there  be  no  debt,  or  if  it  is  paid 
or  extinguished  in  any  way,  the  mortgage  cannot  exist ;  it  is 
fundus  officio.  And  when  the  notes  are  thus  invalidated  the 
trust  deed  or  mortgage  has  no  effective  existence  as  a  contract  or 
obligation,  save  in  so  far  as  it  represents  an  actual  indebtedness.^ 
The  place  of  contract  determines  the  validity  of  the  notes.^ 

§  798.  Lex  Loci  Rei  Sit^  Determines  the  Validity  op 
THE  Mortgage. — The  lex  loci  rei  sitas  determines  the  validity  of 
a  mortgage  of  land,  though  the  mortgage  was  executed  in  an- 
other State,  by  a  citizen  of  the  latter  State.  Thus,  a  note, 
being  a  Massachusetts  contract,  is  governed  by  the  laws  of  this 
State.  But  the  mortgage,  although  executed  in  Massachusetts, 
by  a  citizen  of  this  State,  being  a  conveyance  of  land  in  New 
Hampshire,  is  controlled  by  the  laws  of  New  Hampshire.'^ 

But  the  lex  loci  rei  sitx  does  not  control  the  question  of  usury.* 
The  remedy  to  enforce  a  lien  must  be  sought  where  the  land 
is  situated.  The  validity  of  the  mortgage  is  determined  by 
the  law  of  lex  loci  rei  sitse.^ 

§  799.  The  Law  of  Another  State  Must  be  Pleaded. — 
In  setting  up  the  usury  law  of  another  State  as  a  defense,  it 

^  Central  Trust  Co.  v.  Burton,  74  Wis.  329. 

^  Fessenden  v.  Taft,  65  N.  H.  39. 

''Fessenden  v.  Taft,  65  N.  H.  39;  Griffin  v.  Griffin,  18  N.  J.  Eq.  104;  God- 
dard  v.  Sawyer,  9  Allen  (Mass.),  78. 

*  Connor  v.  Bellamont,  2  Atk.  382;  Stapleton  v.  Conway,  3  Atk.  727. 

*Hosford  V.  Nichols,  1  Paige  (N.  Y.),  220;  Sedgwick  v.  Laflin,  10  Allen 
(Mass.),  430,  432;  Lyon  v.  :McIlvaine,  24  Iowa,  9  ;  Oregon,  etc.,  Co.  v.  Rath- 
bun,  5  Saw.  C.  C.  32  ;  Chapman  v.  Robertson,  6  Paige  (N.  Y.),  627. 


824  CONTRACTS    IN    VIOLATION    OF    LAW. 

must  be  averred  and  proved  as  a  matter  of  fact.*  The  defense 
of  usury  not  having  been  made,  the  court  should  not  declare 
a  contract  made  in  another  State  usurious,  although  upon  its 
face  it  bears  a  rate  of  interest  in  excess  of  that  allowed  by  the 
law  of  the  State  where  the  suit  is  brought.^ 

By  the  statute  ^  of  Wisconsin  a  statute  of  another  State  may 
be  "pleaded  by  stating  the  substance  thereof.* 

No  proof  to  the  contrary,  the  laws  of  another  State  in  regard  to 
usury  will  be  presumed  to  be  the  same  as  those  of  the  lexfori.^ 

The  law  in  force  at  the  time  of  making  the  contract  and 
delivery  of  the  mortgage  controls  its  validity  or  construction.® 

The  manner  of  enforcing  the  remedy  is  not  binding  upon 
the  courts  of  other  States.'^  And  when  the  court  can  use  his 
discretion,  he  may  refuse  to  allow  the  statute  of  another  State, 
as  to  the  contract,  to  be  set  up,  where  he  is  of  the  opinion  that 
such  statute  is  unconscionable.* 

If  an  answer  in  a  suit  in  one  State,  pleading  usury  under  the 
laws  of  another  State,  does  not  aver  what  are  the  laws  of  such 
State,  but  merely  alleges  that  the  security  in  the  suit  is  usuri- 
ous and  contrary  to  the  law  of  such  State,  the  courts  will  pre- 
sume that  such  foreign  laws  are  the  same  as  the  laws  of  their 
own  State.^ 

The  defendant  should  file  such  a  plea  as  the  law  of  the 
foreign  State  prescribes.'" 

*  Camp  V.  Randle,  81  Ala.  240 ;  Klinck  v.  Price,  4  "W.  Va.  4  ;  Campion  v. 
Kille,  14  N.  J.  Eq.  229  ;  Hosford  v.  Nichols,  1  Paige  (N.  Y.),220;  Dolman  v. 
Cook,  14  N.  J.  Eq.  56 ;  Andrews  v.  Torrey,  14  N.  J.  Eq.  355. 

^Reiff  ?'.  Bakken,  36  Minn.  333. 
3  Rev.  Stat.,  sect.  2676. 

*  Central  Trust  Co.  v.  Burton,  74  Wis.  329. 
^  Van  Auken  v.  Dunning,  81  Pa.  St.  464. 

«  Newton  v.  Wilson,  31  Ark.  484  ;  Jacoway  v.  Denton,  25  Ark.  625 ;  Har- 
rison V.  Styres,  74  N.  Car.  290  ;  Scheible  ?'.  Bacho,  41  Ala.  423  ;  Olson  v.  Nel- 
son, 3  Minn.  53  ;  Latrobe  v.  Hulbert,  6  Fed.  Rep.  209.  Compare  Stillman  v. 
Looney,  3  Cold.  (Tenn.)  20. 

'  INIatthews  v.  Warner,  6  Fed.  Rep.  461.  See,  also,  Wheelock  v.  Lee,  64  N. 
Y.  242 ;  Bissell  v.  Kellogg,  65  N.  Y.  432. 

«  Corning  v.  Ludlum,  28  N.  J.  Eq.  398. 

3  Leake  v.  Bergen,  27  N.  J.  Eq.  360. 

1"  Bowman  v.  Miller,  25  Gratt.  (Va.)  331 ;  18  Am.  Rep.  686. 


CHAPTER  XX. 

fkaudulent  mortgages. 

Article  1. 

Fraud  Generally. 

§  800.  Application  to  Mortgages.  ?  803.  Rights  of  Parties. 

\  801.  Secret  Trusts— Confidential  Re-  ^  804.  The  Mortgagor  Must  Use  Due 

lations.  Diligence. 

I  802.  Fraudulent  Intent  as  to  Cred-  §  805.  Pre-existing  Debt. 

itors. 

§  800.  Application  to  Mortgages. — At  common  law  all 
conveyances  made  in  fraud  of  creditors  are  voidable  at  the  in- 
stance of  such  creditors.^ 

The  statute  13  Elizabeth,  ch.  5,  avoiding  fraudulent  con- 
veyances, was  merely  declaratory  of  the  common  law.^ 

The  statute  of  13  Elizabeth,  ch.  5,  perpetuated  by  29  Eliza- 
beth, has  been  re-enacted  or  copied  in  nearly  every  State  in  the 
Union,  and  has  been  adopted  as  the  basis  of  jurisprudence 
upon  the  subject  of  fraudulent  conveyances.  This  statute 
constitutes  the  basis  of  American  jurisprudence  on  this  subject, 
and  is,  when  not  specially  enacted,  a  part  of  the  unwritten 
law.^ 

By  the  provisions  of  this  statute  all  conveyances  and  dispo- 
sitions of  property,  real  and  personal,  made  with  intent  to  de- 
fraud creditors,  are  null  and  void  as  against  creditors.*  Mort- 
gages come  under  the  same  rule  as  other  conveyances,  and 
when  obtained  by  fraud  they  are  null  and  void  and  may  be 
discharged.* 

And  a  mortgagee  cannot  be  a  purchaser  for  value  where  the 

'  Cadogan  r.  Kennet,  1  Cowp.  432,  434 ;  Curtis  v.  Leavitt,  15  N.  Y.  124 ; 
Blackman  v.  Wheaton,  13  Minn.  326 ;  Baker  v.  Humphrey,  101  U.  S.  499. 

*  Clements  v.  Moore,  6  Wall.  (U.  S.)  312 ;  Davis  v.  Turner,  4  Gratt.  (Va.)  429. 

*  Story's  Eq.  Jur.,  sect.  553  ;  Gardner  v.  Cole,  21  Iowa,  209. 
*Drake  v.  Rice,  130  Mass.  410. 

*^Wartemberg  v.  Spiegel,  31  Mich.  400 ;  Mason  v.  Daly,  117  Mass.  403. 

825 


826  CONTRACTS    IN   VIOLATION   OF    LAW. 

mortgage  was  obtained  by  fraud  or  forgery  of  his  agent.^  If 
obtained  by  trickery  witliout  negligence,  it  cannot  become 
good  in  the  hands  of  any  party ,^  and  if  forged,  the  question  of 
good  faitli  cannot  arise.^ 

And  where  tlie  mortgagor  after  the  execution  of  tlie  mort- 
gage obtains  judgment,  fraudulently  quieting  his  title  to  the 
mortgaged  land  against  the  owner  thereof,  and  such  judgment 
is  subsequently  vacated  with  the  consent  of  all  the  parties  thereto 
on  account  of  fraud,  neither  the  mortgagor  nor  the  mortgagee 
acquires  any  benefit  or  title  under  the  fraudulent  judgment.* 

The  principles  and  rules  of  the  common  law  are  so  strong 
against  fraud  in  every  shape  that  the  common  law  would 
have  attained  every  end  proposed  by  the  statutes  of  13  Eliz., 
c.  5,  and  27  Eliz.,  c.  4.  The  former  of  these  statutes  relates  to 
creditors  only  ;  the  latter,  to  purchasers.  These  statutes  cannot 
receive  too  liberal  construction,  or  be  too  much  extended  in 
suppression  of  fraud.^ 

It  is  a  general  rule  that,  where  one  of  two  innocent  persons 
must  suffer  from  the  fraudulent  act  of  a  third,  he  by  whose  act 
the  third  person  was  enabled  to  perpetrate  the  fraud  must  bear 
the  loss.^ 

The  English  courts  hold  that  a  voluntary  settlement,  though 
made  in  good  faith  and  without  any  intention  to  defraud  any 
person,  is  fraudulent  against  subsequent  purchasers,  however 
remote  in  time.  The  result  is  to  give  the  settler  power  to 
revoke  his  settlement  at  his  option.  This  doctrine  has  often 
been  criticised  and  regretted  in  England/  and  has  been  repu- 
diated in  this  country.^ 

^Laprad  v.  Sherwood,  79  Mich.  520. 

''Burson  v.  Huntington,  21  Mich.  415  ;  Bank  v.  Deal,  55  Mich.  592. 

3  McGinn  v.  Tobey,  62  Mich.  252;  Mersman  v.  Werges,  3  Fed.  Rep.  378. 

*  Watkins  v.  Houck,  44  Kan.  502. 

*  Cadogan  v.  Kennct,  1  Cowp.  432, 434.  See,  also,  Perry-Herrick  v.  Attwood, 
2  De  G.  &  J.  40 ;  27  Law  J.  Ch.  121,  128 ;  Hamilton  v.  Russel,  1  Cranch  (U.S.), 
310,  316 ;  May  on  Fraud,  Conv.  3,  4. 

« Burgess  v.  Bragaw  (Minn.),  52  N.  ^Y.  Rep.  45. 

'  Doe  f.  Manning,  9  East,  59 ;  Rob.  Fraud.  Con.  ,39, 41 ;  May  Fraud.  Con.  195. 
«Sterry  v.  Arden,  1  Johns.  Ch.  (N.  Y.)  261 :   12  Johns.  (N.  Y.),  536;  Cath- 
cart  V.  Robinson,  5  Pet.  (U.  S.)  264  ;  Beal  v.  Warren,  2  Gray  (Mass.),  447. 


FRAUDULENT    MORTGAGES.  827 

So  where  the  obhgee  and  mortgagee  named  in  a  bond  and 
mortgage  produces  them  with  no  marks  upon  them  iiidicating 
that  he  had  parted  with  the  property  in  them,  but  with  an 
indorsement  showing  a  recent  payment  of  interest  to  him  as 
owner,  and  he  proposes  to  assign  them  for  full  value,  a  pur- 
chaser will  be  protected  without  examining  the  records  for 
prior  assignments.^ 

§  801.  Secret  Trusts — Confidential  Relations. — Secret 
trusts  cannot  be  upheld  to  defraud  creditors.  Thus,  where  a 
husband  invests  his  wife's  money  in  land,  and  takes  the  title 
in  his  own  name,  and  gives  a  mortgage  back,  his  wife  cannot 
set  up  her  equity  to  have  the  money  she  advanced  paid  back 
to  her  from  the  proceeds  of  the  foreclosure  sale.^  So  if  a  hus- 
band conveys  land  to  his  wife  under  the  pretext  of  having 
held  the  title  in  trust  for  her,  his  grantor  having  a  mortgage 
upon  the  land  prior  to  the  date  of  such  conveyance,  or  a  judg- 
ment creditor,  may  show  that  no  such  trust  existed,  and  that 
such  conveyance  was  made  for  the  purpose  of  defrauding  his 
creditors.^ 

If  a  mortgage  is  given  with  no  intent  to  defraud,  and  the 
mortgagee  takes  possession,  but  permits  the  mortgagor  to  re- 
main upon  the  premises  and  manage  them,  and  receives  a 
portion  of  the  proceeds,  there  is  no  fraud.* 

Where  one  in  good  faith  and  without  fraud  takes  a  mortgage 
from  a  husband  and  wife  to  secure  a  just  debt,  the  court  will 
hesitate  long  before  setting  it  aside,  even  on  proof  that  the 
husband  procured  her  execution  thereof  by  fraudulent  repre- 
sentations, and  that  she  used  due  diligence  to  ascertain  its 
contents.' 

And  where  the  wife  has  sold  several  parcels  of  her  land,  and 
allowed  her  husband  to  receive  the  money,  and  afterward,  at 
his  request,  joined  him  in  conveying  another  part  upon  condi- 

iMellick  V.  Mellick,  47  N.  J.  Eq.  86. 
'^Hallv.  Hall,89Ky.  514. 
'  Lehman  v.  Hawks,  121  Ind.  541. 
*  Decker  v.  Wilson,  45  N.  J.  Eq.  772. 
f  Spurgin  v.  Traub,  65  111.  170. 


828  CONTRACTS    IN   VIOLATION   OF    LAW. 

tion  of  his  making  provisions  for  their  daughter,  to  whom  a  note 
and  mortgage  were  then  given  for  a  larger  amount  than  re- 
ceived for  the  part  last  sold,  in  the  absence  of  fraud,  it  is  a  valid 
transaction,  and  the  mortgage  legal/ 

Constructive  notice  to  the  subsequent  purchaser  of  a  fraudu- 
lent assignment,  arising  from  its  record,  will  not  affect  the  rights 
of  such  subsequent  purchaser. 

Thus,  a  father,  being  the  mortgagee  and  owner  of  two  bonds 
and  mortgages  of  $5,000  and  $2,000,  respectively,  contracted 
with  a  single  woman  to  marry  her  and  to  settle  upon  her  by  as- 
signment, before  marriage,  the  $5,000  bond  and  mortgage.  Nine- 
teen days  before  the  wedding,  for  the  purpose  of  defrauding  her, 
he  assigned  both  bonds  and  mortgages  to  his  son  for  the  express 
consideration  of  one  dollar  and  love  and  affection,  but  actually 
received  a  consideration  in  money  less  than  the  amount  of  the 
smaller  bond  and  mortgage.  He  afterward  regained  posses- 
sion of  the  $5,000  bond  and  mortgage,  and  assigned  the  same 
to  the  woman  just  before  his  marriage  with  her.  The  woman 
was  entitled  to  the  benefit  of  the  securities  notwithstanding 
that  the  prior  assignment  was  recorded  on  the  day  it  was  exe- 
cuted, and  that  the  son  was  innocent  and  ignorant  of  the  fraud- 
ulent scheme  of  his  father.^ 

§  802.  Fraudulent  Intent  as  to  Creditors. — Where 
it  is  the  intention  of  a  debtor  in  giving  a  mortgage  to  put  his 
property  in  such  a  position  as  to  defraud,  hinder,  or  delay  his 
creditors,  and  this  intention  is  known  to  the  mortgagee,  some 
courts  hold  that  the  mortgagee  is,  in  law,  charged  with  a  par- 
ticipation in  the  fraud,  although  he  may  pay  a  full  consid- 
eration, and  take  immediate  and  open  possession ;  where  the 
mortgagee  takes  the  mortgage  with  such  knowledge  of  fraud 
on  the  part  of  the  mortgagor,  the  transaction  cannot  be  said 
to  be  bona  fide,  however  full  and  valuable  the  consideration 
may  be.^ 

1  Brooks  V.  Dalrymple,  12  Allen  (Mass.),  102. 
^Mellick  V.  Mellick,  47  N.  J.  Eq.  86 ;  Sect.  805. 

3  Robinson  v.  Holt,  39  N.  H.  557  ;  Blodgett  v.  Webster,  24  N.  H.  91 ;  Kimball 
V.  Thompson,  4  Cush.  (Mass.)  441 ;  Bridge  v.  Eggleston,  14  Mass.  245. 


FKAUDULENT   MORTGAGES.  829 

On  the  contrary,  it  is  held  that  fraud  on  the  part  of  the 
mortgagor  does  not  affect  the  mortgagee  unless  he  is  a  party 
to  the  fraud,  and  receives  the  mortgage  with  the  intent  to 
hinder,  delay,  or  defraud  the  creditors  of  the  mortgagor/ 

One  line  of  authorities  holds  that  conveyances  made  by  a 
grantor  in  fraud  of  his  creditors  are  valid  unless  it  be  shown 
that  the  purchaser  is  not  a  purchaser  for  value,  and  in  good 
faith.  Another  line  of  authorities  states  that  the  effect  of  the 
statute  to  be  that  conveyances,  fraudulent  on  the  part  of  the 
grantor,  are  invalid  at  the  suit  of  his  creditors,  unless  it  be 
shown  that  the  purchaser  is  a  purchaser  for  value,  and  in 
good  faith. 

The  authorities  are  uniform  in  declaring  that  one  who  attacks 
a  conveyance  as  fraudulently  made  must  establish  the  fraud  ; 
he  has  the  burden  of  proof.  But  there  is  a  conflict  when  the 
question  arises  whether  the  creditor,  by  proof  of  the  fraud  of 
the  grantor,  has  made  a  prima  facie  case  against  the  grantee, 
entitling  the  creditor  to  recover,  in  the  absence  of  any  evidence 
by  his  adversary.  The  rule  adopted  in  Connecticut,^  lowa,^ 
Maryland,*  Massachusetts,^  New  Jersey,^  and  Wisconsin^  is 
that  the  creditor  must  not  only  show  fraud  on  the  part  of  the 
grantor,  but  participation  in  or  notice  of  it  by  the  grantee. 

But  other  authorities  hold  that  where  the  fraud  of  the  grantor 
is  established  a  prima  facie  case  is  made  by  the  creditor,  which 
must  be  met  by  the  purchaser  by  evidence  that  he  is  a  j^ur- 
chaser  in  good  faith  and  for  value.^ 

^  Cornish  v.  Dews,  18  Ark.  172  ;  Miner  >:.  Phillips,  42  111.  123  ;  Price  v.  Mas- 
terson,  35  Ala.  483 ;  Fifield  v.  Gaston,  12  Iowa,  218 ;  Prior  v.  White,  12  111. 
261 ;  Rust  V.  Mansfield,  25  111.  336. 

2  Portelo  V.  Harris,  26  Conn.  480. 

^  Adams  v.  Foley,  4  Iowa,  44  ;  Fifield  >:.  Gaston,  12  Iowa,  218. 

*  Cooke  V.  Cooke,  43  Md.  524. 

^  Bridge  v.  Eggleston,  14  ]\Iass.  245  ;  Foster  v.  Hall,  12  Pick.  (INIass.)  89. 

« Ins.  Co.  V.  Tooker,  35  N.  J.  Eq.  408 ;  Tantum  v.  Green,  21  N.  J.  Eq.  364 ; 
Bank  v.  Northrup,  22  N.  J.  Eq.  58. 

^  Mehlhop  V.  Pettibone,  54  Wis.  652. 

« Rogers  v.  Hall,  4  Watts  (Pa.),  359  ;  Lloyd  r.  Lynch,  28  Pa.  St.  419  ;  Starin 
V.  Kelly,  88  N.  Y.  418 ;  Hamilton  v.  Blackwell,  60  Ala.  545 ;  Gordon  r. 
Tweedy,  71  Ala.  202 ;  Brown  v.  Hedge  Co.,  64  Tex.  396  ;  Miller  v.  Fraley,  21 
Ark.  22 ;  Worthy  v.  Caddell,  76  N.  Car.  82, 


830  CONTRACTS    IN   VIOLATION    OF    LAW. 

Judge  Cooper  says :  "  We  concur  in  the  views  announced  by 
those  courts  which  hold  the  proof  of  fraud  on  the  part  of  the 
grantor  is  sufficient  to  entitle  his  creditors  to  subject  the  prop- 
erty fraudulently  assigned,  in  the  absence  of  evidence  showing 
the  claimant  to  be  a  purchaser  for  value  and  in  good  faith. 
We  fail  to  perceive  why,  in  cases  of  this  character,  the  party 
assailing  the  conveyance  shall  be  required  to  assume  the  bur- 
den of  showing  participation  in  the  fraud  by  the  purchaser, 
and  the  non-payment  of  value  for  the  property  fraudulently 
conveyed."  ^ 

The  rule  is  settled  in  many  States  that  the  debtor  in  failing 
circumstances  may  mortgage  the  whole  of  his  property  for  the 
security  of  a  portion  of  his  creditors,  even  though  the  effect  of 
the  transaction  is  to  defeat  the  collection  of  his  unsecured 
debt.^  If  the  mortgage  sets  out  a  pretended  indebtedness, 
it  may  be  set  aside  for  fraud.^  After  the  death  of  the  mort- 
gagee, when  the  mortgagor  has  absconded,  it  will  not  be  pre- 
sumed from  the  mere  fact  of  non-record  of  the  mortgage  that 
the  intention  of  the  mortgagee  was  to  enable  the  mortgagor  to 
obtain  commercial  credit  on  the  strength  of  being  owner  of  the 
property.*  A  mortgage  for  full  value,  executed  by  both  the 
fraudulent  mortgagor  and  fraudulent  grantee,  is  good  as  against 
a  creditor  without  judgment,  intended  to  be  defrauded,  though 
the  mortgagee  had  notice  that  the  conveyance  was  made  for 
the  purpose  of  defrauding  that  particular  creditor,  provided 
the  purpose  of  the  mortgage  is  not  to  defraud  creditors.^  And 
so  it  is  generally  held  that  a  mortgage,  in  good  faith,  by 
an  insolvent  debtor  to  a  part  only  of  his  creditors  will  be 
upheld.'^ 

^  Richards  v.  Vaccaro,  67  Miss.  516. 

*  Perry  v.  Vezina,  63  Iowa,  25  ;  Southern  White  Lead  Co.  t'.  Haas,  73  loAva, 
399 ;  Giddings  v.  Sears,  115  Mass.  505. 

3  Tully  V.  Harloe,  35  Cal.  302 ;  Farguson  v.  Johnston,  36  Fed.  Rep.  134. 

*Lanahan  v.  Lawton  (N.  J.),  23  Atl.  Rep.  476. 

^Sipley  V.  Wass  (N.  J.),  24  At.  Rep.  233.  See,  also,  Muchmore  v.  Budd, 
53  N.  J.  L.  369. 

« Warren  v.  Dwyer  (Mich.),  51  N.  W.  Rep.  1062,  following  Sheldon  v. 
Mann,  85  Mich.  265.  See,  also,  Warner  v.  Littlefield,  89  Mich.  329 ;  Fitz- 
gerald V.  McCandlish,  89  Mich.  400. 


FRAUDULENT    MORTGAGES.  831 

§  803.  Rights  op  the  Parties. — It  is  an  established  doctrine 
that  when  the  legal  estate  is  acquired  by  fraud,  the  taker  is  r^ 
garded  in  equity  as  the  trustee  to  the  party  defrauded,  and  such 
party  may  recover  the  estate  or  its  value. ^ 

And  where  several  mortgagors  have  given  their  individual 
notes  for  each  one's  sliare  of  the  purchase-money,  secured  by 
their  joint  mortgage,  each  one  may,  without  the  consent  of  the 
other,  by  bill  in  equity,  set  aside  the  mortgage  as  to  himself, 
if  the  purchase  of  which  land  was  procured  by  fraudulent  rep- 
resentation of  the  grantor.^  All  the  mortgagors  might  have 
joined  in  setting  aside  the  mortgage,  if  the  note  secured  was 
only  executed  by  one  of  them.^ 

A  conveyance  executed  by  an  insolvent  or  embarrassed 
debtor,  absolute  in  terms,  but  intended  only  as  a  mortgage  or 
security  for  a  debt,  operates  as  a  secret  reservation  of  benefit  to 
him,  and  is  fraudulent  in  law  as  against  his  existing  cred- 
itors.* 

Fraudulent  intent  on  the  part  of  one  of  two  mortgagees  will 
not  invalidate  the  mortgage,  though  the  mortgage  secures  two 
separate  debts,^ 

The  representation  of  the  mortgagee  that  he  will  not  enforce 
the  mortgage  is  a  nullity." 

And  when  the  mortgagee  has  released  his  mortgage  on  state- 
ments made  by  the  mortgagor,  whereby  a  subsequent  lien  takes 
priority,  in  order  to  have  his  mortgage  reinstated,  he  must 
show  that  he  relied  upon  the  fraudulent  representations  of  the 
mortgagor.^ 

Where  the  directors  of  a  corporation  never  sold  or  authorized 
the  sale  of  land,  a  mortgage  made  by  the  president  of  the  cor- 
poration, in  blank  and  without  seal,  which  is  filled  in  with  the 

'  Small  V.  Attwood,  Younge,  507  ;  Cheney  v.  Gleason,  117  Mass.  557. 
^Moulton  V.  Lowe,  32  Me.  466. 
^  Bowman  v.  Germy,  23  Kan.  306. 
*  Campbell  v.  Davis,  85  Ala.  56. 

^  Smith  V.  Post,  1  Hun  (N.  Y.),  516;  Troustine  v.  Lask,  4  Baxt.  (Tenn.)  162. 
Compare  Adams  v.  Niemann,  46  Mich.  1.35. 
«Catlin  r.  Fletcher,  9  :Minn.  85. 
\McKeen  v.  Haseltine,  46  Minn.  426. 


832  CONTRACTS    IN    VIOLATION    OF    LAW. 

description  of  the  wrong  land,  by  the  grantee,  is  void,  and  a 
mortgage  of  the  grantee  cannot  be  protected/ 

And  though  one  may  give  a  mortgage  to  prefer  some  of  his 
creditors,  the  unsecured  creditors  are  entitled  to  the  equity  of 
redemption,  and  if  the  mortgage  by  its  terms  attempts  to  pre- 
vent access  to  sucli  equity  of  redemption,  it  will  vitiate  the 
mortgage.^ 

Where  a  purchase  of  land  is  made  by  a  syndicate  of  several 
persons,  on  the  false  representations  of  one  of  them  as  to  the 
purchase  price,  so  that  the  others  pay  for  their  interests  the 
amount  of  the  actual  purchase  price  of  the  entire  tract,  while 
he,  claiming  to  be  paying  for  his  interest  and  amount  propor- 
tional to  that  paid  by  them,  gets  it  for  nothing,  they  will  be 
entitled  to  his  interest  in  the  land.^  And  where  the  title  is 
taken  in  the  name  of  one  of  the  syndicate  as  trustee  for  the 
benefit  of  all,  a  person  or  mortgagee  to  whom  the  member  who 
made  the  false  representations,  gives  a  mortgage  of  his  undi- 
vided proportion  of  the  land  does  not  stand  in  the  position  of 
a  bona  fide  incumbrancer  without  notice,  as  the  most  that  the 
mortgage  could  incumber  was  an  equitable  estate,  to  which  the 
doctrine  of  bona  fide  purchaser  does  not  apply  ;  *  because  a 
purchaser  of  an  equitable  interest  purchases  at  his  peril.^ 

§  804.  The  Mortgagor  Must  Use  Due  Diligence. — The 
mortgagor  must  not  sleep  on  his  rights.  Thus,  when  a  mort- 
gagor purchases  land  and  goes  into  possession  of  it  and  gives 
a  mortgage  back,  if  he  has  been  defrauded  he  must  take  the 
first  opportunity  to  seek  redress,  especially  when  the  deception 
must  have  been  known  to  him  before  he  gave  the  mortgage.® 

Though  the  mortgagor  is  unable  to  read,  in  the  absence 
of  fraud,  he  cannot  set  up  fraud.     It  is  his  business  to  have 

1  Vaca  Val,  etc.,  Railroad  Co.  v.  Mansfield,  84  Cal.  560. 

2  Chaffee  v.  Blatchford,  6  Mackey  (Dist.  Col.),  459. 
^  Crater  v.  Binninger,  33  N.  J.  L.  513. 

^Shoufe  V.  Griffiths  (Wash.),  30  Pac.  Rep.  93. 

"Shirras  v.  Caig,  7  Cranch  (U.  S.),  34  ;  Vattier  r.  Hinde,  7  Pet.  (U.  S.)  252; 
Boone  v.  Chiles,  10  Pet.  (U.  S.)  177. 
6  Whiting  V.  Hill,  23  Mich.  399  ;  Wright  v.  Peet,  36  Mich.  213. 


FRAUDULENT    MORTGAGES.  833 

the  instrument  read  over  to  him  before  signing ;  his  failure 
can  be  imputed  only  to  his  neghgence/ 

§  805.  Pre-existixg  Debt. — Where  a  mortgage  is  fraudu- 
lently obtained  to  secure  a  pre-existing  debt,  the  mortgagee  or 
beneficiary  cannot  claim  that  such  mortgage  is  damnum  absque 
injuria.  The  mere  existence  of  such  a  mortgage  outstanding 
is  of  itself  an  injury,  and  any  action  to  enforce  it  a  greater  in- 
jury. Thus,  it  is  a  fraud  in  a  creditor  to  induce  his  debtor  to 
secure  a  pre-existing  debt  by  a  mortgage  upon  condition  of 
advancing  a  further  sum,  and  when  he  has  obtained  the  se- 
curit}'"  to  refuse  to  make  the  advance,  and  a  court  of  ecpity 
will  annul  the  conveyance.^  And  this  is  the  better  rule, 
though  it  has  been  held  that  such  fraud  does  not  furnish  any 
ground  for  annulling  the  mortgage  in  equity,  for  an  action  at 
law  for  breach  of  the  agreement  would  be  a  sufficient  remedy.^ 

An  assignee  of  a  bond  and  mortgage,  holding  under  an 
assignment  made  by  the  assignor  for  the  purpose  of  defraud- 
ing a  subsequent  purchaser  of  the  securities,  can,  as  against  a 
subsequent  purchaser  for  full  value,  derive  no  benefit  from  his 
assignment  unless  he  is  both  innocent  and  ignorant  of  the 
fraud,  and  then  only  to  the  extent  that  he  has  parted  with 
value  on  the  strength  of  the  assignment,  and  before  notice  of 
the  fraud.* 

And  then  he  cannot  be  allowed  for  past  indebtedness  against 
the  assignor,  unless  he  has  given  up  some  security,  or  other- 
wise changed  his  position,  on  the  strength  of  the  assignment.^ 

^  Stewart  v.  Whitlock,  58  Cal.  2 ;  Wilson  r.  Winter,  6  Fed.  Rep.  16 ;  Leslie 
V.  Merrick,  99  Ind.  180  ;  Montgomery  r.  Scott,  9  S.  Car.  20. 

^  Gross  V.  McKee,  53  Miss.  536. 

'Johnson  v.  Murphy,  60  Ala.  288. 

*I\Iellick  V.  Melliek,"47  N.  J.  Eq.  86. 

^Mellick  V.  Mvllick,  47  N.  J.  Eq.  86.     See,  also,  De  Witt  v.  Van  Sickle,  29 
N.  J.  Eq.  209 ;  AUiaire  v.  Hartshorne,  21  N.  J.   L.  665,  668 ;  Holcomb  v. 
Wyckoflf,  35  N.  J.  L.  35 ;  2  Lead.  Cas.  Eq.  (4th  Am.  ed.)  77,  82  et  seq. 
63 


834  contracts  in  violation  of  law. 

Article  2. 

Duress  as  an  Element  of  Fraud. 

§  806.  Kind  of  Duress.  ^  808.  To  Prevent  Criminal  Prosecu- 

i  807.  Husband  and  Wife.  tion. 

§  806.  Kind  of  Duress. — Undue  influence  is  not  sufficient 
to  render  a  mortgage  void.^  Thus,  a  mere  command  of  a  hus- 
band to  his  wife  for  her  to  sign  a  mortgage,  unaccompanied  by 
threats  or  violent  action,  is  not  sufficient  of  itself  to  be  duress.^ 

As  between  parties  occupying  no  relation  of  confidence  in  or 
toward  each  other,  or  of  control  by  reason  of  position,  employ- 
ment, or  otherwise,  undue  influence  to  amount  to  duress  can 
rarely  be  imputed  without  showing  some  degree  of  fear,  or 
threats,  or  advantage  taken  of  position,  or  unfair  practices,  or 
persuasion,  involving  in  some  degree  a  species  of  fraud.  But 
when  any  of  these  elements  enters  into  and  constitutes  part  of 
the  circumstances  attending  a  transaction,  and  controlling  the 
will  of  a  party  making  a  deed  or  other  contract,  courts  of 
equity  have  long  been  accustomed  to  give  relief.^ 

Vice-Chancellor  Bird  says  :  "  Therefore,  it  is  plain,  that  pres- 
sure which  does  not  amount  to  duress  at  common  law  may  be 
considered,  in  equity,  as  sufficient  to  set  aside,  or  to  resist,  a 
contract.  Whenever  a  contract  is  procured  by  such  influence 
as  overcomes  the  free  agency  of  the  contracting  party,  whether 
parent  or  child,  husband  or  wife,  such  influence  aftbrds  an 
equitable  defense.  To  this  end  all  the  cases  unerringly  and 
unwaveringly  tend."* 

§  807.  Husband  and  Wife. — A  mere  command  of  the  hus- 
band to  the  wife  to  go  and  sign  a  mortgage  is  not  duress.'' 

1  Moog  V.  Strang,  69  Ala.  98. 

^  Gabbey  v.  Forgeus,  38  Kan.  62. 

3  Eadie  v.  Slimmon,  26  N.Y.  9.  See,  also,  Lyon  v.  Tallmadge,  14  Johns.  (N.Y.) 
501,  513 ;  Davies  v.  Ins.  Co.,  L.  R.  8  Ch.  Div.  469 ;  Sharon  v.  Gager,  46  Conn. 
189 ;  Reed  v.  Exum,  84  N.  Car.  430 ;  Thurman  v.  Burt,  53  111.  129 ;  Harris  v. 
Carmody,  131  Mass.  51 ;  Smitli  v.  Allis,  52  Wis.  337. 

*  Lomerson  v.  Johnston,  44  N.  J.  Eq.  93,  107. 

*  Gabbey  v.  Forgeus,  38  Kan.  62. 


FRAUDULENT    MORTGAGES.  835 

However,  less  than  actual  duress  will  avoid  an  acknowledg- 
ment of  a  deed  of  conveyance  or  mortgage  by  a  wife,  provided 
it  be  known  to  the  party  claiming  through  it.  It  is  enough 
that  it  be  shown  that  the  wife  did  it  under  moral  constraint — 
that  is,  by  threats,  persecutions,  and  harshness  of  her  husband 
to  force  her  to  set  aside  her  own  free  will.^ 

Whenever  the  execution  of  a  mortgage  by  the  wife  is  in- 
duced by  harshness  and  threats,  and  the  exercise  of  unwar- 
rantable authority  by  the  husband,  so  excessive  as  to  subjugate 
and  control  the  freedom  of  her  will,  the  aid  of  a  court  to  sup- 
port and  enforce  its  provisions  against  her,  will  be  refused  and 
the  mortgage  annulled.^ 

So  where  an  aunt  is  induced  to  give  a  mortgage  by  threats, 
to  secure  the  payment  of  the  defalcation  of  her  nephew,  she 
can  avoid  it.^  The  threats  of  the  husband  to  abandon  his  wife 
if  she  did  not  sign  a  mortgage  is  sufficient  duress  to  annul  the 
mortgage,  when  the  mortgagee  had  notice  of  these  threats  at 
the  time  of  executing  the  mortgage.* 

But  a  married  woman's  own  negligence  cannot  be  pleaded 
to  set  aside  a  mortgage.  Thus,  not  being  able  to  read,  she  re- 
lied on  the  representations  of  her  husband,  which  were  false ; 
such  conduct  was  gross  negligence  ;  she  should  have  required 
the  instrument  to  be  read  to  her  before  signing.^ 

But  such  duress  of  the  husband  over  the  wife  must  be  par- 
ticipated in,  or  known  to,  the  mortgagee.^  But  a  married  woman 
may  be  estopped  by  her  deliberate  conduct  in  executing  a  mort- 
gage in  accordance  with  the  law.  She  is  responsible  for  her  de- 
liberate and  free  action,  and  cannot  claim  to  act  under  duress.^ 

^Michener  v.  Cavender,  38  Pa.  St.  334;  Louden  v.  Blythe,  16  Pa.  St.  532; 
Harris  v.  Carmody,  131  Mass.  51 ;  McCandless  v.  Eagle,  51  Pa.  St.  309. 

*  Central  Bank  v.  Copeland,  18  Md.  305. 

^Sharon  v.  Gager,  46  Conn.  189. 

*Line  v.  Blizzard,  70  Ind.  23. 

*^tna  Life  Ins.  Co.  ?>.  Franks,  53  Iowa,  618  ;  Roach  v.  Karr,  18  Kan.  529; 
Frickee  v.  Donner,  35  Mich.  151. 

«Edgell  V.  Hagens,  53  Iowa,  223  ;  Moog  v.  Strang,  69  Ala.  98  ;  ^tna  Life 
Ins.  Co.  V.  Franks,  53  Iowa,  618.    See,  also,  WiUiams  v.  Baker,  71  Pa.  St.  476. 

^Van  Sickles  v.  Town,  53  Iowa,  259;  Norton  v.  Nichols,  35  Mich.  148;  Ed- 
gell  t.  Hagens,  53  Iowa,  223  ;  Lefebvre  v.  Dutruit,  51  Wis.  326. 


836  CONTRACTS    IN    VIOLATION    OP    LAW. 

A  "mortgage  given  by  a  wife  upon  her  property  to  prevent  a 
criminal  prosecution  of  her  husband  upon  fraudulent  charges 
of  embezzlement  can  be  annulled/  But  the  mortgage  will  not 
be  avoided  when  the  evidence  does  not  show  intimidation  or 
duress.  Thus,  where  the  husband  testified  that  a  criminal 
prosecution  was  threatened,  which  was  denied,  and  the  wife 
and  husband  were  persons  of  great  intelligence,  and  the  hus- 
band a  man  of  great  business  experience,  and  who  did  not 
complain  of  duress  after  the  execution  of  the  mortgage,  it  will 
be  enforced.^ 

§  808.  To  Prevent  Criminal  Prosecution. — When  threats 
are  made  to  a  father  or  to  the  wife,  that  his  son  or  her  husband 
will  be  prosecuted  criminally  with  a  certainty  of  conviction, 
unless  the  amount  of  the  debt  is  secured  by  mortgage  on  his 
or  her  property,  such  mortgage  can  be  annulled  by  the  mort- 
gagor when  executed  under  such  circumstances.  Thus,  when 
a  father  is  appealed  to  under  such  circumstances  to  take  upon 
himself  an  amount  of  civil  liability,  with  the  knowledge  that 
unless  he  does  so  his  son  will  be  exposed  to  a  criminal  prose- 
cution, with  the  certainty  of  conviction,  he  cannot  be  regarded 
as  a  free  and  voluntary  agent,  and  the  mortgage  can  be 
avoided.^ 

So  when  a  creditor  uses  undue  pressure  and  induces  the  wife 
to  mortgage  her  real  estate  to  prevent  a  criminal  prosecution 
of  her  husband,  impressing  her  with  fear  or  unjust  apprehen- 
sion, her  free  agency  is  overcome,  and  such  mortgage  cannot 
be  enforced  against  her  real  estate.*  And  a  mortgage  executed 
by  a  mother  in  the  belief  that  her  son  had  been  guilty  of  for- 
gery, and  would  be  prosecuted  unless  she  secured  the  debt,  is 
given  under  duress  and  is  not  valid.^ 

But  where  the  threat  is  made  to  the  debtor  himself  the  rule 

1  Singer  Manf.  Co.  v.  Rawson,  50  Iowa,  634. 
^  Post  «.  Bank,  138  111.  559,  affirming  38  111.  App.  259. 
nVilliams  v.  Bayley,  L.  R.  1  H.  L.  200;  35  L.  J.  Ch.  717. 
*Lomerson  v.  Johnston,  44  N.  J.  Eq.  93. 

5  Strang  v.  Peterson,  56  Hun  (N.  Y.),  418.  See,  also,  Dykes  v.  Wyman,  G7 
Mich.  236  ;  Edwards  v.  Bowden,  103  N.  Car.  50. 


FRAUDULENT    MORTGAGES.  837 

is  different.  Thus,  when  a  creditor  threatens  to  begin  criminal 
prosecution  if  the  felon  does  not  secure  the  debt  which  is  actu- 
ally due,  no  duress  can  be  shown.^ 

If  there  had  been  no  consideration,  the  mortgage  would  have 
been  set  aside. ^ 

A  mortgage  given  by  a  defaulting  county  officer  to  secure 
the  amount  of  his  defalcation,  is  valid ;  ^  or  a  mortgage  given 
to  secure  a  pardon.* 

Threats  to  begin  legal  proceedings  to  collect  a  valid  debt, 
if  a  mortgage  is  not  given   to  secure  it,  is  not  duress.^ 

A  mortgage  given  to  the  creditor  to  release  the  mortgagor 
from  imprisonment  lawfully  imposed  is  valid.'' 

Mortgages  given  by  a  wife  under  duress  to  prevent  criminal 
prosecution  of  her  husband,  or  by  a  father  to  protect  his  son, 
cannot  be  ratified  and  made  valid.'^  And  in  general  a  note 
and  mortgage  given  in  whole  or  in  part  upon  an  agreement, 
express  or  implied,  to  settle  or  prevent  a  criminal  prosecution, 
are  void,  unless  the  case  falls  within  some  express  statute 
authorizing  settlement.^ 

Article  3. 

Preferences. 

§  809.  At  Common  Law.  §  812.  Stating     the      Consideration 

I  810.  Statutory  Provisions.  More  than  the  Debt. 

I  811.  Fraudulent  Intent. 

§  809.  At  Common  Law. — At  common  law,  if  a  debtor  is 
unable  to  pay  all  his  debts,  he  commits  no  fraud  by  appropri- 
ating his  property  to  the  satisfaction  of  one  or  more  of  his 
creditors,  to  the  exclusion  of  all  the  others.  Nor  does  it  make 
any  difference  that  both  creditor  and  debtor  know  that  the  fact 

1  Plant  V.  Gunn,  2  Woods,  C.  C.  372.' 

''James  v.  Eoberts,  18  Ohio,  548. 

'Oconto  County  v.  Hall,  42  Wis.  59 ;  State  Bank  v.  Chapelle, 40  Mich.  447. 

*  Rood  V.  Winslow,  2  Doug.  (Mich.)  68. 

5  Snyder  v.  Braden,  58  Ind.  143 ;  Dolman  v.  Cook,  14  N.  J.  Eq.  56. 

^Watkins  v.  Baird,  6  Mass.  506;  Smillie  v.  Titus,  32  N.  J.  Eq.  51,  and  note. 

'  See  Lyon  v.  Waldo,  36  Mich.  345. 

«  Small  V.  Williams,  87  Ga.  681. 


838  CONTRACTS    IN    VIOLATION    OF    LAW. 

of  such  appropriation  will  be  to  deprive  other  creditors  of  the 
power  to  reach  the  debtor's  property  by  legal  process  in  satis- 
faction of  their  claims.  If  there  is  no  secret  trust  agreed  upon 
or  understood  between  debtor  and  creditor  in  favor  of  the 
former,  but  the  sole  object  of  the  transaction  of  the  parties  is 
to  pay  or  secure  the  payment  of  a  debt,  the  transaction  is  valid.^ 

So,  where  there  is  no  statute  controlling  such  preferences, 
a  debtor  may  mortgage  his  entire  property  for  the  sole  purpose 
of  securing  the  debt  of  one  of  his  creditors.^ 

And  this  is  the  general  rule,  that  an  insolvent  debtor  may 
prefer  creditors,  if  the  same  is  done  in  good  faith,  and  this  not 
only  in  the  form  of  actual  payment  of  money  to  particular 
creditors  preferred,  but  also  by  giving  of  mortgages  to  such 
creditors.^ 

§  810.  Statutory  Provisions. — Statutory  provisions  often 
control  as  to  giving  preferences,  in  cases  of  bankruptcy  and 
insolvency.  Thus,  in  Kentucky  it  is  provided  b}^  statutory 
provisions  that  every  mortgage  made  b}""  a  debtor  in  contem- 
plation of  insolvency,  and  with  the  design  to  jDrefer  one  creditor 
over  another,  shall  oj^erate  as  a  transfer  of  the  property  for  the 
benefit  of  creditors  generally.  But  it  further  provides  that 
such  preference  shall  not  affect  any  made  in  good  faith  to 
secure  any  debt  made  simultaneously  with  such  mortgage.* 
Hence  a  mortgage  given  by  an  insolvent  to  secure  a  debt,  a 
portion  of  which  is  created  at  the  same  time,  is  a  valid  security 
for  such  portion,  though  the  residue  of  the  debt  is  a  pre-existing 
one.  But  a  mortgage  given  to  secure  a  pre-existing  debt  in 
pursuance  of  a  verbal  agreement,  made  at  the  time  of  the  cre- 

iBanfield  v.  Whipi^le,  14  Allen  (Mass.),  13. 

"^  Giddings  v.  Sears,  115  Mass.  505  ;  Bump's  Fraud.  Con.  213,  226. 

3  Tootle  V.  Coldwell,  30  Kan.  125  ;  Meinhard  v.  Strickland,  29  S.  Car.  491 ; 
Eureka  I.  &  S.  Works  v.  Bresnahan,  66  Mich.  489 ;  Martin  v.  Hausinan,  14 
Fed.  Rep.  160 ;  Leitch  v.  Hollister,  4  N.  Y.  211 ;  Knapp  v.  McGowan,  96  N.  Y. 
86;  Beyer  Wheel  Co.  v.  Fielding,  101  N.  Y.504;  Brown  v.  Guthrie,  110  N.  Y. 
437 ;  Hine  v.  Bowe,  114  N.  Y.  350 ;  Greene  v.  Remington,  72  Wis.  648 ;  People 
V.  Bristol,  35  Mich.  .34  ;  Smith  v.  Ferine,  121  N.  Y.  376 ;  Cleveland,  etc.,  Co.  v. 
Wilson,  80  Iowa,  697 ;  Andrews  v.  Fillmore,  46  Mich.  316 ;  Adams  v.  Nie- 
mann, 46  Mich.  136. 

*  Gen.  Stat.,  oh,  44,  art.  2,  sect.  1. 


FRAUDULENT   MORTGAGES.  839 

ation  of  the  debt,  months  before,  is  not  within  the  exception  of 
the  statute.^ 

Although  the  mortgage  may  be  withdrawn  ^  as  to  such  part 
of  the  debt  as  previously  existed,  yet  it  is  a  security  for  so  much 
as  may  be  created  simultaneously.^  . 

The  voluntary  assignment  act  *  of  Illinois  does  not  affect  the 
right  of  a  failing  debtor  to  prefer  creditors  by  giving  mortgages, 
in  good  faith,  since  such  mortgages  not  being  voluntary  assign- 
ments, are  not  within  the  purview  of  the  act.^ 

So  in  Wisconsin  ^  a  mortgage  free  from  fraud,  given  by  an 
insolvent  debtor  to  a  creditor  in  preference  to  other  unsecured 
creditors,  is  valid,  unless  such  insolvent  within  sixty  days  from 
the  time  of  making  the  mortgage  makes  an  assignment  for  the 
benefit  of  creditors/ 

In  Michigan,  preferences  are  void  only  in  common-law 
assignments,  because  forbidden  by  statute.^  The  statute  inhib- 
its the  debtor  from  preferring  a  creditor  in  the  instrument.^ 

In  Vermont  no  special  remedy  is  prescribed  for  the  recov- 
ery of  property  conveyed  in  fraud  by  the  insolvent  law,  but  the 
assignee  may  resort  to  any  appropriate  proceedings  at  law  or 
in  equity.^" 

In  Ohio,^^  an  insolvent  debtor  may  make  an  assignment  and 
prefer  one  creditor  to  another.'^ 

Under  the  Arkansas  law,'^  a  mortgage  in  form  may  consti- 
tute an  assignment  by  reason  of  the  intention  of  the  parties 
and  the  operation  of  the  instrument.^* 

'  McCutchen  v.  Caldwell  (Ky.),  13  S.  W.  Rep.  1072. 
*Gen.  Stat.,  ch.  44,  art.  2. 
^  Farmer  v.  Hawkins,  79  Ky.  182. 
*  Rev.  Stat.,  ch.  72,  sect.  49. 
6  Weber  v.  Mick,  131  111.  520. 
«Rev.  Stat.,  1883,  sect.  1693  a. 
^  Menzesheimer  v.  Kennedy,  75  Wis.  411. 
8  How.  Stat.,  sect.  8739. 

^Whipple  V.  Stebbins,  67  Mich.  507  ;  Burnham  v.  Haskins,  79  Mich.  35. 
w  Ball  V.  Sawyer,  62  Yt.  367. 
"  Rev.  Stat.,  isSO,  sect.  6343. 

^^  Rouse  r.  Bank,  46  Ohio  St.  493 ;  Smith,  etc.,  Co.  v.  McGroarty,  136  U.  S.  237. 
1*  Mansf.  Dig.,  sects.  30.5-309. 
^ "  Richmond  v.  Mississippi  Valley,  52  Ark.  30. 


840  CONTRACTS    IN    VIOLATION    OF    LAW. 

Generally  where  an  insolvent  debtor  conveys  his  property  to 
one  or  more  preferred  creditors  under  such  circumstances,  that 
it  is  evidently  there  is  no  intention  of  giving  security  merely, 
and  of  going  on  with  the  business,  but  an  absolute  parting 
with  the  jus  dispgnendi,  then  such  transfer  is  an  assignment, 
and  is  void.' 

In  Indiana  a  mortgage  made  in  good  faith  by  an  insolvent 
debtor,  covering  all  of  his  property  to  secure  a  bona  fide  debt, 
although  executed  in  contemplation  of  an  assignment  which 
follows  the  succeeding  day,  is  not  carried  into  and  made  a  part 
of  the  assignment ;  but  it  will  stand  as  a  valid  and  enforceable 
lien  even  where  the  mortgagee  has  knowledge  of  the  contem- 
plated assignment.^  And  generally  under  the  statute,  after 
an  assignment  becomes  voluntary,  no  creditor  not  having  a 
prior  lien,  can  gain  a  preference ;  nor  has  any  creditor  the 
right  to  object  that  preferences  have  been  gained  by  others 
who,  by  superior  vigilance,  in  good  faith,  have  acquired  liens 
prior  to  the  assignment.^  Where  an  insolvent  corporation  has 
a  right  to  prefer  one  creditor  over  another,  in  order  to  impart 
legal  efficacy  to  its  acts,  in  attempting  to  create  preferences,  it 
must  exercise  its  rights  in  this  regard  in  a  lawful  manner.* 
Thus,  where  a  mortgage  is  made,  by  an  insolvent  corporation, 
pending  a  suit  by  a  creditor  to  wind  it  up  as  an  insolvent  cor- 
poration, and  also  in  violation  of  an  injunction  issued  by  the 
Court  of  Chancery,  the  mortgage  is  a  nullity,  and  a  subsequent 
dismissal  of  the  creditor's  suit  will  not  render  the  mortgage  a 
valid  instrument.^ 

§  811.  Fraudulent  Intent. — A  secret  arrangement  by  a 
debtor  who  compounds  with  his  creditors  to  pay  one  creditor 

iMeinhard  v.  Strickland,  29  S.  Car.  491 ;  Colliers.  Wood,  85  Ala.  91 ;  Logan 
V.  Logan,  22  Fla.  561. 

2  Gilbert  v.  McCorkle,  110  Ind.  215. 

3  Dias  V.  Bouchaud,  10  Paige  (N.  Y.),  445,  461 ;  Gage  v.  Perry,  69  Iowa, 
605  ;  Johnson's  Appeal,  103  Pa.  St.  373  ;  Dunham  v.  Whitehead,  2i  N.  Y.  131 ; 
Atkinson  v.  Tomlison,  1  Ohio  St.  237 ;  United  States  v.  McLellan,  3  Sum.  C. 
C.  345  ;  Henshaw  v.  Sumner,  23  Pick.  (Mass.)  446. 

*  Bissell  V.  Besson,  47  N.  J.  Eq.  580. 
^Bissell  V.  Besson,  47  N.  J.  Eq.  580. 


FRAUDULENT  MORTGAGES.  841 

more  than  he  does  the  others  is  a  fraud  upon  the  others  ;  and  a 
mortgage  given  to  carry  out  such  an  arrangement  is  void. 
Such  a  consideration  will  invalidate  the  mortgage  in  toto} 

When  the  consideration  is  made  up  of  several  distinct  trans- 
actions, some  of  which  are  entirely  fair  and  honest,  not  tainted 
with  fraud,  and  the  valid  consideration  can  be  separated  with 
certainty  and  ease  from  the  vicious,  then  it  may  be  held  good 
for  so  much  as  is  free  from  the  taint  of  illegality.^ 

If  the  fraudulent  intent  is  not  carried  out,  ihe  mortgage 
is  not  invalid ;  ^  and  a  mortgage  may  be  fraudulent  with  ref- 
erence to  a  particular  creditor  and  valid  as  to  others/ 

A  defrauded  party  applying  to  a  court  of  equity  for  relief 
must  be  compelled  to  exonerate  himself  from  all  imputations 
of  ratifying,  in  any  degree,  the  fraud  of  wliicli  he  complains. 
He  cannot  be  permitted  to  affirm  as  to  a  part  of  the  transac- 
tion, and  repudiate  as  to  the  residue,  except  in  very  special 
cases,  where  it  is  evident  no  injustice  will  be  done.  In  an 
action  of  this  character,  the  defrauded  party  cannot  be  allowed 
to  retain  the  benefits  of  the  transaction,  and  at  the  same  time 
to  cancel  and  annul  the  mortgage  security.  Such  a  proceed- 
ing would  be  at  once  a  ratification  and  a  repudiation,  and 
these  cannot  concur  in  the  same  action  ;  where  such  a  case  is 
presented,  it  is  within  the  power,  and  it  is  the  duty  of  the  trial 
court,  to  impose  equitable  terms  upon  the  plaintiff  as  a  condi- 
tion to  the  granting  of  the  relief  demanded.^ 

§  812.  Stating  THE  Consideration  More  THAN  THE  Debt. — 
If  the  consideration  is  placed  at  a  sum  slightly  in  excess  of  the 
real  debt,  it  is  not  sufficient  to  stamp  it  with  fraud,  in  the 
absence  of  a  fraudulent  intent  on  the  part  of  the  mortgagee.® 

» I^awrence  r.  Clark,  36  N.  Y.  128 ;  Sharp  v.  Teese,  4  Halst.  (N.  J.  Eq.)  352, 440. 
^Carleton  r.  Woods,  28  N.  H.  290;  Robinson  i\  Green,  3  Met.  (Mass.)  159; 
Feldman  v.  Gamble,  26  N.  J.  Eq.  494. 
^Corbett  r.  Woodward,  5  Saw.  C.  C.  403. 

Hulsman  v.  Whitman,  109  Mass.  411. 
*  Carlton  v.  Hulett  (Minn.),  51  N.  W.  Rep.  1053;  Knappen  v.  Freeman, 
47  Minn.  491 ;  Bradley  v.  Bosley,  1  Barb.  Ch.  (N.  Y.)  125.    See,  also,  Grymea 
V.  Sanders,  93  U.  S.  55  ;  Savery  v.  King,  5  H.  L.  Cas.  627. 
,     «Van  Patten  v.  Thompson,  73  Iowa,  103;  Frost  v.  Warren,  42  N.  Y.  204 ; 


842  CONTRACTS   IN    VIOLATION    OF   LAW. 

But  when  the  value  of  the  property  is  more  than  double  the 
amount  of  the  debt  secured,  or  greatly  in  excess  of  it,  it  is,  to 
say  the  least,  a  badge  of  fraud/ 

A  mortgage  is  not  void  because  no  amount  is  specified  as 
secured  ;  ^  or  because  it  includes  debts  due  other  persons  which 
the  mortgagee  verbally  assumes  to  pay.^ 

Article  4. 
Who  May  Set   Up  Fraud. 

§  813.  Rights  of  Mortgagor  and  Mort-  §  816.  Subsequent  Purchaser. 

gagee.  §  817.  Proof. 

§  814.  When  the  Mortgagor  is  an  In-  §  818.  Burden  of  Proof. 

nocent  Party.  |  819.  Defense — Want  of  Consider- 
§  815.  Who  May  Attack.  ation. 

§  813.  Rights  of  Mortgagor  and  Mortgagee. — Courts  of 
equity  will  not  lend  aid  to  relieve  a  mortgagor  from  the  con- 
sequences of  his  own  fraudulent  act.  Nor  will  it  aid  the  mort- 
gagee in  securing  him  in  the  enjoyment  o^  the  property 
fraudulently  mortgaged  where  its  interposition  is  necessary  for 
that  purpose.'* 

A  fraudulent  mortgage,  duly  executed  and  delivered,  is 
binding  between  the  parties,  and  the  mortgagor  cannot  set  it 
aside  on  account  of  his  own  fraud.^ 

So  executory  contracts  are  likewise  valid  between  the  origi- 
nal parties,  although  they  were  entered  into  for  the  purpose  of 

Weeden  v.  Hawes,  10  Conn.  50 ;  Wilhson  v.  Desenberg,  41  Mich.  156  ;  Tully 
V.  Harloe,  35  Cal.  302  ;  Butts  v.  Peacock,  23  Wis.  359 ;  Blakeslee  v.  Rossman, 
43  Wis.  116 ;  GoflF  v.  Rogers,  71  Ind.  459 ;  Hughes  v.  Shull,  33  Kan.  127  :  Hoey 
V.  Pierron,  67  Wis.  262. 

1  Wright  ('.  Hencock,  3  Munf.  (Va.)  521 ;  Mitchell  v.  Beal,  8  Yerg.  (Tenn.) 
134;  Anderson  v.  Hunn,  5  Hun  (N.  Y.),  79;  Bennett  v.  Bank,  5  Humph. 
(Tenn.)  612  ;  Bailey  v.  Burton,  8  Wend.  (N.  Y.)  339  ;  Hawkins  v.  Alston,  4 
Ired.  Eq.  (N.  Car.)  137  ;  Hubbard  v.  Turner,  2  McLean,  C.  C.  519. 

2  Youngs  V.  Wilson,  27  N.  Y.  351,  reversing  24  Barb.  (N.  Y.)  510. 

*  Carpenter  v.  Muren,  42  Barb.  (N.  Y.)  300. 

*  Brookover  v.  Hurst,  1  Met.  (Ky.)  665 ;  Wearse  v.  Peirce,  24  Pick.  (Mass.) 
141. 

5  Parkhurst  v.  McGraw,  24  Miss.  134 ;  Harvey  v.  Varney,  98  Mass.  118 ; 
Upton  V.  Craig,  57  111.  257. 


FKAUDULEXT    MORTGAGES.  843 

preventing  the  creditors  of  the  vendor  from  attaching  the 
property.^ 

Such  fraudulent  mortgages  as  to  creditors  cannot  be  avoided 
by  the  mortgagor.^ 

If  the  creditors  of  the  mortgagor  do  not  intervene,  the  mort- 
gage stands  as  valid.^ 

The  fact  that  a  person  executes  a  mortgage  while  he  is  in 
the  last  stages  of  a  certain  disease,  does  not  show  that  the  exe- 
cution was  procured  through  mistake  or  fraud,  especially  when 
the  instrument  was  executed  in  his  own  house  and  in  the  ab- 
sence of  the  mortgagee/ 

In  New  York  ^  mortgages  on  land,  executed  in  consideration 
of  money  won  at  betting  or  gambling  shall  be  void  as  to  the 
mortgagees,  and  shall  inure  to  the  sole  benefit  of  such  persons 
as  would  have  been  entitled  to  the  mortgaged  property  if  the 
mortgagor  had  died  immediately  upon  the  execution  of  the 
mortgage.  Under  this  statute,  in  an  action  by  the  assignee  of 
a  deceased  mortgagee  to  foreclose  a  mortgage,  as  the  mort- 
gagor would  be  released  from  personal  liability  on  the  bond  to 
secure  which  the  mortgage  was  given,  he  has  such  an  interest 
in  the  result  as  to  preclude  him,  under  the  statute,^  from  testi- 
fying that  the  mortgage  and  bond  were  given  to  secure  the 
payment  of  money  won  at  gaming,  and  hence  the  mortgage 
may  be  enforced.^ 

§  814.  When  the  Mortgagor  is  an  Innocent  Party. — 
But  where  there  is  no  fraud,  misrepresentation,  or  concealment 
on  the  part  of  the  mortgagor,  neither  he  nor  his  heirs  are 
estopped  from  setting  up  the  invalidity  of  the  mortgage  in  an 
action  of  foreclosure  brought  by  the  mortgagee.^ 

^  Knapp  ?■.  Lee,  3  Pick.  (Mass.)  452. 

^  Bonesteel  v.  Sullivan,  104  Pa.  St.  9  ;  Gill  v.  Henry,  95  Pa.  St.  388 ;  Stores  v. 
Snow,  1  Root  (Conn.),  181 ;  Dyer  v.  Homer,  22  Pick.  (Mass.)  253. 
^  Upton  V.  Craig,  57  111.  257. 
*  Johnston  v.  Derr,  110  N.  Car.  1. 
5 1  Rev.  St.,  p.  663,  sects.  16,  17. 
«Code  Civil  Proc,  sect.  829. 
'Luetchford  v.  Lord,  132  N.  Y.  465. 
^  Brewster  v.  Madden,  15  Kan.  249. 


844  CONTRACTS    IN    VIOLATION    OF   LAW. 

But  if  the  mortgagor  made  fraudulent  representations  in 
inducing  the  mortgagee  to  make  the  loan,  he  cannot  set  up  a 
defense  inconsistent  with  such  statements/ 

The  wrong  which  constitutes  a  legal  fraud,  that  forms  the 
basis  of  an  estoppel  in  such  case,  is  the  repudiation  of  what  has 
been  affirmed,  in  words  or  conduct,  to  be  true ;  and  it  is  not 
necessary  that  there  should  be  prior  positive  fraud  to  create  an 
equitable  estoppel.^ 

And  a  suit  instituted  by  a  creditor,  though  on  behalf  of  him- 
self and  other  creditors  who  may  come  in,  is  subject  to  the 
complete  and  absolute  dominion  of  the  parties  until  decree  is 
made ;  and  they  are  entitled  to  settle  and  have  the  suit  dis- 
missed, without  the  consent  of  the  other  creditors,  at  any  time 
before  decree,  and  until  decree  the  other  creditors  have  no  in- 
terest in  the  suit.^ 

Where  the  mortgagee  is  not  misled  by  the  mortgagor,  he 
cannot  make  him  responsible  for  the  fraud  of  a  third  party. 
Thus,  a  party  executed  a  deed  of  conveyance  with  a  nominal 
consideration,  and  delivered  it  to  a  solicitor,  with  authority 
to  deliver  it  to  the  grantee  or  mortgagee  as  security  for  the 
loan  to  her  son  of  $600.  The  grantee,  in  the  grantor's  ab- 
sence, accepted  the  deed,  which  he  supposed  came  from 
the  son's  possession  as  security  as  well  for  $600  then  loaned 
as  for  $250  previously  advanced.  He  was  notified  by  the 
solicitor  that  the  grantor  had  executed  it  as  security  for  $600 
only,  but  relied  upon  an  untrue  statement  by  the  son  that  his 
mother  had  agreed  that  it  should  stand  as  security  for  both 
sums.  Under  these  circumstances,  the  grantor  could  redeem 
by  paying  the  $600.* 

§  815.  Who  May  Attack. — A  general  creditor  cannot  sue 
to  set  aside  a  mortgage  on  the  ground  that  it  is  in  fraud  of 

1  Kelley  v.  Fipk,  110  Ind.  552. 

'^  Gregg  V.  Wells,  10  Ad.  &  El.  90 ;  Richardson  v.  Chickpring,  41  N.  H.  380  ; 
Catherwood  v.  Watson,  65  Ind.  576;  Rogers  v.  Union  Cfert  L.  Ins.  Co.,  Ill 
Ind.  343. 

^Handford  v.  Storie,  2  Sim.  &  S.  196;  Pemberton  v.  Topham,  1  Beav.  316; 
Innes  v.  Lansing,  7  Paige  (N.  Y.),  583  ;   Thompson  v.  Fisler,  33  N.  J.  Eq.480. 

*McKee  v.  Jordan  (N.  J.),  24  At.  Rep.  398. 


FRAUDULENT    MORTGAGES.  845 

creditors.*  A  third  party  not  being  a  subsequent  purchaser 
from  the  mortgagee  of  the  mortgagor,  nor  a  creditor  of  the 
mortgagor  who  has  laid  hold  of  the  mortgaged  property  by 
legal  process,  is  not  in  position  to  object  to  the  validity  of  the 
mortgage.^ 

When  a  conveyance  is  said  to  be  void  against  creditors,  the 
reference  is  to  such  parties  when  clothed  with  either  judgments 
and  executions,  or  such  other  process  as  the  law  provides  for 
the  collection  of  debts.^ 

It  is  commonly  said  that  a  fraudulent  conveyance  is  void 
against  creditors  ;  but  this  must  be  taken  in  a  limited  sense. 
Creditors  cannot  seize  the  property  of  their  debtor  without  any 
legal  process,  and  appropriate  it  of  their  own  accord  to  the 
satisfaction  of  their  debts.  They  must  follow  the  process  pro- 
vided by  law.*  The  mortgage  cannot  be  questioned  by  a 
creditor  at  large,  except  by  some  process  known  to  the  law.^ 
An  assignee  for  the  benefit  of  creditors  may  not  only  defend 
actions  to  foreclose  mortgages  which  he  deems  fraudulent,  but, 
ordinarily,  is  the  only  one  who  can  institute  actions  to  set 
aside  mortgages  or  conveyances  executed  by  the  assignor  prior 
to  the  assignment  for  fraud  .^ 

§  816.  Subsequent  Purchaser. — A  subsequent  purchaser 
of  the  equity  of  redemption  upon  an  execution  sale,  may  set 
aside  the  mortgage  on  account  of  fraud.'^  And  so  may  a  cred- 
itor of  the  mortgagor,  after  having  levied  an  execution  on  the 
equity  of  redemption  and  purchasing  it  at  sheriff's  sale.^ 

So  a  subsequent  judgment   creditor  may  show  that  a  prior 

1  Wol(7ott  V.  Ashenfelter  (N.  Mex.),  23  Pac.  Rep.  780. 

"^  Ellingboe  v.  Brakken,  36  Minn.  156  ;  Tolbert  v.  Horton,  31  Minn.  518. 

3  Van  Heusen  v.  Radcliff,  17  N.  Y.  580. 

*  Bump's  Fraud.  Con.  (3d.  ed.)  p.  460. 

*  Fearey  v.  Cummings,  41  Mich.  370 ;  People's  Sav.  Bank  v.  Bates,  120  U.  S. 
556 ;  Thompson  v.  Van  Vechten,  27  N.  Y.  568. 

®  Voorhees  v.  Carpenter,  127  Ind.  300 ;  Cooper  r.  Perdue,  114  Ind.  207  ;  Bar- 
ker V.  Barker,  2  Woods,  C.  C.  87  ;  In  re  Leiand,  10  Blatchf.  C.  C.  503 ;  Hilde- 
burn  V.  Brown,  17  B.  Mon.  (Ky.)  779  ;  Hratchinson  v.  Bank  (Ind.),  30  N.  E. 
Rep.  952. 

^  Matson  v.  Capelle,  62  Mo.  235. 

*  Van  Deusen  v.  Frink,  15  Pick.  (Mass.)  449. 


846  CONTRACTS    IN   VIOLATION    OF    LAW. 

mortgage  was  fraudulently  executed  and  without  consideration 
in  an  action  by  the  mortgagee  to  foreclose  the  mortgage.^ 

A  subsequent  incumbrancer  cannot  set  up  fraud  in  a  prior 
mortgage.^ 

The  English  courts  hold  that  a  voluntary  settlement,  though 
made  in  good  faith,  and  without  any  present  intention  to 
defraud  any  person,  is  fraudulent  against  the  subsequent 
purchaser,  however  remote  in  time.  This  doctrine  has  often 
been  criticized  and  regretted  in  England,'  and  has  been  repu- 
diated in  this  country/ 

It  is  a  sound  and  settled  principle  that  notice  to  a  purchaser 
of  a  prior  fraudulent  deed  will  not  affect  the  subsequent  pur- 
chaser, and  that  such  subsequent  purchaser  may  avail  himself 
of  the  fraud  in  the  first  deed.^ 

The  same  principle  is  acted  upon  in  the  case  of  conveyances 
of  land  made  for  the  purpose  of  defrauding  future  creditors.  It 
is  well  settled,  as  Vice-Chancellor  Pitney  says,  in  order  to 
avoid  such  conveyances  as  to  subsequent  creditors,  they  must 
have  been  conceived  in  fraud,  as  distinguished  from  mere  con- 
structive fraud ;  and  it  is  equally  well  settled  that  when  such 
fraud  clearly  appears  the  registry  of  the  fraudulent  deed  will 
not  help  it,  when  attacked  by  a  subsequent  creditor.®  Thus,  a 
father,  being  the  mortgagee  and  owner  of  two  bonds  and  mort- 
gages, of  $5,000  and  $2,000,  respectively,  contracted  with  a 
single  woman  to  marry  her,  and  to  settle  upon  her  by  assign- 
ment, before  marriage,  the  $5,000  bond  and  mortgage.  Nine- 
teen days  before  the  wedding,  for  the  purpose  of  defrauding 
the  contractee,  he  assigned  both  bonds  and  mortgages  to  his 
son  for  the  express  consideration  of  one  dollar,  and  love  and 

>  Kelly  V.  Lenihan,  56  Ind.  448. 

=  Nichols  V.  Weed  Sewing-Machine  Co.,  27  Hun  (N.  Y.),200;  97  N.  Y.  650. 

'  Doe  V.  Manning,  9  East,  59  ;  Roberts  on  Fraud.  Conv.  39-41 ;  May  on 
Fraud.  Conv.  204. 

*Sterry  v.  Arden,  1  Johns.  Ch.  (N.  Y.)  261;  Verplank  v.  Sterry,  12  Johns. 
(N.  Y.)  536 ;  Cathcart  v.  Robinson,  5  Pet.  (U.  S.)  280 ;  Seal  v.  Warren,  2  Gray 
(Mass.),  447. 

*  Verplank  v.  Sterry,  12  Johns.  (N.  Y.)  536,  557.  See,  also,  Roberts  on 
Fraud.  Conv.  30-41. 

sMellick  v.  Mellick,  47  N.J.  Eq.  86. 


FRAUDULENT    MORTGAGES.  847 

afFection,  but  actually  received  a  consideration  in  money  less 
than  the  amount  of  the  smaller  bond  and  mortgage.  He  after- 
ward gained  possession  of  the  $5,000  bond  and  mortgage  and 
assigned  the  same  to  the  contractee  just  before  marriage  with 
her.  It  was  held  that  the  contractee  was  entitled  to  the  bene- 
fit of  the  securities  notwithstanding  that  the  prior  assignment 
to  his  son  was  recorded  on  the  day  it  was  executed,  and  that 
the  son  was  innocent  and  ignorant  of  the  fraudulent  scheme 
of  his  father.^ 

§  817.  Proof. — In  order  to  render  a  mortgage  of  real  estate 
made  by  an  insolvent  debtor  void  under  the  bankrupt  law,^ 
it  must  be  affirmatively  shown  by  his  assignee  in  bankruptcy, 
that  the  grantee  had  reasonable  cause  to  believe  that  the  mort- 
gagor was  insolvent  at  the  time  he  executed  the  mortgage,  and 
that  it  was  made  with  the  intention  to  defeat  the  bankruptcy 
law.^  This  act  requires  that  the  insolvent's  creditor  should 
have  some  reasonable  cause  to  believe  him  insolvent.  He 
must  have  knowledge  of  some  fact  or  facts  calculated  to  pro- 
duce such  belief  in  the  mind  of  an  ordinary  intelligent  man.** 
And  a  mortgage  made  with  the  intent  to  prefer  contrary  to  the 
bankrupt  law  is  void  against  the  assignee  of  the  mortgage, 
although  the  property  be  a  homestead  and  exempted  from  exe- 
cution.^ 

When  a  mortgage  is  executed  in  the  absence  of  the  mort- 
gagee, the  declarations  of  the  person  thus  executing  the  mort- 
gage made  by  him  at  that  time  are  not  competent  to  show  that 
the  execution  of  the  instrument  was  procured  through  mistake 
or  fraud." 

In  some  States  it  is  provided  by  statute  that  when  deeds  and 
mortgages  are  claimed  to  have  been  executed  in  fravid  of  cred- 
itors, the  question  of  fraudulent  intent  shall  be  deemed  a  ques- 
tion of   fact;    in  such  States   there  can   be  no    constructive 

1  Mellick  r.  Mellick,  47  N.  J.  Eq.  86. 

"Act  of  March  2,  1867,  ch.  176,  sect.  35 ;  14  Stat  534. 

'Barbour  v.  Priest,  103  U.  S.  293. 

*  Grant  v.  Bank,  97  U.  S.  80,  82. 
•^Beals  V.  Clark,  13  Gray  (Mass.),  18. 

*  Johnston  v.  Derr,  110  k.  Car.  1. 


848  CONTRACTS    IN    VIOLATION    OP   LAW. 

fraud.'  So  the  question  of  fraud  is  one  of  fact  and  cannot  be 
inferred  as  a  matter  of  law.^  Hence,  whatever  is  necessary  to 
be  found  to  sustain  a  conclusion  of  law  must  be  alleged ;  con- 
sequently, under  such  statutes,  to  raise  an  issue  of  fraud,  fraud, 
as  a  fact,  must  be  alleged.^ 

The  fraudulent  intent,  which  is  a  question  of  fact,  will  not 
be  inferred  from  the  facts  stated  in  the  complaint,  either  for 
that  or  any  other  purpose,  for  the  reason  that  a  voluntary  con- 
veyance by  an  insolvent  debtor,  is  not  necessarily  fraudulent 
and  void  as  to  creditors.* 

The  mere  fact  that  a  mortgagee  withholds  the  mortgage  from 
record  under  an  agreement  with  the  mortgagor,  though  a  badge 
of  fraud,  does  not  make  such  mortgage  fraudulent  as  to  exist- 
ing or  subsequent  creditors.^ 

Pertinent  declarations  made  by  the  person  while  on  his  way 
to  procure  the  execution  of  a  mortgage  to  secure  an  antecedent 
debt  or  liability,  the  expedition  having  resulted  in  its  procure- 
ment, are  admissible  in  evidence  against  the  mortgagee  on  the 
question  whether  the  mortgage  was  procured  by  fraud  or  du- 
ress. They  are  a  part  of  the  res  gestae  of  the  transaction  and, 
consequently,  are  admissible  in  evidence  irrespective  of  the 
relation  of  agency  between  the  mortgagee  and  the  person  who 
procures  for  him  the  execution  of  the  mortgage.® 

§  818.  Burden  of  Proof. — The  burden  of  proof  rests  on 
the  one  claiming  a  conveyance  to  be  fraudulent  to  show  that  it 
is  in  plain  violation  of  law.^ 

So   where   in   an   attachment   proceeding,    a  third    person 

1  Cicero  v.  Picken,  122  Ind.  260. 

2  Farmers'  L.  &  Trust  Co.  v.  Railroad  Co.,  127  Ind.  250 ;  Smith  v.  Long,  9 
Daly  (N.  Y.),  429,  436. 

3  Smith  V.  Long,  9  Daly  (N.  Y.),  429, 436 ;  Hutchinson  v.  Bank  (Ind.),  30  X. 
E.  Rep.  952. 

*  Threlkel  v.  Scott,  89  Cal.  351 ;  Bull  v.  Bray,  89  Cal.  286 ;  Jamison  v.  King, 
50  Cal.  130 ;  McFadden  v.  Mitchell,  54  Cal.  628 ;  Scythe  Co.  v.  Foster,  36  N.  Y. 
561 ;  Bank  v.  Reed,  27  Abb.  N.  C.  (N.  Y.)  5;  Martin  v.  Fox,  40  Mo.  App.  661. 

5  Hutchinson  v.  Bank  (Ind.),  30  N.  E.  Rep.  952. 

«  Small  V.  Williams,  87  Ga.  681. 

^Pettingill  v.  Jones,  30  Mo.  App.  280 ;  Rochester  v.  Sullivan  (Ariz.),  H  Pac. 
Rep.  58. 


FRAUDULENT    MORTGAGES.  849 

claims  the  attached  property  under  a  deed  of  trust  which  the 
plaintiff  attacks  as  fraudulent,  the  burden  is  uj^on  the  plaintiff 
to  show  fraud.^ 

Where  the  natural  inference  from  the  proofs  made  does  not 
necessarily  lead  to  the  presumption  of  a  fraudulent  intent,  but 
the  evidence  relied  on  is  equally  consistent  with  innocence 
as  with  a  wrong-doing,  that  construction  must  be  placed  upon 
it  which  will  exonerate  the  party  implicated  from  a  dishonest 
intent.^ 

§819.  Defense — Want  of  Consideration. — The  intention 
to  defraud  creditors  is  common  to  both  parties,  and  neither  can 
be  permitted  to  show  that  the  notes  and  mortgage  were  made 
to  delay  or  defraud  creditors.  The  mortgagor  cannot  show 
fraud  as  a  substantive  ground  of  defense,  but  he  may  show 
want  of  consideration,  and  when  this  is  shown  the  mortgagee 
cannot  rebut  this  defense  by  showing  that  the  notes  and  mort- 
gage were  also  given  to  defeat  creditors  of  the  mortgagor.^ 

Between  the  original  parties,  want  of  consideration  is  a  good 
defense  in  a  foreclosure  suit.* 

And  a  purchaser  of  the  right  of  redemption  of  the  assignee 
of  the  mortgagor  may  avoid  the  mortgage  as  to  creditors  for 
want  of  consideration  in  the  notes  secured  by  the  mortgage.^ 

The  English  rule  is  that  purely  voluntary  settlements  of 
land- are  void  under  27  Eliz.,  c.  4,  as  against  subsequent  pur- 
chasers, no  matter  how  free  they  were  of  any  actual 
fraud.  Of  late  years  the  English  judges  have  caught  at  very 
small  matters  of  consideration  for  such  voluntary  settlements, 
in  order  to  relieve  against  the  hardship  of  this  rule.  Lord 
Hatherly  says :  ''  With  regard  to  the  observation  which  was 
made  by  counsel,  that  purchasers  would  hardly  know  how 
they  are  to  deal  with  property  where  there  has  been  a  volun- 

*  Deering  r.  Collins,  80  Mo.  App.  73. 

"  Morris  v.  Talcott,  96  N.  Y.  100 ;  Shultz  v.  Hoagland,  85  N.  Y.  464. 
3  Clark  V.  Clark,  62  N.  H.  267 ;  Wearse  v.  Peirce,  24  Pick.  (Mass.)  141 ;  Han- 
nan  V.  Hannan,  12.3  Mass.  441. 

*  Northy  v.  Northy,  45  N.  H.  141. 

'  Brewer  v.  Hyndman,  18  N.  H.  9. 
64 


850  CONTRACTS   IN    VIOLATION    OF    LAW. 

tary  settlement,  I  do  not  think  anything  could  be  more  un- 
satisfactory than  what  we  find  to  be  the  state  of  the  law  under 
which  a  person,  with  full  and  distinct  knowledge  of  a  volun- 
tary settlement,  is  able  at  any  time  to  overthrow  it.  It  is 
quite  established  that,  although  a  settler  cannot  get  rid  of  such 
a  settlement  directly,  he  can  do  so  indirectly,  by  making  a 
mortgage  of  the  property  to  somebody  else  for  the  purpose 
of  being  able  to  destroy  the  settlement.  Now,  it  is  not 
for  me  to  say  whether  the  mode  by  which  the  court  has  at- 
tempted to  remedy  some  of  the  evil  of  this  state  of  the  law, 
namely,  by  holding  that  a  small  and  inadequate  consideration 
is  sufficient  to  support  such  a  settlement  under  the  statute  of 
Elizabeth  has  diminished  the  extent  of  the  mischief.  But  so 
it  is,  that  a  very  small  consideration  is  admitted  to  be  suffi- 
cient." ^ 

When  the  defense  set  up  to  an  action  to  foreclose  is  that 
the  plaintiff  fraudulently  misrepresented  the  quality  and  value 
of  the  mortgaged  land,  but  fails  to  state  the  value  of  the  land 
had  it  been  as  represented,  and  the  amount  of  damages  result- 
ing from  the  fraud,  the  answer  presents  only  a  defense  of  a 
total  failure  of  consideration,  and  not  a  counter  claim  for 
damages.^ 

Article  5. 
Sunday  Laws. 

2  820.  Mortgages  and  Notes  Executed  §  822.  Doctrine   that   Sunday  Con- 
on  Sunday.  tracts    are    Voidable,    but 

§  821.  Doctrine  that  Sunday  Contracts  may  be  Katified. 
are  Absolutely  Void. 

§  820.  Mortgages  and  Notes  Executed  on  Sunday. — As 
a  general  rule  contracts  executed  on  Sunda}''  are  void  ;  this  is 
affirmed  by  statutory  provisions.  But  there  are  exceptions  to 
this  rule,  or  the  statutes  are  not  interpreted  the  same.  Thus, 
in  Illinois,  a  note  executed  and  delivered  on  Sunday  is  valid 

'  Bayspoole  v.  Collins,  L.  R.  6  Ch.  228,  232.  See,  also,  Price  v.  Jenkins,  5 
Ch.  Div.  619. 

^  Kobiter  v.  Albrecht  (Wis.),  61  N.  W.  Rep.  1124.  See,  also,  Herman  v. 
Gray,  79  Wis.  182. 


FEAUDULENT   MORTGAGES.  851 

provided  the  parties  thereto  do  not  disturb  the  peace  in  per- 
fecting the  transaction.^ 

But  many  courts  interpret  such  statutes  as  making  all  con- 
tracts executed  on  Sunday  as  invalid  and  incapable  of  ratifi- 
cation on  a  secular  day.^ 

§  821.  Doctrine  that  Sunday  Contracts  are  Absolutely 
Void. — Some  courts  treat  Sunday  contracts  as  absolutely  void, 
and  incapable  of  ratification  on  a  secular  day.  Thus,  Chief 
Justice  Beasley  says  that  the  parties  cannot  legalize  that  which 
the  law  has  declared  illegal.  "  It  is  competent  to  them  to  im- 
part new  efficacy  to  a  voidable  act,  but  they  have  no  power  to 
give  life  to  an  act  which,  from  reasons  of  public  policy,  has 
been  ordained  by  the  legislative  authority  to  be  absolutely 
void."  ^  So  a  parol  agreement  to  extend  the  time  of  the  pay- 
ment of  a  mortgage  debt,  entered  into  on  Sunday,  is  absolutely 
void.*     And  a  loan  made  on  Sunday  is  void.^ 

But  when  Sunday's  sacredness  is  limited  to  sunset  of  that 
day,  a  mortgage  executed  and  delivered  after  sunset  on  Sunday 
is  valid,  and  can  be  enforced.^ 

§  822.  Doctrine  that  Sunday  Contracts  are  Voidable, 
BUT  may  be  Ratified. — Some  of  the  courts  in  construing 
Sunday  contracts  hold  that  they  are  voidable,  but  may  be  rati- 
fied and  validated  on  a  secular  day.  Thus,  in  Iowa,  though 
notes  and  a  mortgage  to  secure  the  same  are  voidable  if  exe- 
cuted on  Sunday,  a  payment  on  a  secular  day  on  such  notes  is 
a  ratification  thereof,  and  both  notes  and  mortgage  are  thence- 
forth valid  obligations.  The  payment  of  a  part  of  a  debt, 
whether  the  payment  is  made  to  apply  upon  the  notes  or 
mortgage,  is  a  ratification  of  both  instruments.  Both  are  but 
incidents  of  the  debt,  and  the  satisfaction  of  the  debt  will  dis- 

^  Richmond  v.  Moore,  107  111.  429. 

"  Reeves  v.  Butcher,  31  N.  J.  L.  224 ;  Header  v.  White,  66  Me.  90 ;  Finn  v. 
Donahue,  35  Conn.  216. 
3  Reeves  r.  Butcher,  31  N.  J.  L.  224. 
*Ruph  V.  Rush  (N.  J.),  18  At.  Rep.  221. 

*  Header  r.  White,  66  Me.  90;  Finn  v.  Donahue,  35  Conn.  216. 

*  Tracy  v.  Jenks,  15  Pick.  (Mass.)  465. 


852  CONTRACTS    IN    VIOLATION    OP    LAW. 

charge  both.  So  payment  upon  the  debt  will  discharge,  pro 
tanto,  both  instruments  and  thereby  operate  as  a  ratification  of 
both.^ 

But  if  the  agreement  is  noi  ratified  on  a  secular  day  there- 
after, the  mortgage  and  notes  are  void.^ 

And  in  Tennessee,  because  a  mortgage  is  acknowledged  on 
Sunday  does  not,  for  that  reason,  make  it  void.^  So  a  mort- 
gage given  to  secure  the  payment  of  money  and  dated  on  a 
secular  day,  may  be  enforced,  though  the  note  was  made  and 
executed,  and  the  money  borrowed,  on  Sunday.* 

So,  in  Wisconsin,  if  a  note  and  mortgage  are  executed  on 
Sunday,  but  not  delivered  until  the  next  day,  they  are  valid.'^ 
The  rule  held  in  Vermont  is  that  such  contracts  may  be 
affirmed  on  a  subsequent  secular  day  and  thus  made  valid." 

In  Massachusetts  a  deed  was  executed  and  delivered  on  Sun- 
day to  secure  the  mortgagee.  An  oral  agreement  was  also  entered 
into  that  the  mortgagee  should  hold  the  land  in  trust  for  the 
mortgagor  after  his  debt  was  discharged  ;  a  declaration  of  trust 
was  afterward  executed,  and  it  was  held  that  because  the  deed 
was  executed  and  delivered  on  Sunday,  it  did  not  entitle  the 
grantee  to  hold  the  land  discharged  of  the  trust.  The  apparent 
title  conveyed  was  qualified  by  the  trust  imposed  upon  it,  as 
effectually  as  if  the  terms  of  the  trust  were  contained  in  the 
deed  itself.  The  title,  such  as  it  was,  passed  to  the  grantee 
and  was  held  in  trust.  Neither  party  could  assert  rights  incon- 
sistent with  the  conveyance.^ 

^Russell  V.  Murdock,  79  Iowa,  101.  Compare  Harrison  v.  Colton,  31 
Iowa,  16. 

"^  Hanchett  v.  Jordan,  43  Minn.  149  ;  Schwab  v.  Bigby,  38  Minn.  395. 

'  Lucas  V.  Larkin,  85  Tenn.  355. 

*  Gwinn  v.  Simes,  61  Mo.  335.    See,  also.  Heller  v.  Crawford,  37  Ind.  279. 

HVilson  r.  Winter,  6  Fed.  Rep.  16. 

6  Adams  v.  Gay,  19  Yt.  358. 

'Faxon  v.  Folvey,  110  Mass.  392.  See  Myers  v.  Meinrath,  101  Mass.  366  ; 
Hall  V.  Corcoran,  107  Mass.  251. 


PART  V. 

EIGHTS    OF   PARTIES    BEFORE    DEFAULT. 


CHAPTER  XXI. 

the  rights  of  the  mortgagor. 

Article  1. 

Construction  of  Mortgagor's  Covenants. 

I  823.  Personal  Liability.  §  825.  As  Evidence  against  the  Mort- 

l  824.  Statutory  Provisions.  gagor. 

§  823.  Personal  Liability. — The  mortgage,  unless  it  con- 
tains some  express  contract  to  that  effect,  is  not  of  itself  an 
instrument  which  imports  personal  liability  of  the  mortgagor 
to  the  mortgagee.  Justice  Clark  ably  says  that  the  remedy  of 
such  mortgage  is  confined  to  the  land  in  pledge,  unless  accom- 
panied by  some  cause  of  action  which,  of  itself,  creates  a  per- 
sonal liability,  in  which  case  the  mortgage  is  merely  a  collateral 
security,  and  does  not  merge  such  claim.  Unless  the  mortgage 
contains  an  express  covenant  to  that  effect,  it  does  not  of  itself 
import  any  personal  liability  for  the  money  it  secures.'  A 
personal  liability  will  not  be  implied.^  And  the  mere  recital 
of  a  consideration  is  not  sufficient  to  .create  such  a  liability,^ 
even  though  the  condition  stipulates  that  the  grant  is  intended 
as  security  for  the  payment  of  a  certain  amount  with  interest.* 

^  Baum  V.  Tonkin,  110  Pa.  St.  569. 

^Sliafer  v.  Bear  River,  etc.,  Co.,  4  Cal.  294 ;  Smith  v.  Rice,  12  Daly  (N.  Y.), 
307 ;  Howel  v.  Price,  1  P.  Wm.  291,  292 ;  Coleman  v.  Van  Rensselaer,  44 
How.  Pr.  (N.  Y.)  368. 

3  Henry  v.  Bell,  5  Vt.  393. 

*  Severance  v.  Griffith,  2  Lans.  (N.  Y.)  38 ;  Coleman  v.  Van  Rensselaer.  44 
How.  Pr.  (N.  Y.)  368. 

853 


854  RIGHTS   OF    PARTIES    BEFORE    DEFAULT. 

The  mortgagor  in  possession  is  liable  upon  covenants  which 
run  with  the  land.*  And  when  he  covenants  to  insure  he  will 
be  bound  by  them,  even  if  the  agent  of  the  mortgagee  tells 
him  that  the  mortgagee  will  see  to  the  insurance,^  but  his 
covenants  to  insure  do  not  import  any  admissions  as  to  the 
other  recitals  and  covenants.^ 

A  mortgage  that  recites  that  a  general  execution  shall  not 
issue  thereon,  does  not  create  a  personal  liability.*  But  a  re- 
cital that  the  mortgagor  is  indebted  in  a  certain  sum  which 
should  have  been  previously  paid,  is  a  covenant  to  pay  money, 
and  the  mortgagor  is  personally  liable.^  An  unqualified  ad- 
mission of  indebtedness  by  the  mortgagor  is  equivalent  to  an 
express  covenant ;  ^  but  a  recital  that  the  mortgagor  "  is  justly 
bound  "  does  not  make  a  personal  liability  on  the  part  of  the 
mortgagor.'' 

§  824.  Statutory  Provisions. — It  is  provided  by  statutory 
provisions  in  some  of  the  States  that  no  mortgage  shall  imply 
a  covenant  for  payment  of  the  debt  secured. 

So  if  the  mortgage  contains  no  covenant  to  pay  the  amount, 
no  personal  liability  attaches  to  the  mortgagor,  and  the  mort- 
gagee's remedy  must  be  confined  to  the  land.*  A  verbal 
agreement  will  not  change  this  rule,  and  the  remedy  is  still 
upon  the  land.* 

Of  course  the  mortgage  must  secure  the  payment  of  some 
debt  or  the  performance  of  some  duty,  but  it  is  not  essential 
that  there  should  be  any  covenant  to  that  efiect,**^  and  it  is  not 

^Trustees  v.  Streeter,  64  K  H.  106. 

2  Brant  v.  Gallup,  111  111.  487. 

3  Coleman  v.  Van  Renssalaer,  44  How.  Pr.  (N.  Y.)  368. 
*  Kennion  v.  Kelsey,  10  Iowa,  443. 

^  Couger  V.  Lancaster,  6  Yerg.  (Tenn.)  477.  See,  also,  Philadelphia  &  B.  R.  R. 
Co.  r.  Johnson,  54  Pa.  St.  127. 

«  Elder  v.  Rouse,  15  Wend.  (N.  Y.)  218. 

^  Smith  V.  Rice,  12  Daly  (N.  Y.),  307. 

^  California :  Civil  Code,  sect.  2928 ;  Michigan :  Comp.  Laws,  1871,  sect. 
4208  ;  Minnesota :  Gen.  Laws,  1866,  ch.  40,  sect.  6 ;  New  York  :  2  Rev.  Stat., 
p.  1119;  Wyoming:  Comp.  Laws,  1876,  ch.  3,  sects.  5,  6. 

8  Van  Brunt  v.  Mismer,  8  Minn.  232;  Weed  v.  Covill,  14  Barb.  (N.  Y.)  242. 

lOHickox  V.  Lowe,  10  Cal.  197 ;  Dougherty  v.  McColgan,  6  Gill  &  J.  (Md.)  275. 


I 


THE    EIGHTS    OF    THE    MORTGAGOR.  855 

necessary  that  there  shall  be  any  personal  security/  But  an 
express  covenant  to  pay  the  debt  makes  the  mortgagor  per- 
sonally liable.^ 

§  825.  As  Evidence  against  the  Mortgagor. — The  recit- 
als in  a  mortgage  are  competent  evidence  against  the  mort- 
gagor ;  ^  but  when  a  negotiable  note  is  given,  it  must  be  pro- 
duced before  judgment,  unless  its  absence  is  accounted  for  by 
being  lost  or  accidentally  destroyed.*  The  note  is  not  merged 
in  the  mortgage  or  extinguished  by  it.^ 

The  recitals  may  refer  to  a  present  indebtedness  or  to  one 
contemplated  by  the  parties,  and  may  be  explained.^ 

Article  2. 
Relative  Rights  as  to  the  Mortgagee. 

I  826.  Possession.  I  833.  Appointment  of  Receiver. 

\  827.  Recitals  may  Imply  that  the  ^  834.  Royalties. 

Mortgagor  may  Retain  Pos-  I  835.  Use  and  Occupation  by  Mort- 

session.  gagor. 

I  828.  Statutory  Provisions.  I  836.  Adverse  Possession. 

I  829.  The    Property  Must  be  Ap-  I  837.  Sale  Subject  to  the  Mortgage. 

plied  to  the  Mortgage  Debt.  §  838.  Dedication  and  Easements. 

I  830.  Rents  and  Profits.  I  839.  Taxes. 

§  831.  Mortgage  of  Leasehold.  §  840.  Abandonment. 

\  832.  After  Forfeiture.  §  841.  Surrender  of  Property. 

§  826.  Possession. — In  those  States  where  it  is  held  that  the 
mortgage  conveys  the  legal  estate,  defeasible  on  performance 
of  the  condition,  the  right  of  immediate  possession  is  given  to 
the  mortgagee,  unless  by  the  terms  of  the  mortgage  possession 
is  reserved  in  the  mortgagor.^ 

1  Brookings  v.  ^Vhite,  49  Me.  479 ;  Mitchell  r.  Burnham,  44  Me.  286. 

^  Brown  v.  Cascaden,  43  Iowa,  103 ;  Newbury  v.  Rutter,  38  Iowa,  179. 

^Warner  v.  Brooks,  14  Gray  (Mass.),  107. 

*Chewning  v.  Proctor,  2  McCord  (S.  Car.),  Ch.  11. 

^  Ligget  V.  Bank,  .7  Serg.  &  R.  (Pa.)  218 ;  Williamson  v.  Andrew,  4  Har.  & 
M.  (Md.),  482;  Shaw  v.  Burton,  5  Mo.  478. 

*Keeler  v.  Keeler,  3  Stockt.  (X.  J.  Eq.)  458;  Ellis  v.  Messervie,  11  Paige  (N. 
Y.),  467 ;  Hone  v.  Fisher,  2  Barb.  Ch.  (N.  Y.)  559. 

'  Morse  r.  Whitcher,  64  N.  H.  591 ;  Brastow  v.  Barrett,  82  Me.  456 ;  Watford 
V.  Gates,  57  Ala.  290 ;  Youngman  v.  Elmira,  etc.,  R.  R.  Co.,  65  Pa.  St.  278 


856  RIGHTS   OF    PARTIES    BEFORE    DEFAULT. 

If  the  mortgagor  is  left  in  possession  he  is  regarded,  fo. 
most  purposes,  as  the  owner  and  takes  the  rents  and  profits/ 
If  tlie  mortgagor  and  mortgagee  be  Hving  together  in  posses- 
sion of  the  premises  after  condition  broken,  it  is  a  question  of 
fact  for  the  jury  to  determine  as  to  who  has  the  possession.^ 

In  tliose  mortgages  where  possession  is  reserved  to  the  mort- 
gagor, his  possession  may  be  terminated  after  default  by  the 
mortgagee,^  and  if  the  grantor  in  a  trust  deed  wrongfully  re- 
fuses to  give  possession  after  demand,  he  is  liable  to  the  trustee 
in  damages.  The  grantor's  interest  is  not  an  estate  upon  con- 
(Jition,  but  an  estate  upon  a  conditional  limitation,  which 
terminates  with  the  happening  of  the  contingency,  and  the 
right  of  possession  would  cease  without  entry  or  demand.* 
And  where  the  mortgagor  has  possession  under  the  statute 
until  condition  broken,  he  has,  as  against  the  mortgagee,  the 
legal  right  to  the  possession,  and  whatever  he  severs  from  the 
real  estate  before  condition  broken,  becomes  his  property.^ 

Though  the  mortgagee  is  entitled  to  the  possession  of  the 
land  until  he  takes  it  legally,  the  possession  of  the  mortgagor 
is  not  illegal,  and  a  contract  of  the  sale  of  timber  thereon  by 
the  latter  is  not  in  contravention  of  the  Arkansas  statute.*^  And 
in  Missouri  real  property  destroyed  by  the  neglect  of  a 
stranger  makes  him  liable  to  the  mortgagor,  who  may  sue  for 
damages ;  and  this  rule  applies  to  personalty,  even  when  the 
condition  was  broken.'^ 

§  827.  Recitals  may  Imply  that  the  Mortgagor  may 
Retain  Possession. — Though  the  mortgage  does  not  state  in 
express  terms  that  the  mortgagor  shall  remain  in  possession, 

^  Anderson  v.  Strauss,  98  111.  485. 

=>  Hall  V.  Tunnell,  1  Houst.  (Del.)  320. 

2  Hill  V.  Robertson,  24  Miss.  368;  Pratt  v.  Skolfield,  4.5  Me.  38G;  Pierce  v. 
Brown,  24  Vt.  165 ;  Rev.  Stat,  of  Vt.  1880,  sect.  1258. 

nValker  r.  Teal,  7  Saw.  C.  C.  39. 

^  Brunswick-Balke-Callender  Co.  v.  Herrick,  63  Vt.  286 ;  Rev.  Stat.  Vt., 
sect.  1258. 

« Stewart  v.  Scott,  54  Ark.  187;  Mansf.  Dig.,  sects.  1658,  1659,  1663, 
Supp. 

'  Logan  V.  Wabash,  etc.,  Co.,  43  Mo.  App.  71. 


THE    RIGHTS    OF    THE   MORTGAGOR.  857 

yet  recitals  in  the  instrument  may  imply  that  such  is  the  con- 
tract. Thus,  a  stipulation  that  the  mortgagee  may  enter  after 
default,  implies  that  the  mortgagor  shall  remain  in  possession/ 
So  if  the  mortgagee  takes  a  lease  of  the  premises,  covenanting 
to  pay  the  mortgagor  rent.^ 

The  condition  of  the  parties  will  often  determine  this  point. 
Thus,  when  the  agreement  is  to  support ;  ^  or  the  mortgagor  is 
to  work  the  farm  on  shares/ 

A  stipulation  that  the  mortgagee  may  take  possession  upon 
default,  and  receive  the  rents  and  profits  until  the  mortgage 
debt  is  paid  may  be  enforced.  If  the  mortgagor  pays  the 
debt  after  the  mortgagee  has  taken  possession,  he  has  a  right 
to  the  property.^  To  fullv  understand  this  branch  of  the  sub- 
ject as  to  the  right  of  possession,  the  law  as  laid  down  in 
Chapter  I  must  be  consulted.® 

§  828.  Statutory  Provisions. — ^By  referring  to  Chapter  I, 
it  will  be  seen  that  several  of  the  States  have  enacted  that  the 
mortgagee  shall  not  take  possession  of  the  mortgaged  premises 
except  by  buying  +^/em  at  the  foreclosure  sale.''  The  mort- 
gagor's possessioiu  it  a  matter  of  right  under  such  a  statute.^ 
And  a  stip'cTlation  that  the  mortgagee  may  take  possession  after 
default  and  receive  the  rents  and  profits,  is  a  nullity ;  ^  but  the 
CQ^cirt  may  appoint  a  •receiver  to  collect  the  rents  and  profits,  when 
the  property  is  inadequate  to  pay  the  debt,  pending  foreclosure.^" 

§  829.  The  Property  Must  be  Applied  to  the  Mort- 
gage Debt. — If  the  mortgagor  sells  his  equity  of  redemption, 

'  McMillan  v.  Otis,  74  Ala.  560. 

^  Newall  V.  Wright,  3  Mass.  138. 

'Soper  V.  Guernsey,  71  Pa.  St.  219. 

*Lamb  v.  Foss,  21  Me.  240  ;  Rhoades  v.  Parker,  10  N.  H.  83 ;  Flagg  v.  Flagg, 
11  Pick.  (IMass.)  475  ;  Norton  v.  Webb,  35  Me.  218  ;  Bryant  v.  Erskine,  55  Me. 
153,  15G  ;  Wales  >\  Mellen,  1  Gray  (Mass.),  512. 

^  Mclntyre  v.  Whitfield,  13  Sm.  &  M.  (Miss.)  88 ;  Hyman  v.  Kelly,  1  Nev.  179. 

«  Sects.  11-27. 

'  Sects.  29-54. 

*  Kidd  V.  Teefle,  22  Cal.  255 ;  Crippen  v.  Morrison,  13  Mich.  23. 

^Sickler  v.  Delfs,  25  Kan.  159. 
/"Post  V.  Dorr,  4  Edw.  (N.  Y.)  412;  Hunter  v.  Hays,  7  Biss.  C.  C.  362. 


858  EIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

and  the  mortgage  is  assumed  by  the  purchaser,  the  mortgagor 
becomes  in  effect  a  surety  of  the  debt,  and  can  compel  the 
mortgagee  to  apply  first  the  property  to  the  debt,  or  to  transfer 
to  him  if  he  pays  the  debt.  Therefore,  if  the  mortgagee  releases 
a  portion  of  the  property  to  such  purchaser,  he  must  account 
for  it  in  an  action  against  tlie  mortgagor  to  collect  the  debt.^ 

§  830.  Rents  and  Profits. — Substantially  the  legal  title  to 
the  mortgage  premises,  both  at  law  and  in  equity,  is  in  the 
mortgagor  during  the  life  of  the  mortgage.  His  right  to  use 
and  occupy  the  mortgage  premises  carries  with  it  the  right  to 
the  proceeds  of  such  use,  until  he  is  divested  of  the  title.^ 
Judge  Hines  says  that  it  ought  not  to  alter  the  case  that  the 
mortgagee  before  sale,  undertook,  without  right,  to  control  and 
rent  the  property  ;  that  the  rent  goes  with  the  legal  title,  and 
the  right  to  possession  begins  and  ceases  with  it.  The  location 
of  the  legal  title  and  the  right  of  possession  at  any  time,  de- 
termine the  right  to  the  rents,  and  not  the  unauthorized 
assumption  of  control  of  the  property  by  the  mortgagee,  and 
this  is  the  true  rule.^ 

Before  entry,  and  so  long  as  the  mortga'jg:or  is  allowed  to 
remain  in  possession,  he  is  entitled  to  receive  aiT.d  apply  to  his 
own  use  the  income  and  profits  of  the  mortgaged  es.tate.  He 
can  recover  and  receive  to  his  own  use,  damages  for  any  iiTjl'iry 
done  to  the  possession  or  estate.  He  is  not  liable  to  the  mort- 
gagee for  rent  nor  for  damages  recovered.  Although  the 
mortgagee  has  the  right  to  take  possession,  if   he  does   not 

^  Worcester  Mech.  Sav.  Bank  v.  Thayer,  136  Mass.  459.  See,  also,  Townsend 
Sav.  Bank  v.  Munson,  47  Conn.  390, 

2  Hardin  v.  Hardin,  34  S.  Car.  77 ;  Taliaferro  v.  Gay,  78  Ky.  496. 

3  Argall  V.  Pitts,  78  N.  Y.  239 ;  Teal  v.  Walker,  111  U.  S.  242  ;  Central  Trust 
Co.  V.  Wabash,  etc.,  R.  R.  Co.,  30  Fed.  Rep.  332 ;  Mississippi,  etc.,  R.  R.  Co.  *'. 
U.  S.  Express  Co.,  81  111.  534 ;  Reeder  v.  Dargan,  15  S.  Car.  175 ;  Kountze  v. 
Hotel  Co.,  107  U.  S.  378,  392;  Woolley  v.  Holt,  14  Bush  (Ky.),  788  ;  Leeds  v. 
Gifford,  41  N.  J.  Eq.  464 ;  Wooten  v.  Bellinger,  17  Fla.  289  ;  Frierson  v.  Blan- 
ton,  1  Baxt.  (Tenn.)  272 ;  Chelton  v.  Green,  65  Md.  272 ;  Coflfey  v.  Hunt,  75 
Ala.  236 ;  Falkner  v.  Campbell  Printing  Press,  etc.,  Co.,  74  Ala.  359 ;  Young  v. 
Northern,  etc.,  Co.,  9  Biss.  C.  C.  300 ;  Boston  Bank  v.  Reed,  8  Pick.  (Mass.) 
459 ;  Noyes  v.  Rich,  52  Me.  115 ;  Wathen  v.  Glass,  54  Miss.  382 ;  Mayo  v. 
Fletcher,  14  Pick.  (Mass.)  525 ;  M'Kim  v.  Mason,  3  Md.  Ch.  186. 


il 


THE    RIGHTS    OF    THE    MORTGAGOR.  859 

exercise  it,  he  cannot  claim  the  profits.  If  he  sees  fit  to  exer- 
cise tlie  riglit,  lie  thereupon  becomes  entitled  to  the  earnings 
and  to  all  the  damages  that  may  be  done  to  the  possession.^ 

And  upon  the  death  of  the  mortgagor  in  possession,  his 
widow  is  entitled  to  retain  the  possession  and  receive  the 
rents  and  profits  until  her  dower  is  assigned,  or  until  the  entry 
of  the  mortgagee  to  foreclose  for  breach  of  condition." 

§  831.  Mortgage  of  Leasehold. — The  same  rule  applies  as 
to  leasehold  property.  Thus,  upon  a  suit  to  foreclose  a  mort- 
gage of  a  leasehold,  the  mortgagor  will  continue  to  take  the 
rents  and  profits,  unless  the  court,  by  its  order,  appoint  a 
receiver,  and  he  takes  possession  of  it  in  the  same  way  as  if  the 
property  was  a  fee  simple  estate.  Rents  and  profits  are  not 
the  corpus  of  a  leasehold.^ 

The  law  does  not  imply  an  obligation  on  the  mortgagor's 
part  to  pay  rent  previous  to  an  entry  by  the  mortgagee.* 

§  832.  After  Forfeiture. — Ordinarily  the  purchaser  of 
real  estate  at  decretal  sale  for  satisfying  a  mortgage  debt  is 
entitled  to  rents  from  the  date  of  the  execution  and  delivery 
of  the  commissioner's  or  master's  deed.^  And  upon  the  appoint- 
ment of  a  receiver,  the  mortgagee  cannot  maintain  a  suit  to  re- 
cover earnings  of  a  railroad  in  the  hands  of  an  agent  which 
accrued  before  the  receiver's  appointment.'' 

If  the  mortgagee  wishes  to  receive  the  rents  and  profits,  he 
must  take  early  means  to  gain  possession.'^ 

The  mortgagor  can  ordinarily  receive  the  rents  and  profits 
until  the  deed  under  sale  is  delivered  to  the  purchaser  in  those 
States  where  the  mortgagee  cannot  gain  possession  until  after 
foreclosure  and  sale  to  him.^ 

Such   statutory  provisions,  prohibiting   a  mortgagee   from 

1  Morse  v.  Whitcher,  64  N.  H.  591. 
"  Cook  V.  Parham,  63  Ala.  456. 
3  Childs  V.  Hurd,  32  W.  Va.  66. 
*  Mayo  V.  Fletcher,  14  Pick.  (Mass.)  525. 
5  Taliaferro  v.  Gay,  78  Ky.  496. 
^Noyes  v.  Rich,  52  Me.  115. 

''  Wilder  v.  Houghton,  1  Pick.  (^Nlass.)  87 ;  White  r.  Wear,  4  Mo.  App.  341. 
v«  Hunter  v.  Hays,  7  Biss.  C  C.  362  ;  Gelston  v.  Burr,  11  Johns.  (N.  Y.)  482 ; 


860  RIGHTS   OF    PARTIES   BEFORE    DEFAULT. 

taking  possession,  apply  to  a  mortgage  in  the  form  of  an  abso- 
lute deed.^  However,  this  is  denied  by  other  courts,^  thus 
presenting  an  irreconcilable  conflict.  A  provision  of  the  statute 
that  it  shall  not  be  waste  for  the  mortgagor  to  occupy  the 
premises  during  the  time  of  redemption  may  be  waived  in  a 
stipulation  in  the  mortgage.^ 

A  special  stipulation  in  a  mortgage  that  the  mortgagor  shall 
remain  in  possession  until  forfeiture,  does  not  imply  that  the 
mortgagee  may  take  possession  after  default,  under  a  statute 
giving  the  mortgagee  possession  only  after  foreclosure  sale  and 
buying  the  premises.  Such  a  provision  is  surplusage,  because 
the  law  implies  as  much.^ 

§  833.  Appointment  of  Receiver. — The  mortgagee  can  only 
be  entitled  to  the  rents  of  the  mortgaged  premises  by  commenc- 
ing suit  for  the  foreclosure  of  his  mortgage,  and  procuring  the 
appointment  of  a  receiver  ;  and  then  will  be  confined  to  the 
rents  and  profits  accruing  pending  the  suit.^ 

If  the  property  is  shown  to  be  inadequate  to  meet  the  debt 
the  court  may  appoint  a  receiver  of  the  rents  and  profits  pend- 
ing the  foreclosure  proceedings,^  and  order  the  rents  and  prof- 
its paid  to  the  receiver.^ 

If  the  rents  and  profits  are  expressly  pledged  for  the  security 

of  the  mortgage  debt,  the  mortgagee  has  no  right  to  rents  and 

profits  until  he  gains  possession,  or  until  possession  is  taken  in 

his  behalf  by  a  receiver.* 

Barrett  «.  Blackmar,  47  Iowa,  565  ;  Astor  r.  Turner,  11  Paige  (N.  Y.),  436; 
Sickler  v.  Delfs,  25  Kan.  159 ;  Clason  v.  Corley,  5  Sandf.  (N.  Y.)  447 ;  Argall  v. 
Pitts,  78  N.  Y.  239 ;  Mitchell  v.  Bartlett,  52  Barb.  (N.  Y.)  319. 

1  Jackson  v.  Lodge,  36  Cal.  28 ;  Thompson  v.  Hickey,  8  Abb.  (N.  C.)  159. 

2  Allen  V.  Frost,  62  Ga.  659 ;  Broach  v.  Barfield,  57  Ga.  601 ;  Richards  v. 
Crawford,  50  Iowa,  494 ;  Burdick  v.  Wentworth,  42  Iowa,  440 ;  Jeffery  v. 
Hursh,  42  Mich.  563 ;  Brophy  Mining  Co.  v.  Brophy  &  Dale  Gold  and  Silver 
Mining  Co.,  15  Nev.  101. 

3  Edwards  v.  Woodbury,  1  McCrary,  C.  C.  429. 
*  Morrow  v.  Morgan,  48  Tex.  304. 

s  Argall  V.  Pitts,  78  N.  Y.  2.39. 

«  Post  V.  Dorr,  4  Edw.  (N.  Y.)  412 ;  Lofsky  v.  Maujer,  3  Sandf.  Ch.  (N.  Y.)  69. 
'  Hunter  v.  Hays,  7  Biss.  C.  C  362. 

8  Teal  r.  Walker,  111  U.  S.  242  ;  Grant  v.  Ins.  Co.,  121  U,  S.  105, 117.  See, 
also,  Sickler  v.  Delfe,  25  Kan.  159. 


THE   RIGHTS   OF    THE    MORTGAGOR.  861 

§  834.  Royalties. — Royalties  are  not  profits  arising  from 
the  estate,  but  are  in  the  corpus  of  it.^  As  between  the  owner 
or  his  assignee  in  bankruptcy  and  an  assignee  of  the  mortgage 
of  such  premises,  such  royalties  belong  to  the  latter.  However, 
if  the  mortgagor  is  allowed  to  remain  in  possession,  he  may 
receive  the  royalties.  If  a  receiver  is  appointed  and  the  royal- 
ties are  paid  into  court  for  distribution,  the  owner  nor  his 
assignee  in  bankruptcy  can  receive  the  royalties  until  the 
mortgage  debt  is  first  paid.^ 

§  835.  Use  and  Occupation  by  Mortgagor. — At  common 
law  tenants  at  sufferance  were  not  liable  to  payment,  strictly 
so-called.^  But  a  tenant  at  sufferance,  occupying  by  permis- 
sion of  the  landlord,  was  liable  upon  an  implied  contract  in 
assumpsit  for  use  and  occupation  of  the  premises.* 

But  if  he  did  not  occupy  the  premises  by  contract,  express 
or  implied,  with  the  owner,  but  showed  that  he  asserted  an 
adverse  title,  he  was  not  liable  to  such  an  action.^ 

Whether  in  the  absence  of  any  agreement  for  payment  of 
rent,  a  mortgagee,  after  notice  to  foreclose,  may  maintain  an 
action  against  the  mortgagor  for  use  and  occupation,  is  not 
decided.*' 

A  mortgagee  cannot  sue  the  mortgagor  for  use  and  occupa- 
tion of  the  mortgaged  premises  subsequent  to  an  entry  to  fore- 
close, if  the  foreclosure  has  been  completed,  and  the  premises 
at  the  time  of  such  completion  were  worth  more  than  the  debt 
and  interest  secured  by  the  mortgage.^ 

§  836.  Adverse  Possession. — Possession  of  the  mortgagor 
or  his  privies,  including  his  grantees  with  notice,  will  not  be 

1  Caldwell  v.  Fulton,  31  Pa.  St.  475. 

^ippeal  of  DuflF  (Pa.),  14  At.  Rep.  364. 

3 1  Cruise  Dio;.,  tit.  9,  ch.  2,  sect.  6. 

*  Ibbs  V.  Richardson,  9  Ad.  &  El.  849 ;  Christy  v.  Tancred,  7  Mees.  &  AVels. 
127  ;  9  Mees.  &  Wels.  438  ;  12  Mees.  &  Wels.  316. 

^Cripps  V.  Blank,  9  Dowl.  &  R.  480 ;  Tew  v.  Jones,  13  Mees.  &  Wels.  12  ; 
Church  Wardens  v.  Ford,  2  Hurl.  &  N.  446;  Smith  v.  Stewart,  6  Johns.  (X. 
Y.)  46. 

«  See,  Murrill  v.  Bullock,  105  Mass.  486. 

'Morse  v.  Murritt,  110  Mass.  458,  opinion  per  Wells,  J. 


862  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

adverse,  nor  bar  an  action  by  the  mortgagee  for  foreclosure 
or  for  possession  of  the  land,  unless  there  has  been  an  open 
and  explicit  disavowal  and  disclaimer  of  holding  under  the 
mortgagee's  title,  and  assertion  of  title  in  the  holder  brought 
home  to  the  mortgagee. 

Judge  Smith  says  the  mere  taking  possession  by  the  vendee 
of  the  mortgagor,  and  continued  occupancy  by  him  and  his 
vendees  for  the  period  of  the  statutory  bar,  and  their  open  control 
and  improvements  of  the  land,  and  payment  of  taxes  thereon 
as  their  own  absolute  property,  with  the  intention  of  holding 
it  against  all  comers,  will  not  bar  the  action  by  the  mort- 
gagee.^ The  grantees  of  a  mortgagor  are  not  protected  in 
their  title  against  foreclosure  of  the  mortgage  duly  recorded, 
by  seven  years'  possession  and  payment  of  taxes,  under  the 
Illinois  law.  Because  from  the  peculiar  relation  of  mortgagor 
and  mortgagee,  and  the  fact  that  a  purchaser  from  the  former 
had  succeeded  to  his  rights  with  notice  of  the  incumbrance, 
and  the  consequent  privity  between  the  parties,  the  possession 
of  such  purchaser  must  be  considered  in  subordination  to  such 
mortgage,  and  not  adverse ;  and  it  cannot  cease  to  be  of  that 
character  until  there  is  an  open  disclaimer  of  holding  under 
it,  and  the  assertion  of  a  distinct  title  with  the  knowledge  of 
the  mortgagee.^ 

The  mortgagor's  possession  at  common  law  is  consistent 
with,  and  subordinate  to,  the  right  and  title  of  the  mortgagee.^ 

1  Benton  County  v.  Czarlinsky,  101  Mo.  275 ;  Harding  v.  Durand,  36  111. 
App.  238 ;  Gatford  v.  Strauss,  89  Ala.  283 ;  Whittington  v.  Flint,  43  Ark.  504, 
approving  Harris  v.  King,  16  Ark.  122 ;  Birnie  v.  Maine,  29  Ark.  591 ;  Cold- 
cleugh  V.  Johnson,  34  Ark.  312,  overruling  so  far  as  the  Arkansas  cases  hold 
that  adverse  possession  may  be  set  up  by  a  mortgagor  or  his  vendee  with  notice, 
without  a  distinct  denial  of,  or  acts  inconsistent  with,  the  mortgagee's  title. 

2  Medley  r.  Elliott,  62  111.  532.  See,  also,  Martin  v.  Jackson,  27  Pa.  St.  504  ; 
Hughes  V.  Edwards,  9  Wheat.  (U.  S.)  490 ;  Hall  v.  Doe,  5  Barn.  &  Aid.  687 ; 
Jones  V.  Williams,  5  Adol.  &  Ell.  291 ;  Palmer  v.  Eyre,  17  Adol.  &  Ell.  (N.S.) 
366 ;  Chinnery  v.  Evans,  11  H.  L.  Cas.  115  ;  Colddeugh  v.  Johnson,  34  Ark. 
312  ;  Butler  v.  Douglass,  1  McCrary,  C.  C.  630 ;  Pike  v.  Goodnow,  12  Allen 
(Mass.),  472;  Parker  v.  Banks,  79  N.  Car.  480;  Bacon  v.  Mclntire,  8  Met. 
(Mass.)  87 ;  Conard  v.  Atlantic  Ins.  Co.,  1  Pet.  (U.  S.)  441. 

^  Doyle  V.  Mellen,  15  R.  I.  523  ;  Jamison  v.  Perry,  38  Iowa,  14 ;  Seeley  o. 
Manning,  37  Wis.  574 ;  Tucker  v.  Keeler,  4  Vt.  161. 


THE    RIGHTS    OF    THE   MORTGAGOR.  863 

And  this  is  the  law  in  all  the  States  where  a  mortgage  car- 
ries a  legal  title,  except  in  Mississippi,  where,  it  seems,  the 
possession  of  the  mortgagor,  after  condition  broken,  is  prima 
facie  adverse  to  the  mortgagee.* 

The  true  rule  is  that  where  the  original  possession  by  the 
holder  of  land  is  in  privity  with  the  title  of  the  rightful  owner, 
in  order  to  enable  such  holder  to  avail  himself  of  the  statute 
of  limitations,  nothing  short  of  an  open  and  explicit  disavowal 
and  disclaimer  of  holding  under  that  title,  and  assertion  of 
title  in  himself  brought  home  to  the  other  party,  will  satisfy 
the  law.^  An  overt  act  of  hostility  is  required  to  set  the  stat- 
ute in  motion  in  favor  of  a  mortgagor  or  his  vendee  against  a 
mortgagee  out  of  possession.^ 

Of  course  the  question  of  adverse  possession  cannot  arise  at 
all  in  favor  of  a  mortgagor  in  possession  against  a  mortgagee 
in  those  States  where  the  mortgagee's  interest  is  considered  a 
mere  chattel  interest  and  not  an  interest  in  the  land.  For 
there  the  mortgagee  is,  under  no  circumstance,  entitled  to 
the  possession;  and  the  mortgagor's  possession  during  the 
period  allowed  by  the  statute  for  instituting  a  suit  for  fore- 
closure is  not  adverse  to  the  rights  of  the  mortgagee,  but  is 
subordinate  thereto.  Justice  Raney  says  the  same  is  true  as  to 
the  possession  of  the  grantor  to  the  grantee,  although  such 
grantee  holds  under  a  covenant  of  warranty  of  title.  He  fur- 
ther says,  in  speaking  of  those  States  where  a  mortgage  at  law 
and  in  equity  is  a  mere  lien,  that  the  theory  of  any  conveyance 
of  legal  title  to  the  mortgagee,  either  actual  or  technical, 
existing  by  virtue  of  a  mortgage,  is  entirely  antagonistic  to 
both  the  spirit  and  letter  of  the  law.  So  there  can  be  no 
basis  for  an  analogy  to  legal  actions  for  the  recovery  of  real 
property  as  to  adverse  title  between  the  mortgagor  and  mort- 
gagee.* 

A  mortgagee,  as  well  as  a  mortgagor,  may  be  disseized  by 

'  Wilkinson  v.  Flowers,  37  Miss.  579,  and  cases  cited ;  Nevitt  v.  Bacon,  32 
Miss.  212. 
^  Zeller  v.  Eckert,  4  How.  (U.  S.)  289. 
« Boyd  V.  Beck,  29  Ala.  703. 
*  Jordan  i'.  Say  re,  24  Fla.  1. 


864  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

a  stranger,  but  it  must  be  by  an  actual  ouster  and  exclusive 
occupation.^ 

The  policy  of  the  common  law  is  to  restrain  and  prohibit 
the  conveyance  of  land  by  one  who  is  not  in  actual  seisin  and 
possession  thereof;  hence,  under  the  common  law,  a  mortgagee 
of  land  who  is  disseized  cannot  make  a  valid  assignment  of 
his  mortgage.^ 

§  837.  Sale  Subject  to  the  Mortgage. — The  mortgagor 
may  sell  the  premises  subject  to  his  mortgage,  and  the  grantee 
receives  the  equity  of  redemption,  which  can  be  barred  only 
by  proceedings  for  foreclosure  by  which  he  is  made  a  party  or 
by  lapse  of  time.  Such  sale  of  redemption  is  not  fraudulent 
as  to  the  mortgagee.^  So  when  a  mortgagor  conveys  his  mort- 
gaged land  in  fee,  he  only  transfers  the  equity  of  redemption,^ 
and  the  mortgagee  is  not  affected  by  such  sale.^ 

§  838.  Dedication  and  Easements. — It  is  not  in  the  power 
of  the  grantor  of  land  in  a  deed  of  trust  to  secure  the  payment 
of  money,  to  dedicate  the  streets  and  alleys  laid  off  by  him 
or  the  land  conveyed  in  trust  to  the  public  use,  so  as  to  de- 
stroy or  release  the  trust  lien  of  the  cestui  que  trust  thereto,  or 
estop  him  from  the  assertion  thereof  without  the  concurrence 
of  the  cestui  que  trust  clearly  established.^ 

If  the  owner  of  land  mortgages  it,  he  cannot  subsequently 
by  grant,  create  an  easement  in  the  land  to  the  prejudice  of 
the  rights  of  the  mortgagee.^ 

The  mortgagor  cannot  nor  his  grantee,  by  any  subsequent 
act  affect  the  mortgagee's  lien  in  any  respect.^     In  fine,  the 

1  Hunt  V.  Hunt,  14  Pick.  (Mass.)  385. 

^Dadmun  v.  Lamson,  9  Allen  (Mass.),  85. 

^Hodson  V.  Treat,  7  Wis.  263. 

*  Buchanan  v.  Monroe,  22  Tex.  537. 

5  Coker  v.  Whitlock,  54  Ala.  180 ;  Flanagan  v.  Westcott,  3  Stockt.  (N.  J.  Eq.) 
264. 

^  Walker  v.  Summers,  9  W.  Va.  533. 

^  Murphy  i'.  Welch,  128  Mass.  489. 

« Hartley  v.  Harrison,  24  N.  Y.  170  ;  Frost  v.  Shaw,  10  Iowa,  491 ;  Kruse  v. 
Scripps,  11  111.  98 ;  Anderson  v.  Strauss,  98  111.  485. 


THE    RIGHTS    OF    THE    MORTGAGOR.  865 

mortgagee  is  not  affected  by  any  act  of  the  mortgagor  in  pass- 
ing any  rights  of  his  to  third  persons.' 

The  owner  of  a  tract  of  land  on  which  was  a  mill-dam  mort- 
gaged forty-one  acres  of  it  without  reserving  the  right  to  over- 
flow such  land.  About  two  acres  of  the  forty -one  were  flooded 
by  the  dam,  though  it  was  not  shown  that  said  two  acres  were 
actually  under  w^ater  when  the  mortgage  was  given,  or  that  it 
was  necessary  to  flood  them  in  order  to  run  the  mill  successfully. 
A  purchaser  at  a  foreclosure  sale  of  the  forty-one  acres  took  title 
free  from  any  easement.^  In  this  case  the  court  says  it  would 
be  unreasonable  to  hold  that  the  mortgagor  intended  to  reserve 
any  right  in  the  nature  of  an  easement  over  the  mortgaged 
premises,  or  that  the  mortgagee  understood  when  he  accepted 
the  security  that  it  was  cut  down  in  extent  and  reduced  in 
value  by  the  fiction  of  an  implied  reservation. 

§  839.  Taxes. — It  is  the  mortgagor's  duty  to  pay  the  taxes 
unless  otherwise  stipulated.  If  not  paid,  the  mortgagee  has  a 
right  to  pay  the  taxes  on  the  mortgaged  premises  to  protect 
his  interest,  and  especially  so  when  the  mortgagor  has  cov- 
enanted to  pay  taxes.^ 

But  when  the  mortgagee  has  paid  the  taxes,  and  sells  the 
mortgage  to  the  mortgagor  and  releases  it  of  record,  he  cannot 
then  sue  the  mortgagor  for  the  taxes  paid.* 

And  generally  the  mortgagee  may  pay  the  taxes  to  prevent  a 
sale  of  the  property  for  taxes.^  And  so  when  the  mortgagee  is 
not  in  possession  of  the  land  conveyed  by  a  mortgage  deed, 
nor  bound  by  any  covenant  or  promise  to  pay  the  taxes  on 
the  property,  there  being  no  trust  relation  existing  between 
the  mortgagor  and  mortgagee,  the  mortgagee  may  purchase 
the  land  so  mortgaged,  and  acquire  a  good  title  thereto  under 

1  EUithorp  v.  Dewing,  1  D.  Chip.  (Vt.)  141 ;  Coker  «.  Whitlock,  54  Ala.  180. 

^  Wells  V.  Garbutt,  132  N.  Y.  430. 

^Gormley  v.  Bunyan,  138  U.  S.  623;  Hall  v.  Gould,  79  111.  16;  Jackson  v. 
Relf,  26  Fla.  465  ;  Townsend  v.  Case  Thresh.  Mach.  Co.,  31  Nebr.  836;  Boone 
V.  Clark,  129  111.  466,  495 ;  McCreery  v.  Schaffer,  26  Nebr.  173 ;  Austin  v.  Bank, 
30  La.  Ann.  689,  691. 

*  Kersenbrock  v.  Muff,  29  Nebr.  530. 

^  Young  V.  Omohundro,  69  Md.  424  ;  West  v.  Hayes,  117  Ind.  290. 
55 


866  RIGHTS    or    PARTIES    BEFORE    DEFAULT. 

his  tax  deed  ;  and  if  under  such  circumstances  the  mortgagee 
is  dead,  his  executor  may  purchase  the  land  at  a  tax  sale  and 
acquire  title  under  the  tax  deed/ 

When  the  original  debt  is  barred  by  the  statute  of  limita- 
tions, the  mortgagee  cannot  recover  from  the  mortgagor  money 
paid  for  taxes.^ 

Where  the  mortgagee  agrees  to  pay  a  certain  per  cent,  if  the 
mortgagor  would  pay  the  taxes,  this  is  not  an  agreement  that  the 
mortgagee  will  pay  the  taxes ;  ^  but  the  mortgagee  has  a  right 
to  pay  the  taxes  to  keep  the  premises  from  being  sold  for  taxes.* 

§  840.  Abandonment. — The  owner  of  a  mining  claim  who  has 
mortgaged  it,  cannot  abandon  the  same  so  as  to  permit  the  land 
to  be  located  as  unoccupied  mineral  lands,  and  defeat  the  mort- 
gage lien  thereby,^  because  his  rights  have  passed  to  the  mort- 
gagee, and  the  mortgagor  could  not  abandon  it,  and  by  so  doing 
defeat  the  mortgage.  To  permit  such  a  subterfuge  to  defeat  a 
mortgage  would  be  to  give  to  fraud  the  sanction  of  a  court  of 
equity." 

§  841. — Surrender  of  Property. — The  mortgagor  may 
surrender  his  property  to  the  mortgagee.  Thus,  where  the 
transaction  is  fair  and  not  tainted  with  oppression  or  fraud  or 
undue  influence,  and  the  mortgagor  has  not  availed  himself  of 
his  position  to  obtain  an  advantage  over  the  mortgagee,  a  bona 
fide  agreement  between  the  parties  to  vest  the  entire  estate  in 
the  mortgagee  will  be  sustained,  and  the  execution  of  a  formal 
deed  will  not  be  required  ;  ^  and  a  judgment  creditor  of  the 
mortgagor,  whose  debt  is  subsequent  to  that  of  the  mortgagee, 
cannot  object  that  he  has  been  deprived  of  any  security.* 

'  Beckwith  v.  Seborn,  .31  W.  Va.  1 ;  Summers  v.  Kanamha,  26  W.Va.  159. 

2  Hill  V.  Townley,  45  Minn.  167. 

3  Hewitt  V.  Dean,  91  Cal.  5,  617. 

*  Robinson  v.  Suiter,  85  Ga.  875 ;  Parsons  v.  Gas  Light  and  Coke  Co.,  108 
111.  380^  Gormley  v.  Bunyan,  138  U.  S.  623. 

^  Alexander  v.  Sherman  (Ariz.),  16  Pac.  Rep.  45. 

« Keller  v.  Berry,  62  Cal.  488 ;  Stephens  v.  Mansfield,  11  Cal.  363 ;  Moren- 
haut  V.  Wilson,  52  Cal.  263  ;  Deny  v.  Ross,  5  Colo.  295. 

'  West  V.  Reed,  55  111.  242 ;  Carpenter  v.  Carpenter,  70  111.  457 ;  Harrison  v. 
Phillip's  Academy,  12  Mass.  456. 

8  Seymour  v.  Mackay,  126  111.  341. 


the  rights  of  the  mortgagor.  867 

Article  3. 

Remedies  Against  Mortgagee. 

I  842.  Ejectment.  §  844.  Injunction — Damages. 

I  843.  Trespass.  I  845.  In  Equity. 

§  842,  Ejectment. — The  mortgagor  cannot  recover  in  eject- 
ment against  the  mortgagee  in  possession  after  breach  of  the 
condition,  or  against  persons  holding  possession  under  the 
mortgagee.^ 

When  the  mortgagee  is  in  possession,  the  taking  of  an 
account  of  what  is  due  under  the  mortgage  is  a  proceeding 
appertaining  to  a  court  of  equity  by  which  a  multipHcity  of 
suits  will  be  avoided,  and  ejectment  cannot  be  maintained.- 

So  long  as  there  is  any  settlement  to  be  made  between  the 
parties,  the  mortgagor  must  go  into  equity.^ 

However,  in  Pennsylvania,  a  mortgagor  may  bring  ejectment 
against  a  mortgagee  in  possession,  and  the  action  will  be  treated 
as  a  substitute  to  redeem,  and  equitable  principles  applied.* 

In  those  States  where  a  mortgage  is  a  mere  lien,  if  the 
mortgagor  puts  the  mortgagee  into  possession,  he  cannot  be 
ejected  so  long  as  his  possession  is  rightful.^ 

At  common  law  the  title  remains  in  the  mortgagee  after  the 
debt  is  paid,  if  not  paid  till  after  the  law  day,^  and  the  mort- 
gagor cannot  set  up  payment  in  ejectment  proceedings  until  a 
discharge  is  legally  made.^  This  title  remaining  in  the  mort- 
gagee after  payment,  cannot  be  taken  advantage  of  by  any 
party  but  the  mortgagee.  Until  the  mortgagor  redeems  he  is 
a  stranger  to  the  legal  title  at  common  law.^ 

iBrobst  V.  Brock,  10  Wall.  (U.  S.)  519 ;  Oldham  r.  Pfleger,  84  111.  102. 
■•'Moulton  V.  Leighton,  33  Fed.  Rep.  143. 

^  Woods  V.  Woods,  66  Me.  206  ;  Edwards  v.  Farmers'  Ins.  and  Loan  Co.,  21 
Wend.  (N.  Y.)  467. 

*  Wells  V.  Van  Dyke,  109  Pa.  St.  330  ;  Brobst  v.  Brock,  10  Wall.  (  U.S.)  519. 
» Newton  r.  McKay,  30  Mich.  380;  Preston  v.  Young,  46  Mich.  103, 107. 

*  Chamberlain  v.  Thompson,  10  Conn.  243  ;  Cross  v.  Robinson,  21  Conn.  379 ; 
Cooch  V.  Gerry,  3  Harr.  (Del.)  280. 

'Doton  V.  Russell,  17  Conn.  146. 
?  Savage  v.  Dooley,  28  Conn.  411. 


868  RIGHTS    OF    PARTIES    BEFORE    DEFAULT, 

If  ejectment  be  brought  by  one  claiming  under  a  mortgage 
of  the  premises  against  tlie  mortgagee  in  possession  or  one 
holding  under  him  as  tenant,  the  mortgage  will  constitute  a 
complete  defense  to  the  action,  for  the  reason  that  ejectment 
cannot  be  brought  against  one  lawfully  in  possession.^ 

And  an  equitable  assignee  of  a  mortgage,  after  condition 
broken,  being  in  possession  of  the  land  mortgaged,  and  being 
the  holder  of  the  note  secured  by  the  mortgage,  and  the  as- 
signee thereof,  can  defend  his  possession  under  the  mortgage  in 
ejectment  brought  by  the  mortgagor  or  those  claiming  under 
him.^ 

§  843.  Trespass. — As  the  mortgagee  is  regarded  as  having 
all  the  rights  of  a  grantee  in  fee,  subject  to  a  defeasance,^  there- 
fore an  action  of  trespass  will  not  lie  in  favor  of  the  mortgagor 
against  the  mortgagee  or  his  assignee  for  entering  peaceably 
upon  the  mortgaged  premises.  Thus,  a  mortgagee  entering 
peaceably  upon  the  premises  and  digging  up  and  carrying 
away  and  converting  to  his  own  use  portions  of  the  soil  cannot 
be  sued  in  trespass,*  or  for  any  other  trespass.^  If  the  mort- 
gagor, by  agreement,  is  a  tenant  of  the  mortgagee,  then  tres- 
pass will  lie.'^ 

§  844.  Injunction — Damages. — A  mortgagor  in  possession  is 
entitled  to  an  injunction  to  restrain  the  mortgagee  from  unrea- 
sonably depositing  sawdust  from  his  mill  upon  the  mortgaged 
premises,  by  throwing  it  into  the  stream  on  which  his  mill 
stands  on  his  own  land,  whereby  it  is  floated  down  upon  the 
mortgaged  premises  below.  The  mortgagee  has  no  right  to 
injure  the  possession  of  the  property.^     So  long  as  the  mort- 

1  Brown  v.  Bookstaver  (111.),  31  N.  E.  Rep.  17. 

2  Brown  v.  Bookstaver  (111.),  31  N.  E.  Rep.  17. 

3  Oilman  v.  Wills,  66  Me.  275. 
*Furbush  v.  Goodwin,  29  N.  H.  .321. 

5  Chellis  V.  Stearns,  22  N.  H.  312 ;  Howe  v.  Lewis,  14  Pick.  (Mass.)  329 ; 
Wilson  V.  Ring,  40  Me.  116 ;  Jones  v.  Smith,  79  Me.  447 ;  Parsons  v.  Welles,  17 
Mass.  419;  Lackey  v.  Holbrook,  11  Met.  (Mass.)  458 ;  Taylor  v.  Townsend,  8 
Mass.  411. 

*  Marden  v.  .Jordan,  65  Me.  9. 

'  Morse  v.  Whitcher,  64  N.  H.  590. 


THE    EIGHTS    OF    THE    MORTGAGOR.  869 

gagor  is  entitled  to  remain  in  possession,  he  is  entitled  to  dam- 
ages to  his  possession,  though  such  damages  were  caused  by 
his  mortgagee  of  the  same  premises/ 

And  the  mortgagor  after  dispossession  may  recover  for  dam- 
ages he  received  while  in  possession.^ 

The  mortgagee  is  also  liable  for  flowing  the  mortgaged  land 
by  means  of  a  dam  erected  on  other  premises.^  So  when  the 
title  of  fixtures  is  in  the  mortgagor,  for  a  removal  of  them  by 
the  mortgagee,  the  mortgagor  can  recover  of  him  their  value.* 

Where  a  mortgagee  takes  a  deed  absolute  to  defraud  the 
mortgagor's  creditors,  the  court  will  order  a  reconveyance  on 
the  ground  that  he  cannot  take  advantage  of  his  own  fraud 
upon  others  to  defraud  the  creditors.  After  the  conditions 
had  been  broken,  the  grantor  rented  the  premises,  and  the 
mortgagee  notified  the  tenant  that  he  must  pay  the  rent  to 
him  ;  the  mortgagee  also  used  the  land.  It  was  held  on  a  bill 
to  redeem  that  the  mortgagee  had  taken  possession  of  the  land, 
and  was  accountable  for  such  rents  and  profits  as  he  ought  to 
have  received.* 

§  845.  In  Equity. — It  is  well  settled  that  the  mortgagee 
having  entered  into  possession  for  breach  of  condition,  and 
thus  having  the  legal  estate  at  common  law,  may  successfully 
resist  the  suit  of  the  mortgagor  at  law,  though  the  debt  may 
have  been  paid  since  entry.  In  such  case  the  mortgagor's 
remedy  is  by  bill  in  equity.®  And  the  mortgagee  may  defend 
against  an  action  at  law  of  the  owner  of  the  equity  of  redemp- 
tion if  the  mortgage  has  not  been  discharged,  although  the 
mortgage  debt  has  been  satisfied.  The  mortgagor's  only 
remedy  is  in  equity.^ 

1  Vaugh  V.  Wetherell,  116  Mass.  138 ;  Paine  v.  Woods,  108  Mass.  160. 
'  Walker  v.  Oxford  Woolen  Manuf.  Co.,  10  Met.  (Mass.)  203. 
3  Great  Falls  Co.  v.  Worster,  15  N.  H.  412,  445. 

*  Hill  V.  Gwin,  51  Cal.  47. 

*  Still  V.  Buzzell,  60  Vt.  478. 

*  Parsons  ('.  Welles,  17  Mass.  420 ;  Wilson  v.  Ring,  40  Me.  116;  Rowell  v. 
Jewett,  69  Me.  293  ;  Rowell  v.  Mitchell,  68  Me.  21 ;  J^wett  v.  Hamlin,  68  Me. 
172 ;  Hill  V.  Payson,  3  Mass.  559,  560. 

J  New  England  Jewelry  Co.  v.  Merriam,  2  Allen  (Mass.),  390. 


870  RIGHTS    OP    PARTIES    BEFORE    DEFAULT. 

Likewise  a  purchaser  from  the  mortgagor  whose  purchase 
was  made  subsequent  to  the  date  of  the  mortgage,  cannot 
maintain  ejectment  against  the  purchaser  at  foreclosure  sale, 
although  such  subsequent  purchaser  was  not  made  a  party 
to  the  proceedings  in  chancery.  He  must  file  a  bill  to 
redeem/ 

But  if  the  mortgagee  owes  a  •  balance  to  the  mortgagor  he 
cannot  have  judgment  in  equity  and  execution  for  such  ]>al- 
ance,  but  must  proceed  at  law.^  And  a  court  of  equity  will 
not  sustain  a  bill  for  relief  if  from  the  allegations  it  appears 
that  the  complainant  has  a  remedy  at  law.  Thus,  after  the 
debt  for  which  a  mortgage  on  personal  property  was  given  is 
paid,  the  mortgagor  may  maintain  an  action  at  law  to  recover 
the  personal  property.^ 

Article  4. 

Relative  Rights  as  to  Third  Persons. 

^  846.  Mortgagor  in  Possession.  §  851.  Land  Attached  in  the  Maiden 
§  847.  Equity  of  Redemption  Subject  Name  of  a    Single    Woman, 

to  Levy.  which  was  Mortgaged  in  Her 

§  848.  Surplus.  Married  Name. 

I  849.  Effect  on  Mortgagee's  Rights.  ?  852.  Homestead  Exemptions. 
§  850.  Mortgagee  in  Possession.  §  853.  Dower. 

§  846.  Mortgagor  in  Possession. — As  to  third  persons, 
the  mortgagor  in  possession  has  the  same  rights  as  if  there  was 
not  a  mortgage  on  the  land.*  He  has  the  right  to  the  absolute 
control  of  the  income  of  the  property  prior  to  the  institution 
of  proceedings  to  foreclose,^  so  long  as  he  does  not  commit 
waste.^  No  third  person  can  interfere  with  the  land  or  his 
enjoyment  of  it,  and  claim  justification  because  the  land  is 
mortgaged.^     He  may  recover  for  waste  committed  by  third 

^  Frische  v.  Kramer,  IG  Ohio,  125. 

^  Taylor  v.  Townsend,  6  Ma?s.  264. 

'Blanchard  v.  Kenton,  4  Bibb.  (Ky.)  451 ;  Comyn's  Digest,  99. 

*  Hall  V.  Lance,  25  111.  277  ;  Bird  v.  Decker,  64  Me.  550 ;  Ellison  v.  Daniels, 

II  N.  H.  274. 

5 Central  Trust  Co.  v.  Wabash,  etc.,  Railroad  Co.,  30  Fed.  Rep.  332. 
«  Kimball  v.  Lewiston  Steam  Mill  Co.,  55  Me.  494. 
^  Denby  v.  Mellgrew,  58  Ala.  147 


THE    RIGHTS    OF    THE   MORTGAGOR.  871 

parties  ; '  and  maintain  ejectment  against  a  stranger  who  has 
entered  wrongfully.^ 

§  847.  Equity  of  Redemption  Subject  to  Levy. — The 
equity  of  redemption  may  be  attached  and  sold  on  execution,* 
and  the  title  dates  only  from  the  seizure  on  the  execution  ;  * 
and  this  equity  may  be  sold  either  before  or  after  the  law  day 
and  default,  or  whether  the  mortgagor  or  mortgagee  is  in  pos- 
session.^ 

In  Massachusetts  and  in  Maine  it  has  been  held  that  the 
creditor  may  extend  his  execution  upon  the  whole  estate,  and 
such  levy  will  pass  the  interest  of  the  debtor  whatever  it  may 
be.« 

In  Massachusetts  under  the  statute,^  a  sale  under  the  execu- 
tion of  a  judgment  creditor's  right  of  redemption  of  mortgage 
land  does  not  pass  any  interest  not  covered  by  the  mortgage 
which  he  has  in  the  land  and  which  he  retains  in  the  land. 

Thus,  a  judgment  creditor  owning  the  fee  in  land  mortgaged 
a  life  estate  therein.  The  right  of  redeeming  the  mortgage 
was  taken  and  sold  on  execution  under  the  statute.  It  was 
held  that  the  sale  did  not  cover  his  reversion  in  fee  after  the 
life  estate.^  And  although  the  statute  ^  authorizes  an  estate  not 
subject  to  a  mortgage  to  be  levied  upon  by  sale  instead  of  by 
extent,  it  does  not  authorize  an  estate  which  is  subject  to  a 
mortgage  when  attached,  and  which,  at  the  time  of  the  levy 
is  free  from  mortgage  to  be  levied  upon  and  sold  as  an  equity 
of  redemption.     The  discharge  of  the  mortgage  after  attach- 

^  Abney  v.  Austin,  6  111.  App.  49  ;  Bird  v.  Decker,  64  Me.  550. 

^  Bartlett  v.  Borden,  13  Bush  (Ky.),  45  ;  Stinson  v.  Ross,  51  Me.  556  ;  Duval 
V.  McLoskey,  1  Ala.  708. 

'Bodwell  Granite  Co.  v.  Lane,  83  Me.  168;  Crane  r.  March,  4  Pick.  (Mass.) 
131;  Warren  i'.  Childs,  11  Mass.  222;  Aiken  r.  Medex,  15  Me.  157;  N.  W. 
Forwarding  Co.  r.  INIahaffey,  36  Kan.  152. 

*CoggsweIl  r.  Warren,  1  Curtis,  C.  C.  223. 

^Gassenheinier  r.  ^Nlolton,  80  Ala.  521 ;  Lovelace  v.  Webb,  62  Ala.  271. 

«  Litchfield  r.  Cud  worth,  15  Pick.  (Iklass.)  23;  Brown  v.  Clifford,  38  Me.  210; 
Freeman  on  Ex.,  sect.  382. 

^  Gen.  Stat.,  ch.  103,  sect.  39. 

^Laflin  v.  Crosby,  99  Mass.  446. 

»Stat.  1874,  ch.  i88. 


872  EIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

ment  and  before  levy  caused  the  equity  of  redemi^tion  to 
cease  to  exist/ 

In  general,  the  mortgagor's  right  of  redemption  may  be 
levied  upon  before  or  after  default,  either  by  a  third  person,  or 
by  the  mortgagee  for  some  other  debt  reduced  to  judgment 
against  the  mortgagor.^ 

A  mortgage  lien  for  the  purchase  price  of  a  coal  lease,  is 
not  divested  by  a  sale  of  the  lease  on  execution  against  the 
lessee.* 

The  mortgagor's  interest  in  land  may  be  sold  under  execu- 
tion, even  when  the  mortgage  was  given  to  support  the  mort- 
gagee, although  there  is  no  provision  in  the  mortgage  that  the 
mortgagor's  assigns  may  perform  its  conditions/  And  a 
judgment  against  the  grantor  in  a  deed  absolute  on  its  face, 
but  in  reality  a  mortgage,  is  a  lien  on  the  land.  The  owner 
of  such  judgment  may,  in  an  action  in  aid  of  his  execution, 
have  the  deed  declared  a  mortgage.^ 

And  a  purchaser  of  a  grantee  in  a  deed  which  is  in  reality  a 
mortgage,  but  who  does  not  pay  for  the  same  in  full,  is  not 
entitled  to  the  land,  as  against  the  mortgagor  or  his  creditors, 
even  though  he  had  no  notice  that  the  deed  was  a  mortgage, 
but  he  is  entitled  to  be  reimbursed  the  part  payment  he  has 
actually  made  before  the  property  can  be  taken  from  him.^ 
In  order  to  maintain  the  defense  that  it  is  a  bona  fide  purchase 
without  notice,  he  must  have  paid  all  the  purchase-money.'^ 

And  when  the  judgment  creditor  has  levied  on  the  grantor's 
land  thus  sold,  he  may  go  into  equity  to  have  the  execution 
enforced  free  from  the  obstruction  that  the  deed  was  absolute 

^Hackett  v.  Buck,  128  Mass.  369. 

*  Walters  v.  Defcnbaugh,  90  111.  241 ;  Finley  v.  Thayer,  42  111.  350;  Gotten 
V.  Blocker,  6  Fla.  1 ;  Crow  r.  Tinsley,  6  Dana  (Ky.),  402. 

'First,  Nat.  Bank  v.  Sheafer  (Pa.),'  24  At.  Rep.  221 ;  30  W.  N.  C.  232. 

*Bodwell  Granite  Co.  v.  Lane,  83  Me.  168. 

*Macauley  v.  Smith,  132  N.  Y.  524. 

«Macauley  v.  Smith,  132  N.  Y.  524. 

'Sargent  v.  Apparatus  Co.,  46  Hun  (N.  Y.),  19 ;  Harris  v.  Norton,  16  Barb. 
(N.  Y.)  264 ;  Patten  v.  Moore,  32  N.  H.  382;  Boone  v.  Chiles,  10  Pet.  (U.  S.) 
179  ;  Jewett  v.  Palmer,  7  Johns.  Ch.  (N.  Y.)  65 ;  Jackson  v.  Cadwell,  1  Cow. 
(N.  Y.)  622. 


THE    EIGHTS    OF    THE    MORTGAGOR.  873 

and  not  a  mortgage  in  reality.     Such  an  action  is  within  the 
equitable  jurisdiction  of  the  court.' 

§  848.  Surplus. — The  purchaser  takes  the  property  subject 
to  the  mortgage,  and  the  surplus  of  the  purchase  price  after 
payment  of  the  judgment  and  costs,  is  to  be  returned  to  the 
judgment  creditor,  and  not  paid  over  to  the  mortgagee.^ 

If  no  means  are  provided  by  statute  for  the  attachment 
creditor  to  enforce  his  right  to  the  surplus,  equity  will  afford  a 
remedy,  so  that  the  judgment  creditor  may  enforce  his  claim 
against  the  surplus.^ 

Upon  the  foreclosure  of  the  mortgage,  the  levy  is  defeated, 
when  the  mortgagee  has  a  right  to  purchase  for  the  amount  of 
the  mortgage.* 

§  849.  Effect  on  Mortgagee's  Rights. — The  levy  of  an 
execution  upon  the  mortgagor's  equity  of  redemption  does  not 
affect  the  rights  of  the  mortgagee ;  ^  the  purchaser  at  such  sale 
succeeds  to  the  equitable  rights  of  the  mortgagor,  and  may 
redeem  the  estate.^  The  interest  of  the  debtor  passes  at  such 
sale,  whatever  that  may  be.''  Such  sale  extinguishes  the 
mortgagor's  rights  in  the  property,  unless  such  sale  is 
declared  void  for  irregularity  and  reversed.^  The  mortgagee 
may  be  estopped,  by  consenting  to  the  levy  and  sale,  from  set- 
ting up  his  mortgage.^ 

The  purchaser  at  such  sale  acquires  a  title  on  which  he  may 
recover  in   ejectment,  against  any  one  who  does  not  show  a 

iBeck  V.  Burdett,  1  Paige  (N.  Y.),  305  ;  Heye  v.  Bolles,  33  How.  Pr.  (N.  Y.) 
266;  Rinchey  v.  Stryker,  28  N.  Y.  48;  Frost  v.  Mott,  34  N.  Y.  253;  Thurber 
V.  Blanek,  50  N.  Y.  80. 

2  Jenkins  v.  Green,  22  Kan.  562. 

^  Wiggin  r.  Heywood,  118  Mass.  514. 

*  German-American  Seminary  v.  Saenger,  66  Mich.  249. 

5  Gotten  r.  Blocker,  6  Fla.  1 ;  Crow  v.  Tinsley,  6  Dana  (Ky.),  402;  Atcheson 
V.  Broadhead,  56  Ala.  414  ;  Childress  v.  Monette,  54  Ala.  317. 

« Jenkins  v.  Green,  22  Kan.  562;  Turner  v.  Watkins,  31  Ark.  429;  Shaw  v. 
Lindsey,  60  Ala.  344. 

^Dunbar  v.  Starkey,  19  N.  H.  160;  Pettee  v.  Peppard,  125  Mass.  66;  Perrin 
V.  Reed,  35  Vt.  2. 

« Delano  v.  Wilde,  11  Gray  (Mass.),  17. 

^8 Smith  V.  Sweetser,  32  Me.  246;  Graces.  Mercer,  10  B.  Hon.  (Ky.)  157. 


874  RIGHTS    OF    PARTIES   BEFORE    DEFAULT. 

paramount  title,  provided  the  mortgage  reserves  to  the  mort- 
gagor the  possession  and  enjoyment  of  the  property  with  the 
right  to  rent  it,  until  default  is  made  in  payment  of  notes  or 
interest/ 

§  850.  Mortgagee  in  Possession. — If  the  mortgagee  is  in 
possession  after  condition  broken,  it  is  no  longer  in  the  power 
of  the  mortgagor,  or  any  one  claiming  under  him  by  virtue  of 
a  sale  or  a  judgment  lien,  to  recover  the  possession  in  eject- 
ment. The  only  right  the  purchaser  acquires  in  such  case  is 
to  redeem  the  premises  by  paying  the  mortgage,  because  the 
mortgagee  in  that  case  is  the  holder  of  the  legal  title  ;  but  if 
the  mortgagor  is  in  possession,  the  sale  on  the  judgment  will 
convey  the  mortgagor's  interest  to  the  purchaser  subject  to  the 
mortgage.^ 

§  851.  Land  Attached  in  the  Maiden  Name  of  a  Single 
Woman,  which  was  Mortgaged  in  Her  Married  Name. — 
A  deed  to  a  married  woman  by  her  maiden  name  vests  the 
title  in  her.  It  is  the  common  case  of  a  person  being  known 
by  different  names.^ 

Hence,  land  conveyed  to  a  single  woman  may  be  attached 
and  the  attachment  prevail,  though  she  afterward  mortgages 
it  by  her  married  name.  Thus,  land  was  conveyed  to  an  un- 
married woman,  and  after  her  marriage  was  attached  in  an 
action  against  her  by  her  maiden  name,  the  creditor  being 
ignorant  of  her  marriage.  After  the  attachment  and  before 
judgment,  the  woman,  by  her  married  name,  and  adding  her 
former  name,  mortgaged  the  same  land  to  a  person  who  had 
no  actual  notice  of  the  attachment.  The  land  was  sold  uuder 
the  execution.  It  was  held  that  the  attachment  was  the  para- 
mount lien,  that  the  fact  that,  after  her  marriage  and  before 
attachment,  she  made  a  conveyance  of  land  in  the  same  county 
by  her  married  name  was  not  constructive  notice  to  the 
attaching  creditor  of  the  mortgage.* 

1  Bernstein  v.  Humes,  60  Ala.  582. 

'^Hall  V.  Tunnell,  1  Houst.  (Del.)  320. 

'Scanlan  v.  Wright,  13  Pick.  (Mass.)  523. 

*  Cleaveland  v.  Boston  Five  Cents  Sav.  Inst.,  129  Mass.  27. 


THE    RIGHTS    OF   THE   MORTGAGOR.  875 

§  852.  Homestead  Exemptions. — As  against  subsequent 
attachment  or  judgment  creditors,  the  mortgagor  is  entitled  to 
his  homestead  exemptions  out  of  the  surplus  proceeds  of  a  sale 
under  a  inortgage  containing  a  waiver  of  the  homestead.  Be- 
cause when  the  right  to  a  homestead  is  waived  or  relin- 
quished by  the  mortgage,  it  does  not  inure  to  the  benefit  of  all 
the  creditors  of  the  debtor,  but  to  such  only  as  the  mortgage 
was  intended  to  secure.^ 

§  853.  Dower. — A  widow  can  have  dower  in  land  sold 
subject  to  a  mortgage,  only  by  paying  her  ratable  share  of  the 
sum  necessary  to  discharge  the  mortgage,  which  will  be  an 
amount  bearing  the  same  proportion  to  the  whole  debt  that 
the  computed  present  value  of  her  dower  bears  to  the  whole 
value  of  the  land.^  In  the  equity  of  redemption  she  has 
dower,  although  she  has  released  her  right  of  dower.^ 

The  doweress  cannot  be  forbidden  to  bid  in  the  mortgaged 
land  under  the  same  conditions  that  her  husband  could.* 

Where  land  has  been  mortgaged  by  the  husband  before 
marriage,  or  where  after  marriage,  he  has  executed  mortgages 
in  which  his  wife  has  joined,  she  is  entitled  to  dower  as 
against  all  persons  except  the  mortgagees  and  those  claiming 
under  them ;  and  she  is  entitled  to  dower  in  any  surplus  that 
may  be  realized  on  foreclosure.^ 

To  redeem  the  land  as  against  the  mortgagee,  she  must  pay 
the  whole  amount  due  on  the  mortgage.^ 

^  Quinn's  Appeal,  86  Pa.  St.  447  ;  Vermont  Sav.  Bank  v.  Elliott,  53  Mich. 
256 ;  White  v.  Fulghum,  87  Tenn.  281 ;  First  Nat.  Bank  v.  Briggs,  32  111.  App. 
228  ;  McTaggert  v.  Smith,  14  Bush  (Ky.),  414.  See,  also,  Colby  v.  Crocker,  17 
Kan.  527 ;  Hill  v.  Johnston,  29  Pa.  St.  362  ;  Swan  v.  Stephens,  99  Mass.  7. 

''Noffisi;.  Koss,  29  111.  App.  301. 

'Snow  V.  Stevens,  15  Mass.  278 ;  Leary  v.  Shaffer,  79  Ind.  567  ;  Titus  v.  Neil- 
son,  5  Johns.  Ch.  (N.  Y.)  452.  But  in  England  dower  is  a  legal  estate,  so  there 
is  no  dower  interest  in  an  equity  of  redemption  :  Story's  Eq.  Jur.,  sect.  529. 

*  Walker  v.  Doane,  131  111.  27. 

5  Burrall  v.  Hurd,  61  Mich.  608 ;  Burrall  v.  Clark,  61  Mich.  624 ;  Mandel  v. 
McClave,  46  Ohio  St.  407 ;  Seibert  v.  Todd,  31  S.  Car.  206 ;  Hinchman  v. 
Stiles,  9  N.  J.  Eq.  454. 

^McMahon  v.  Russell,  17  Fla.  698,  705  ;  Campbell  v.  Campbell,  30  N.  J.  Eq. 
415;  Graves  v.  Braden,  62  Ind.  93;  McCabe  v.  Bellows,  7  Gray  (Mass.),  148. 


876  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

Foreclosure  effectually  divests  her  dower  right,  if  she  has 
joined  in  the  mortgage,  and  there  be  no  surplus.^ 

She  can  redeem  the  mortgage  in  equity,  and  thus  take  her 
dower.^  Unless  she  redeems,  and  there  be  no  surplus,  she  has 
no  dower.^  But  she  is  entitled  to  dower  in  the  surplus,  even 
though  the  mortgage  provides  that  such  surplus  shall  go  to  the 
mortgagor.* 

Where  during  divorce  proceedings  a  mortgage  is  executed 
by  the  husband  without  the  wife's  signature,  the  amount  of  the 
mortgage  cannot  be  deducted  from  the  wife's  right  of  dower, 
though  executed  to  raise  money  to  pay  alimony  pendente  lite.^ 
Where  the  mother  paid  a  mortgage  on  land  owned  by  her  and 
her  son  as  tenants  in  common,  and  given  by  them  before  the 
son's  marriage,  and  at  the  time  assigned  to  her,  the  dower 
estate  on  the  death  of  the  son  is  subject  to  the  lien  for  this 
payment.^ 

If  a  party  purchases  the  equity  of  redemption  on  an  execu- 
tion sale,  and  then  pays  the  amount  of  the  debt  without  any 
assignment  of  the  mortgage  to  him,  which  is  release  of  record 
by  the  mortgagee,  then  the  dower  right  vests  in  the  property 
free  from  the  incumbrance/  A  widow  is  not  endowable  of  an 
equity  of  redemption  in  the  District  of  Columbia.^ 

^  Roach  ^\  Dion,  39  Minn.  449 ;  Crawford  v.  Hazelrigg,  117  Ind.  63  ;  Meyer 
V.  Cahen,  111  N.  Y.  270  ;  Johnson  r.  Watson,  87  111.  535. 

^Trenholm  v.  Wilson,  13  S.  Car.  174  ;  Eaton  v.  Simonds,  14  Pick.  (Mass.)  98 ; 
Hawley  v.  Bradford,  9  Paige  (N.  Y.),  200;  Collins  v.  Torry,  7  Johns.  (N.  Y.) 
278. 

3  Sparrow  v.  Kelso,  92  Ind.  514  ;  Elder  v.  Robbins,  122  Ind.  203. 

*New  York  L.  Ins.  Co.  v.  Mayer,  14  Daly,  318 ;  19  Abb.  N.  C.  72. 

5  Rea  V.  Rea,  63  Mich.  257. 

«Lake  v.  Nolan,  81  Mich.  112. 

'  Eaton  V.  Simonds,  14  Pick.  (Mass.)  98 ;  Wedge  v.  Moore,  6  Cush.  (Mass.) 
8.  See,  also,  Kemerer  v.  Bournes,  53  Iowa,  172 ;  Strong  v.  Converse,  8  Allen 
(Mass.),  557. 

«In  re  Thompson,  6  Mackey  (Dist.  Col.),  536. 


the  rights  of  the  mortgagor.  877 

Article  5, 

Iirtprovements. 

1 854.  Money  Expended  in   Improve-     §  856.  Rights  of  Parties  Furnishing 

ments.  Labor  and  Material. 

I  855.  Improvements  by  Third  Persons.     1 857.  Corporations. 

§  854.  Money  Expended  in  Improvejments. — Money  ex- 
pended in  improvements  by  the  mortgagor  upon  the  mortgaged 
premises,  or  by  his  grantee  subsequent  to  the  mortgage,  can- 
not be  a  Hen  prior  to  that  of  the  mortgagee.^  And  where  land 
is  sold  and  conveyed  by  mortgage,  the  improvements  consti- 
tute a  part  of  the  realty,  irrespective  of  the  question  by  whom 
made ;  the  improvements  are  clearly  subject  to  the  lien  of  the 
mortgagee  as  the  land  upon  which  they  are  made.^  And 
when  the  mortgagee  covenants  to  allow  the  mortgagor  for 
improvements,  the  debt  being  first  paid,  the  improvements 
will  come  under  the  lien,  if  the  land  does  not  sell  for  enough 
to  pay  the  mortgage  debt.^  In  no  case,  in  the  absence  of  cov- 
enants, is  a  mortgagor  to  be  allowed  for  improvements  as 
against  the  mortgagee.* 

§  855.  Improvements  by  Third  Persons. — This  rule  holds 
the  same  as  to  third  persons.  Thus,  if  a  party  makes  im- 
provements on  the  mortgaged  land  with  the  consent  of  the 
owner,  with  notice  of  the  mortgage,  he  has  no  greater  rights 
than  the  mortgagor  if  he  had  made  the  improvements,  unless 
a  covenant  in  the  mortgage  provides  for  an  allowance  to  the 
mortgagor  in  case  of  foreclosure.^ 

§  856.  Rights  of  Parties  Furnishing  Labor  and  Mati:- 
RiAL. — The  relation  held  by  the  mortgagee  does  not  itself 
make  him  responsible  for  permanent  improvements  or  essen- 

'  Martin  v.  Beatty,  54  111.  100  ;  Asher  v.  Mitchell,  9  111.  App.  335. 

'^  Rice  V.  Dewey,  54  Barb.  (N.  Y.)  455 ;  Union  Water  Co.  v.  ^Murphy,  22  Cal. 
621 ;  McCumber  v.  Gibnan,  15  111.  381 ;  Childs  v.  Dolan,  5  Allen  (Mass.),  319. 

3  Phillips  V.  Holmes,  78  N.  Car.  191. 

*Baird  v.  Jackson,  98  111.  78 ;  Wharton  v.  INIoore,  84  N.  Car.  479. 

*  Coleman  v.  Witherspoon,  76  Ind.  285  ;  Catterlin  v.  Armstrong,  79  Ind.  514 ; 
Frierson  v.  Blanton,  1  Baxt.  (Tenn.)  272. 


878  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

tial  adclitioiis  made  to  the  estate  by  the  mortgagor,  or  enable 
a  party  furnishing  work  or  material  for  improvements  to 
maintain  a  case  against  the  mortgagee  without  proof  of  any 
further  facts  than  is  disclosed  by  the  mortgage.  There  must 
be  a  promise  on  the  part  of  the  mortgagee  to  pay  for  such 
work  or  material,  or  the  party  cannot  obtain  satisfaction  from 
the  mortgagee.^ 

§  857.  Corporations. — Corporations  in  making  improve- 
ments cannot  claim  privileges  not  given  to  a  person.  If  it  makes 
improvements  before  the  land  is  condemned,  it  is  not  material. 
If  the  land  is  sold  at  foreclosure  sale,  it  cannot  redeem  by 
paying  the  value  of  the  land  before  the  improvements  were 
made.  The  court  said  that  it  was  negligence  on  the  part  of 
the  corporation  to  proceed  with  improvements  without  first 
obtaining  a  release  of  the  mortgage,  or  condemning  the  inter- 
est of  the  mortgagee  if  it  had  that  power.  That  the  corpora- 
tion stood  in  the  relation  of  a  purchaser  with  notice  of  the 
mortgage,  and  that  it  could  not  have  advantage  as  to  improve- 
ments which  the  mortgagor  could  not  have.^ 

Article  6. 

Tlie  Right  of  Eminent  Domain. 

§  858.  Damap;eH-  Condemnation.  §  861.  Assessments. 

\  859.  Massachusetts  Rule.  I  862.  Pleadings. 

§  860.  Connecticut     Rule  —  Statutory- 
Provisions. 

§  858.  Damages — Condemnation. — Where  mortgaged  land 
has  been  damaged  for  public  use,  the  mortgagee  has  an  equita- 
ble lion  on  the  award  to  the  extent  of  the  deficiency  of  the 
mortgage  debt  after  foreclosure.^ 

This  equitable  lien  is  well  established.*  Damages  thus 
awarded  are  to  take  the  place  of  the  land  used  in  respect  to  all 
the  rights  and  interests  which  were  dependent  upon  and  inci- 

^  Holmes  v.  Morse,  50  Me.  102. 

^Booraem  v.  Wood,  27  N.  J.  Eq.  371. 

'Utter  V.  Richmond,  112  N.  Y.  610. 

*Bank  v.  Roberts,  44  N.  Y.  192 ;  In  re  Eleventh  Avenue,  81  N.  Y.  436. 


THE    RIGHTS    OF    THE   MORTGAGOR.  879 

dent  to  it.  If  not  paid  to  the  mortgagee  when  his  debt  is 
unsatisfied  by  the  security  remaining,  he  may  recover  the 
deficit  by  action  against  the  person  or  corporation  who  has 
entered  upon  the  land/ 

Where  the  debt  is  not  discharged  and  the  land  is  not  suffi- 
cient to  pay  tlie  mortgage  debt,  and  especially  when  the  mort- 
gagor is  insolvent,  the  mortgagee  has  as  against  the  mortgagor 
a  lien  on  the  damages  awarded  for  the  right  of  way  over  the 
premises  ;  ^  and  this  lien  is  superior  to  that  of  an  attachment 
creditor's.^ 

But  in  some  States,  for  all  purposes  of  establishing  and 
opening  highways  through  mortgaged  premises,  the  mortgagor 
in  possession  is  to  be  regarded  as  the  owner  of  the  land,  and  is 
entitled  to  the  damages.*  But  in  equity  this  may  be  changed. 
Chief  Justice  Strange  says  :  "  Whether  a  mortgagee  may  by 
proceeding  in  equity  intervene,  and  have  the  damages  applied 
in  accordance  with  what  the  court,  under  all  the  circumstances 
might  consider  as  equitable,  we  are  not  called  upon  in  this 
case  to  decide,  and  therefore  leave  that  question  open  to  be 
settled  in  a  case  when  it  is  raised."  ^ 

It  is  generally  held  that  the  damages  awarded  to  the  owner 
stand  instead  of  tlie  land,  andean  be  subjected  to  the  payment 
of  the  incumbrance.^ 

§  859.  Massachusetts  Rule. — In  this  State  the  mortgagor 
of   land    taken   in    condemnation   proceedings   may   recover 

1  Colehour  v.  State  Sav.  Inst.,  90  111.  152 ;  Severin  v.  Cole,  38  Iowa,  463 ; 
Michigan,  etc.,  Railroad  v.  Barnes,  40  Mich.  383 ;  Trogden  v.  Winona,  etc., 
Railroad  Co.,  22  Minn.  198 ;  Stewart  v.  Raymond  Railroad  Co.,  7  Sm.  &  M. 
(Miss.)  568  ;  Wilson  v.  European,  etc.,  Railroad  Co.,  67  Me.  358 ;  State  v.  Eas- 
ton,  etc.,  Railroad  Co.,  36  N.  J.  L.  181 ;  Bright  v.  Piatt,  32  N.  J.  Eq.  362  ;  War- 
wick Inst.  V.  Providence,  12  R.  I.  144  ;  Kennedy  v.  Milwaukee,  etc.,  Railroad 
Co.,  22  Wis.  581. 

*  Schafer  v.  Sehafcr,  75  Iowa,  349. 
^  Sawyer  v.  Landers,  56  Iowa,  422. 

*  Railroad  Co.  v.  Wilder,  17  Kan.  239;  Goodrich  v.  Commissioners,  47 
Kan.  355. 

^  Goodrich  v.  Commissioners,  47  Kan.  355. 

8  Railway  Co.  v.  Brown,  136  111.  322;  12  Lawy.  Rep.  Ann.  84,  and 
note;  Thompson  v.  Railway  Co.  (Mo.),  19  S.  W.  Rep.  77.     See  sect.  899. 


880  EIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

the  full  amount  of  damages   without   regard   to   the   mort- 
gagee.^ 

In  equity  the  damages  assessed  to  the  owner  of  the  land 
shall  be  deemed  to  be  land,  and  the  mortgagee  can  follow 
such  assessed  damages  and  have  the  same  applied  to  the  pay- 
ment of  the  mortgage.  He  must  show  to  what  extent  he  has 
a  lien  upon  the  money .^ 

§  860.  Connecticut  Rule — Statutory  Provisions. — Before 
the  statute,  in  Connecticut,  when  land  was  taken  which  was 
covered  by  a  mortgage,  the  mortgagor,  and  not  the  mortgagee 
was  the  owner  of  the  land,  and  to  him  the  damages  must  be 
paid.^ 

Under  a  statute  *  now  damages  are  assessed  to  the  mort- 
gagee to  the  extent  of  his  interest,  and  the  balance  to  the 
mortgagor,  as  in  case  of  lands  condemned  by  railroad  corpora- 
tions.^ 

§  861.  Assessments. — When  the  mortgage  stipulates  that 
the  mortgagor  shall  have  the  benefit  accruing  from  the  taking 
any  part  of  the  land  for  a  street  by  a  city,  and  that  the  city 
shall  pay  the  condemnation  money  directly  to  him,  the  mort- 
gagor must  pay  the  assessment  made  upon  the  remaining  part 
of  the  land  for  the  improvements  to  that  part.  If  he  takes 
the  damages  on  one  part,  he  must  also  pay  the  assessment  on 
the  other  part.^ 

§  862.  Pleadings. — The  condemnation  money  is  not  a  fund 
within  the  jurisdiction  and  control  of  the  court  in  a  foreclosure 
action.     In  order  to  give  the  court  jurisdiction,  the  mortgagee 

'Breed  v.  Eastern  Railroad  Co.,  5  Gray  (Mass.),  470;  Ballard  v.  Ballard 
Vale  Co.,  5  Gray  (Mass.),  468. 

'^Pond  v..  Eddy,  113  Mass.  149;  Paine  v.  Woods,  108  Mass.  160.  See,  also, 
Farnsworth  v.  Boston,  126  Mass.  1,  9 ;  Read  r.  Cambridge,  126  Mass.  427 ; 
Barnstable  Savings  Bank  v.  Boston,  127  Mass.  254. 

3  Whiting  V.  New  Haven,  45  Conn.  303 ;  Mills  v.  Shepard,  30  Conn.  98,  101 , 
Norwich  v.  Hubbard,  22  Conn.  587. 

*Actsof  1881,  ch.  110. 

6  Acts  of  1874,  ch.  372,  sect.  110. 

«  United  States  Mortgage  Co.  v.  Gross,  93  111.  483. 


THE    RIGHTS    OF    THE    MORTGAGOR.  881 

must  file  supplemental  bill  in  the  foreclosure  case,  thus  bring- 
ing all  the  parties  directly  into  court,  who  are  connected  with 
the  award  made  or  to  be  made,  setting  forth  the  facts  respecting 
the  condemnation  proceedings,  and  insist  that  the  money  paid 
for  condemnation  should  be  held  as  a  fund  for  the  satisfaction 
of  the  mortgage.  Or  this  may  be  accomplished  by  an  inde- 
pendent action.  A  motion  to  this  effect,  though  served  on  the 
attorneys  of  the  mortgagor,  is  of  no  avail.^ 

Article  7. 
Remedies  Against  Mortgagor  for  Waste. 

1 863.  In  Equity.  §  872.  Trover. 

\  864.  Injunction— English  Rule.  I  873.  License  to  Cut  Timber. 

§  865.  Injunction — American  Eule.  1 874.  In    Possession  of  the    Farm 

§  866.  Injunctions  Will  Issue — Render-  after  Condition  Broken. 

ing  the  Security  Insufficient.  ?  875.  Damages  for    Injury    to    the 
§  867.  Legal  Title  Remaining  in  the  Property. 

Vendor.  1 876.  Statutory  Provisions. 

§868.  Rights  of  Third  Party.  §877.  Rights  of  Second  Mortgagee. 

§  869.  At  Law.  I  878.  Accounting  to  Mortgagor  for 
^  870.  Replevin.  Damages  Recovered. 

§871.  Trespass.  §  879.  Burden  of  Proof. 

§  863.  In  Equity. — Courts  of  equity  will  interfere  to  pre- 
vent the  commission  of  waste  by  the  mortgagor  in  possession. 
This  interference  is  based  upon  two  grounds  :  1.  The  right  of 
the  mortgagee  to  the  protection  of  the  entire  security  unim- 
paired during  the  life  of  the  mortgage.^  2.  As  between  the 
mortgagor  and  mortgagee  the  latter  is  deemed  in  law  the 
owner  of  the  fee  and  as  such  entitled  to  protection.^  And 
where  the  mortgage  is  considered  but  a  lien,  the  mortgagee  is 
entitled  to  protection  of  equity  against  the  commission  of 
'waste.*  The  mortgagor  in  possession  may  exercise  all  acts  of 
ownership,  if  he  does  not  impair  the  security ;  ^  he  must  not 

'  Schermerhorn  v.  Peck,  43  Kan.  667. 
"^  Nelson  r.  Pinegar,  30  111.  473. 
^Nelson  v.  Pinegar,  30  111.  473. 

*  Brady  v.  AValdron,  2  Johns.  Ch.  (N.  Y.)  148  ;   Cooper  v.  Davis,  15  Conn. 
556. 
^Kekewich  v.  Marker,  3  Mac.  &  G.  329. 
56 


882  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

depreciate  the  value  of  tlie  premises  and  render  the  security 
insufficient.' 

And  courts  of  equity  will  take  jurisdiction  especially  where 
the  mortgagor  has  been  declared  a  bankrupt,  and  his  property 
vested  in  an  assignee.^  The  mortgagee's  lien  will  be  protected 
in  equity.^  And  the  ordinary  remedy  for  the  mortgagee 
against  the  mortgagor  to  protect  the  premises  is  by  bringing 
a  bill  in  equity  for  an  injunction.* 

§  864.  Injunction — English  Rule. — It  is  said  to  be  the 
established  rule  in  England  that  if  the  security  of  the  mort- 
gagee is  insufficient,  and  the  court  is  satisfied  of  that  fact,  the 
mortgagor  will  not  be  allowed  to  do  that  which  will  directly 
impair  the  security — cut  timber  upon  the  mortgaged  premises. 
The  cases  decide,  that  a  mortgagee  out  of  possession  is  not,  of 
course,  entitled  to  an  injunction  to  restrain  the  mortgagor  from 
cutting  timber  on  the  mortgaged  property.  If  the  security  is 
sufficient,  the  court  will  not  grant  an  injunction  merely  be- 
cause the  mortgagor  cuts,  or  threatens  to  cut  timber.  There 
must  be  a  special  case  made  out  before  the  court  of  equity 
will  interfere.  The  difficulty  is  in  determining  what  is  meant 
by  a  sufficient  security.  "  Suppose  the  mortgage  debt,  with  all 
the  expenses,  to  be  £1,000,  and  the  property  to  be  worth  £1,000, 
that  is,  in  one  sense,  a  sufficient  security ;  but  no  mortgagee, 
who  is  well  advised,  would  lend  his  money,  unless  the  mort- 
gaged property  was  worth  one-third  more  than  the  amount 
lent  at  the  time  of  the  mortgage."  This  is  considered  the 
rule,  and  the  only  safe  rule,  under  English  values.^ 

'  Ensign  v.  Colburn,  11  Paige  (N.  Y.),  503  ;  Bunker  v.  Locke,  15  Wis.  635. 

2  Ensign  r.  Colburn,  11  Paige  (N.  Y.),  503. 

3  Verner  v.  Betz,  46  N.  J.  Eq.  256. 

*  Cooper  V.  Davis,  15  Conn.  556 ;  Brady  v.  Waldron,  2  Johns.  Ch.  (N.  Y.) 
148  ;  Salmon  v.  Clagett,  3  Bland  (Md.),  180;  Scott  v.  Wharton,  2  Hen.  &  M. 
(Va.)  25;  Gray  v.  Baldwin,  8  Blackf.  (Ind.)  164;  Bunker  ?».  Locke,  15  Wis. 
635  ;  Vanderslice  r.  Knapp,  20  Kan.  647  ;  Hampton  v.  Hodges,  8  Yes.  105 ; 
Goodman  v.  Kine,  8  Beav.  379. 

^  King  V.  Smith,  2  Hare,  239,  244 ;  Humphreys  v.  Harrison,  1  Jac.  &  W. 
581 ;  Ilippesley  v.  Spencer,  5  Madd.  256 ;  Harper  v.  Apin,  54  Law  T.,  N.  S. 
383 ;  Kekewich  v.  Marker,  3  Mac.  &  G.  329 ;  Farrant  v.  Lovel,  3  Atk.  722. 


THE    RIGHTS   OF    THE    MORTGAGOR.  883 

§  865.  Injunction — American  Rule. — It  appears  that  a 
sufficient  security  in  England  is  where  the  mortgaged  property- 
is  worth  at  least  one-third  more  than  the  debt  secured.  But  in 
England,  land  values  are,  in  a  measure,  stationary.  In  the 
United  States  they  are  fluctuating.  So  to  be  a  sufficient  secur- 
ity in  this  country,  there  should  be  a  much  broader  margin 
between  the  amount  of  the  debt  and  the  estimated  value  of  the 
property  mortgaged  for  its  security  than  is  considered  suffi- 
cient in  England.^ 

§  866.  Injunction  Will  Issue — Rendering  the  Security 
Insufficient. — While  some  authority  holds  that  the  mortgagee 
is  entitled  to  injunction,  restraining  any  acts  of  waste  by  the 
mortgagor  in  possession  w^hich  may  diminish  the  value  of  the 
mortgaged  property,  yet  the  great  weight  of  authority  is  to  the 
effect  that  equity  w411  not  interfere  in  such  cases  unless  the 
acts  complained  of  are  such  as  may  render  the  security  insuf- 
ficient for  the  satisfaction  of  the  debt,  or  of  doubtful  security.^ 

In  other  cases,  the  courts  in  stating  the  ground  upon  which 
equity  will  interfere,  seem  to  regard  it  as  a  necessary  condition 
that  the  sufficiency  of  the  security  be  threatened.^ 

Judge  Dickinson  says  that  the  mortgagee  is  entitled  to  be 
protected  from  acts  of  waste  which  would  so  far  impair  the 
value  of  the  property  as  to  render  the  security  of  doubtful  suf- 
ficiency.    "  He  is  entitled  to  have  the   mortgaged  property 

^  Moses  t;.  Johnson,  88  Ala.  517. 

^Coker  v.  Whitlock,  54  Ala.  180;  Scott  v.  Wharton,  2  Hen.  &  M.  (Va.)  25; 
Buckout  V.  Swift,  27  Cal.  433 ;  Vanderslice  v.  Knapp,  20  Kan.  647 ;  Harris  v. 
Bannon,  78  Ky.  568 ;  Van  Wyck  v.  Alli<jer,  6  Barb.  (N.  Y.)  507,  511 ;  Snell's 
Eq.  304;  2  Story's  Eq.  Jur.,  sect.  915;  High  on  Inj.  (2d  ed.)  sects.  693,  694; 
Bish.  Eq.  (4th  ed.)  sect.  433 ;  1  Lead.  Cas.  Eq.  (4th  Am.  ed.)  992,  1021 ; 
Kerr  on  Inj.  (2d  Am.  ed.)  84 ;  Eden  on  Inj.,  p.  119 ;  King  v.  Smith,  2  Hare, 
239 ;  Humphreys  v.  Harrison,  1  Jac.  &  AV.  581 ;  Hippesley  r.  Spencer,  5  Madd. 
256 ;  Harper  v.  Aplin,  54  Law  T.,  N.  S.  383 ;  Goodman  v.  Kine,  8  Beav.  379 ; 
Usborne  v.  Usborne,  Dick.  75;  Bagnall  v.  Villar,  L.  R.  12  Ch.  D.  812;  Adams 
V.  Corriston,  7  Minn.  456;  Dorr  v.  Dudderar,  88  111.  107;  Bunker  v.  Locke, 
15  Wis.  635 ;  Eobinson  v.  Russell,  24  Cal.  467 ;  Am.  Trust  Co.  v.  North  Belle- 
ville Quarry  Co.,  31  N.  J.  Eq.  89 ;  Moses  v.  Johnson,  88  Ala.  517  ;  Moriarty  v. 
Ashworth,  43  Minn.  1. 

^Cooper  V.  Da\as,  15  Conn.  556;  Gray  v.  Baldwin,  8  Blackf.  (Ind.)  164; 
Ha^stings  v.  Perry,  20  Vt.  272 ;  Fairbanks  v.  Cudworth,  33  Wis.  368. 


884  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

preserved  as  sufficient  security  for  the  payment  of  his  debt,  and  it 
is  not  enough  that  its  vahie  may  be  barely  equal  to  the  debt. 
That  would  not  ordinarily  be  deemed  sufficient  as  security  to 
one  whose  purpose  is  to  secure  payment,  and  not  to  become  a 
purchaser  of  the  property  at  its  market  value.  And  not  only 
must  it  be  considered  that  the  mortgage  is  held  to  secure  pay- 
ment of  the  debt,  and  not  for  the  purpose  of  converting  the 
mortgagee  into  a  purchaser,  but  that  if  the  debt  is  not  yet  ma- 
ture it  is  to  be  considered  whether,  during  the  time  which  may 
elapse  before  maturity,  the  present  value  of  the  property  may 
not  become  depreciated  from  causes  not  known."  ^ 

Chief  Justice  Stone  says  that  to  be  a  sufficient  security  there 
should  be  a  much  broader  margin  between  the  amount  of  the 
debt  and  the  estimated  value  of  the  property  mortgaged  for  its 
security  than  is  considered  sufficient  in  England. 

That  the  rule  is  well  settled,  "  that  when  the  mortgagor  is 
committing  waste  which  impairs  the  security,  or  renders  it  in- 
sufficient, chancery,  at  the  suit  of  the  mortgagee,  will  restrain 
him  by  injunction."  ^  And  Judge  Pry  or  holds  the  same  doc- 
trine, that  upon  application  of  a  mortgagee,  a  court  of  equity 
will  restrain  the  mortgagor  from  committing  waste  when  it 
appears  that  the  mortgage  security  will  be  endangered  unless 
the  court  interferes.^ 

§  8G7.  Legal  Title  Remaining  in  the  Vendor. — When  the 
vendor  of  lands  retains  the  legal  title  in  himself  as  security 
for  the  purchase-money,  executing  only  a  bond  for  title,  the 
relation  between  him  and  the  purchaser,  in  substance,  is  the 
same  as  between  mortgagee  and  mortgagor  ;  the  same  rights  and 
remedies,  legal  and  equitable,  and  the  same  limitations  to  the 
right  of  recovery  exist  in  eacl\  case.*  So  when  the  vendee  com- 
mits waste,  the  court  of  equity  will  treat  the  case  precisely  as 

^Moriarty  v.  Ash  worth,  4o  Minn.  1,  2,  3. 

^  Moses  V.  Johnson,  88  Ala.  517.  See,  also,  Coleman  v.  Smith,  55  Ala.  868 ; 
Hammond  v.  Winchester,  82  Ala.  470  ;  Sullivan  v.  Rabb,  86  Ala.  433  ;  2  Dan. 
Ch.  Pract.  1629,  note  3 ;  Robinson  ';.  Preswick,  3  Ed.  Ch.  (N.  Y.)  246  ;  Mur- 
dock's  Case,  2  Bland  (Md.),461;  Downing  v.  Palmateer,  1  Mon.  (Ky.)  64. 

3  Harris  v.  Bannon,  78  Ky.  568. 

*  Moses  ('.  Johnson,  88  Ala.  517. 


THE    EIGHTS   OF    THE    MORTGAGOR.  885 

if  the  parties  were   mortgagor  and  mortgagee/  and  an  in- 
junction issued  in  like  manner.^ 

§  868.  Rights  of  Third  Party. — Tlie  mortgagee  is  not  the 
only  party  who  may  have  the  mortgagor  restrained  from  com- 
mitting waste.  Thus,  a  purchaser  may  have  an  injunction  at 
a  foreclosure  sale,  pending  confirmation.^  So  upon  the  appli- 
cation of  a  party  who  stands  in  the  relation  of  a  surety  of  the 
mortgage  debt,  either  personally  for  its  payment,  or  by  reason 
of  his  property  being  covered  by  the  mortgage.  He  has  a 
right  to  protect  the  principal  fund,  thereby  saving  himself 
from  loss.* 

§  869.  At  Law. — If  adequate  damages  can  be  recovered  at 
law  for  the  injury  committed,  and  it  is  not  alleged  that  the 
mortgagor  is  insolvent,  relief,  in  equity,  will  be  refused.^  It 
may  be  asserted  as  a  general  rule  that  equity  will  not  interfere 
by  injunction  to  prevent  the  foreclosure  of  a  mortgage  unless 
it  be  shown  that  great  and  irreparable  injury  is  likely  to  result, 
or  unless  complainant  shows  himself  entitled  to  more  speedy 
relief  than  can  be  had  by  the  slower  process  of  courts  of  law.^ 

§  870.  Replevin. — Replevin  may  be  maintained  by  the 
mortgagee  for  timber  cut  or  fixtures  removed  from  the  prem- 
ises.'^ But  a  mortgagor  of  a  farm,  while  in  possession,  may  cut 
a  reasonable  quantity  of  wood  for  his  own  use  as  fuel,  and  may, 
on  leaving  the  farm,  remove  the  wood  for  use  elsewhere.^ 

Where  property  is  severed  from  the  realty  so  as  to  become  a 
chattel,  it  still  belongs  to  the  owner  of  the  land,  who,  under 
the  common  law,  is  the  mortgagee ;  the  mortgagee  having  such 

1  Scott  V.  Wharton,  2  Hen  &  Munf.  (Va.)  25;  Fairbank  t.  Cudworth,  33 
Wis.  358. 

2  Taylor  v.  Collinf?,  51  Wis.  123  ;  Kimball  v.  Darling,  32  Wis.  675 ;  Thomp- 
son V.  Heywood,  129  Mass.  401 ;  McCasUn  v.  State,  44  Ind.  151. 

3  Mutual  L.  Ins.  Co.  v.  Bigler,  79  N.  Y.  568 ;  Malone  v.  Marriott,  64  Ala.  486 ; 
Mutual  L.  Ins.  Co.  v.  Bank,  18  Hun  (N.  Y.),  371. 

*  Knarr  tJ.  Conaway,  42  Ind.  260,  265  ;  Johnson  v.  White,  11  Barb.  (N.  Y.)  194. 

*  Robinson  v.  Russell,  24  Cal.  467 ;  High  on  Inj.,  sect.  315. 
^Montgomery  v.  McEwen,  9  Minn.  103  ;  High  on  Inj.,  sect.  311. 
^  Waterman  v.  Matteson,  4  R.  I.  539. 

^  Judkins  v.  Woodman,  81  Me.  351. 


886  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

interest  in  the  land,  and  the  actual  or  constructive  possession 
of  the  land  may  maintain  an  action  for  the  value  of  the  arti- 
cle, or  an  action  for  the  specific  chattel.^ 

No  rule  of  law  or  equity  will  enable  the  mortgagee  to  pur- 
sue the  property  when  sold  by  the  mortgagor,  and  subject  to 
his  lien  after  it  has  become  annexed  to,  and  forms  a  part  of, 
the  real  estate  of  the  vendee ;  ^  but  if  it  afterward  becomes 
severed,  before  the  mortgage  debt  is  satisfied,  the  mortgagee 
may  regain  it  by  replevin.^ 

However,  this  rule  seems  to  be  modified  in  some  of  the 
States.  Thus,  in  Kansas,  a  mortgagee  cannot  maintain  replevin 
for  a  house  built  by  the  mortgagor  on  the  land  after  the  mort- 
gage, and  then  sold  and  removed  by  a  purchaser  of  the  prem- 
ises before  foreclosure.* 

In  New  Jersey  the  mortgagee  cannot  maintain  replevin  for 
severed  chattels  which  are  removed,  but  he  may  maintain  an 
action  at  law,  in  the  nature  of  an  action  on  the  case,  against 
the  tort-feasor.^ 

In  many  of  the  States,  the  mortgagee  can  maintain  replevin 
for  timber  cut  or  fixtures  removed  from  the  estate.^  In  other 
States  he  cannot  bring  replevin. 

Thus,  in  Kansas,  a  mortgagor  of  real  estate  has  the  right  to 
the  possession  of  the  mortgaged  property,  and  to  sever  and 
remove  timber,  wood,  sand,  earth,  coal,  stone,  or  anything  else 
therefrom,  and  to  sell  the  same,  unless  it  unreasonably  impairs 
the  mortgage  security.  When  it  unreasonably  impairs  the 
mortgage  security  the  remedy  of  the  mortgagee  is  not  at  law, 
but  in  equity,  not  replevin  to  recover  the  property  severed 
from  the  realty,  but  generally  injunction,  to  restrain  the  com- 
mission of  waste  upon  the  realty.^ 

1  Holland  v.  Hodgson,  L.  R.  7  C.  P.  328. 
-Harris  v.  Bannon,  78  Ky.  568. 
3  Dorr  V.  Dudderar,  88  111.  107. 
*  Clark  V.  Reyburn,  1  Kan.  281. 
s  Kircher  v.  Schalk,  39  N.  J.  L.  335. 

« Hemenway  V.  Bassett,  13  Gray  (Mass.),  378;  Latham  v.  Blakely,  70  N. 
Car.  368 ;  Goff  r;.  O'Conner,  16  111.  421  ;  Thomas  v.  Crofut,  14  N.  Y.  474. 
^  Vanderslice  v.  Knapp,  20  Kan.  647. 


THE    RIGHTS    OF    THE    MORTGAGOR.  887 

§  871.  Trespass. — Under  the  common  law,  after  condition 
broken,  the  right  of  possession  immediately  accrues  to  the 
mortgagee.^ 

So  as  an  incident  to  the  right  of  possession  follows  the  right  to 
bring  trespass  for  an  injury  to  the  freehold.^ 

In  those  States  where  a  mortgage  is  a  mere  lien,  the  interest 
of  the  mortgagee  is  contingent  and  may  be  defeated  by  pay- 
ment, and  is  not  such  an  interest  as  will  sustain  trespass  for 
waste  ;  ^  though  it  appears  that  trespass  may  be  brouglit  under 
some  circumstances.  Thus,  a  building  was  removed  from  the 
premises  pending  foreclosure  proceedings,  and  the  mortgagee 
brought  trespass  against  the  mortgagor.  It  was  held  that  the 
action  could  be  maintained  when  the  mortgagee,  under  such 
circumstances,  shows  that  there  is  a  deficiency  upon  a  regular 
foreclosure  and  sale  of  the  mortgaged  property,*  or  that  the 
purchaser  acted  fraudulently  to  injure  the  mortgagee.^ 

In  Pennsylvania,  cutting  timber  and  selling  the  same  by  the 
mortgagor,  does  not  seem  to  be  waste." 

In  Minnesota,  it  was  held  that  the  mortgagee  was  not  enti- 
tled to  the  timber  cut  from  the  mortgaged  property,  even  after 
default,  until  he  shall  have  foreclosed  his  mortgage,  because 
the  mortgagee  is  not  entitled  to  possession  without  foreclosure.^ 

The  mortgagee,  who  has  an  order  from  the  mortgagor  to  cut 
grass  thereon  and  apply  the  proceeds  to  the  payment  of  the 
mortgage  debt,  may  maintain  trespass  against  a  stranger  who 

^Hapgood  V.  Blood,  11  Gray  (Mas?.),  400. 

^  Linscott  V.  Weeks,  72  Me.  506  ;  Mosher  v.  Vehue,  76  Me.  469 ;  Atkinson  v. 
Hewitt,  6.3  Wis.  396  ;  Sanders  v.  Reed,  12  N.  H.  558 ;  Southworth  ;•.  Van  Pelt, 
3  Barb.  (N.  Y.)  347 ;  Harris  v.  Haynes,  34  Yt.  220 ;  Butler  v.  Page,  7  Met. 
(Mass.)  40 ;  Mitchell  v.  Bogan,  11  Rich.  (S.  Car.)  686 ;  Hampton  v.  Hodges, 
8  Yes.  105. 

'  Peterson  v.  Clark,  15  Johns.  (N.  Y.)  205 ;  Pueblo,  etc..  Railroad  Co.  v.  Besh- 
oar,  8  Colo.  32. 

*  Rose  V.  Rose,  53  Mich.  585,  587.  "  ■ 

*  Tomilson  v.  Thompson,  27  Kan.  70.  See  Waterman  v.  Matteson,  4  R.  I. 
539,  543. 

«Angier  v.  Agnew,  98  Pa.  St.   587;  Hoskinv.  Woodward,  45  Pa.  St.  42; 
Witmer's  Appeal,  45  Pa.  St.  455. 
V  ^  Adams  v.  Corriston,  7  Minn.  456. 


RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

wrongfully  enters  upon  the  premises,  and  cuts  and  carries  away 
the  grass/  He  can  also  maintain  replevin  for  the  grass  re- 
moved from  the  premises.^ 

§  872.  Trover. — If  a  mortgagor  cuts  timber  after  condition 
broken  and  leaves  it  upon  the  ground  until  the  mortgagee 
takes  possession,  and  then  removes  it,  he  is  liable  in  trespass, 
trover,  or  in  an  action  on  the  case  in  the  nature  of  waste.^ 

If  the  mortgagee  be  not  in  possession  at  common  law  he 
may  retake  the  property  removed  from  a  purchaser,  or  he  may 
recover  the  value  in  an  action  of  trover.*  The  same  rule  ap- 
plies to  an  assignee  in  bankruptcy.^ 

The  mortgagee  may  waive  his  right  to  the  property  sold,  in 
which  case  the  vendee  is  liable  for  the  payment  to  the  mort- 
gagor.*' The  principal  is  liable  for  his  servants  carrying  away 
turf  from  the  mortgaged  premises,  and  the  mortgagee  may 
recover  in  an  action  of  trover.^    ■ 

In  those  Siates  where  a  mortgage  is  a  mere  lien,  a  purchaser 
taking  such  property  without  notice  is  not  liable  to  the  mort- 
gagee.** It  is  held  in  New  York  that  the  purchaser  is  liable 
if  he  has  an  intent  to  injure  the  mortgagee,^  but  in  other 
States  the  mortgagee  is  not  entitled  to  the  timber  cut  from  the 
mortgaged  property  until  foreclosure.^''  Such  property  may  be 
sold  under  foreclosure  sale,  though  it  be  not  on  the  premises?^' 

1  Burley  v.  Pike,  62  N.  H.  495. 

2  Burley  v.  Pike,  62  N.  H.  495. 

^  Langdon  v.  Paul,  22  Vt.  205  ;  Hagar  v.  Brainerd,  44  Vt.  294.  See,  also, 
Hitchman  v.  Walton,  4  Mees.  &  W.  409  ;  Morey  v.  McGuire,  4  Vt.  327 ;  Lull 
V.  Matthews,  19  Vt.  322 ;  Blaney  v.  Bearce,  2  Me.  132 ;  Frothingham  v.  Mc- 
Kusick,  24  Me.  403 ;  Gore  v.  Jenness,  19  Me.  53 ;  Waterman  v.  Matteson,  4 
R.  I.  539. 

*  Smith  V.  Moore,  11  N.  H.  55 ;  Searle  v.  Sawyer,  127  Mass.  491 ;  Wilbur  v. 
Moulton,  127  Mass.  509 ;  Langdon  v.  Paul,  22  Vt.  205.  See,  also,  W  ilmarth  v. 
Bancroft,  10  Allen  (Mass.),  348. 

» In  re  Bruce,  9  Ben.  D.  C.  2.36. 

*  Kimball  v.  Lewiston  Steam  Mill  Co.,  55  Me.  494. 
'  Wilbur  V.  Moulton,  127  Mass.  509. 

8  Wilson  V.  Maltby,  59  N.  Y.  126. 

9  Van  Pelt  v.  McGraw,  4  N.  Y.  110. 
'"Adams  v.  Corriston,  7  Minn.  456. 

"  Higgins  V.  Chamberlin,  32  N.  J.  Eq.  566. 


THE    RIGHTS    OF    THE   MORTGAGOR.  889 

§  873.  License  to  Cut  Timber. — The  mortgagor  may"  be 
licensed  to  cut  timber,  and  this  agreement  may  be  inserted  in 
the  mortgage  or  implied  by  the  terms  and  conditions.  Thus, 
where  the  note  is  to  be  paid  in  wood  cut  from  the  premises.^ 
But  he  must  not  cut  timber  in  excess  of  the  amount  stipulated.^ 
But  after  the  payment  of  the  mortgage,  the  mortgagee  can 
claim  nothing  further,  though  the  timber  was  cut  before  pay- 
ment and  without  license  ;  ^  he  has  then  no  right  for  damages 
for  a  previous  trespass.* 

Where  the  cutting  of  timber  is  under  license,  express  or 
implied,  from  the  mortgagee,  it  belongs  to  the  mortgagor, 
otherwise  to  the  mortgagee.^ 

If  the  mortgagor  in  possession  cut  down  and  carry  away 
timber  he  is  liable  in  trespass  ;  ^  or  case  in  the  nature  of 
waste.^  But  perhaps  in  case  of  wild  lands,  a  custom  to  do  so 
might  be  equivalent  to  a  license.* 

In  case  of  waste  in  cutting  and  carrying  away  timber,  a 
second  mortgagee  may  maintain  trespass  after  a  discharge  of 
the  first  mortgage.^ 

§  874.  In  Possession  op  the  Farm  After  Condition 
Broken. — A  mortgagor  of  a  farm,  while  in  possession,  may 
cut  a  reasonable  amount  of  wood  for  his  own  use  as  fuel,  and 
may,  on  leaving  the  farm,  remove  the  wood  for  use  elsewhere.^" 
He  may  also  cut  timber  for  repairing  fences  and   for  other 

^Ingell  V.  Fay,  112  Mass.  451. 

^  Scott  V.  Webster,  50  Wis.  53 ;  Searle  v.  Sawyer,  127  Mass.  491 ;  Page  v.  Rob- 
inson, 10  Cush.  (Mass.)  99 ;  Smith  v.  Moore,  11  N.  H.  55 ;  Emmons  v.  Hin- 
derer,  24  N.  J.  Eq.  39 ;  Van  Wyck  v.  Alliger,  6  Barb.  (N.  Y.)  507,  511  ;  Hill  v. 
Gwin,  51  Cal.  47  ;  Goggill  v.  Millburn  Land  Co.,  25  N.  J.  Eq.  87  ;  Wilson  v. 
Maltby,  59  N.  Y.  126. 

3  Berthold  v.  Holman,  12  Minn.  335 ;  Corbin  v.  Reed,  43  Iowa,  459. 

*  Kennerly  v.  Burgess,  38  Mo.  440. 

*  Smith  V.  Moore,  11  N.  H.  55 ;  Grore  v.  Jenness,  19  Me.  53 ;  Lull  v.  Matthewa, 
19  Vt.  322. 

^Stowell  V.  Pike,  2  Me.  387 ;  Page  v.  Robinson,  10  Cush.  (Mass.)  99, 
^  Langdon  v.  Paul,  22  Vt.  205. 
^Langdon  v.  Paul,  22  Vt.  205. 
"Sanders  v.  Reed,  12  N.  H.  558. 
">  Judkins  v.  Woodman,  81  Me.  351. 


890  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

purposes,  according  to  the  well-known  and  existing  usages  of 
ordinary  husbandry.' 

If  the  wood  is  cut  in  good  faith  for  firewood,  it  may  be  re- 
moved to  another  place.^  He  is  entitled  to  take  the  wood  and 
the  annual  crops.^ 

§  875.  Damages  for  Injury  to  the  Property. — The  mort- 
gagor is  liable  to  the  mortgagee,  at  common  law,  for  injury 
done  to  the  premises.*  If  the  mortgagee  has  foreclosed  his 
mortgage  after  damages  have  been  done  by  a  mob,  and  he  has 
become  the  purchaser  at  the  sale,  in  order  to  recover  such 
damages,  he  must  prove  the  injury  to  the  property  and  his 
own  loss  of  a  part  of  the  mortgage  debt  in  consequence,  in 
order  to  make  the  city  liable.^ 

Where  a  mortgage  is  regarded  as  a  lien  only,  the  damages 
a  mortgagee  may  recover  against  a  third  person  in  trespass  on 
the  case  are  the  amount  of  injury  to  the  mortgage  as  a  se- 
curity, however  great  the  injury  to  the  land  may  be,*^  and  he 
must  show  that  the  mortgagor  is  insolvent.^ 

At  common  law  he  may  recover  for  a  permanent  injury  to 
the  land  which  injures  his  security.* 

§  876.  Statutory  Provisions. — In  Connecticut  the  statute 
provides  that  any  person  claiming  the  right  of  possession, 
whether  as  mortgagor  or  otherwise,  to  any  land  subject  to  any 
mortgage  duly  executed  and  recorded,  who  shall,  while  such 
mortgage  is  unreleased  of  record,  impair  the  value  of  the 
premises  subject  to  such  mortgage  b}^  removing,  destroying,  or 
injuring  any  building  or  fixture  on  the  land  so  mortgaged,  or 

^Hapgood  V.  Blood,  11  Gray  (Mass.),  400 ;  Smith  v.  Moore,  11  N.  H.  55,  62; 
Page  V.  Robinson,  10  Cush.  (Mass.)  99, 102. 

2  Wright  V.  Lake,  30  Vt.  206;  Judkins  v.  Woodman,  81  Me.  351. 

3  Woodward  v.  Pickett,  8  Gray  (Mass.),  617;  Searle  v.  Sawyer,  127  Mass. 
491,  494. 

*  King  V.  Bangs,  120  Mass.  514 ;  Byrom  v.  Chapin,  113  Mass.  308. 
5  Levy  V.  New  York,  3  Robt.  (N.  Y.)  194. 
« Morgan  v.  Gilbert,  2  Flip.  C.  C.  645. 
'Gardner  v.  Heartt,  3  Denio  (N.  Y.),  232. 

8  Atkinson  v.  Hewett,  63  Wis.  396 ;  Searle  v.  Sawyer,  127  Mass.  491 ;  Wilbur 
V.  Moulton,  127  Mass.  509 ;  James  v.  Worcester,  141  Mass.  361. 


THE    EIGHTS    OP    THE    MORTGAGOR.  891 

by  cutting  wood  not  necessary  for  firewood  to  be  used  on  said 
land  by  the  family  of  the  mortgagor,  or  by  any  other  means, 
without  the  consent  in  writing  of  whoever  appears  of  record 
to  be  the  owner  of  or  interested  in  such  mortgage,  and  wdth 
intent  to  defraud  any  owner  or  person  interested  in  such  mort- 
gage or  with  intent  to  lessen  the  value  of  the  property  subject 
to  such  mortgage,  to  the  injury  of  any  person  owning  or  inter- 
ested in  such  mortgage,  shall  be  guilty  of  a  misdemeanor,  and 
shall  be  punished  by  a  fine  not  exceeding  one  hundred  dol- 
lars, or  by  imprisonment  not  exceeding  three  months,  or  by 
both.i 

§  877.  Rights  of  Second  Mortgagee. — One  holding  land 
both  as  mortgagee  and  grantee  of  the  mortgagor  or  grantor  is 
liable  for  waste  to  the  junior  mortgagee.^  However,  if  the  senior 
mortgagee  settles  for  the  damages  to  the  premises  in  good  faith, 
the  second  mortgagee  has  no  remedy,  unless  he  shows  that 
such  settlement  was  inadequate  to  compensate  for  the  injury.^ 
So  a  junior  mortgagee  is  entitled  to  damages  between  the  date 
of  the  judgment  of  foreclosure  and  the  date  of  the  sale  there- 
under.* 

§  878.  Accounting  to  Mortgagor  for  Damages  Recov- 
ered.— When  the  mortgagee  is  in  possession  and  settles  for  a 
trespass  to  the  property  committed  by  a  third  party,  who 
carries  away  timber,  he  discharges  the  trespasser,  and  the 
mortgagor  cannot  then  hold  the  trespasser  for  the  injury.  The 
mortgagor's  remedy  is  against  the  mortgagee  in  possession  for 
the  timber  cut  and  carried  away,  as  for  profits  received  by  the 
mortgagee  for  which  he  is  liable.^ 

§  879.  Burden  of  Proof. — The  burden  of  proof  is  upon  the 
mortgagee  ;  but  when  the  defense  is  affirmative  then  the  burden 
changes  to  the  mortgagor.     Thus,  when  the  mortgagee  seeks 

1  Acts  of  1879,  p.  392. 
*  Scott  V.  Webster,  50  Wis.  53. 
'Byrom  v.  Chapin,  113  Mass.  308. 
MVhorton  v.  Webster,  56  Wis.  356. 
.  8  Guthrie  v.  Kahle,  46  Pa.  St.  331. 


892  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

to  enjoin  the  mortgagor  from  cutting  timber  on  the  land,  be- 
cause the  value  of  the  land  is  thereby  diminished,  and  tliat  he 
has  no  other  security,  an  averment  in  the  answer  that  the 
land  is  fertile,  and  that  its  value  would  be  increased  by  clear- 
ing and  reducing  it  to  cultivation,  is  affirmative  matter  in 
avoidance,  and  must  be  proved  by  the  mortgagor/ 

Article  8. 
Right  to  Emblements. 

§  880.  General  Rule — Crops.  §  884.  As  to  Lessee  of  Mortgagor. 

§  881.  After  Severance.  §  885.  Estoppel  of  Purchaser  to  take 

§  882.  Trees  and  Shrubs.  the  Emblements. 

§  883.  Tenant  at  Will — and  at  Sufferance. 

§  880.  General  Rule — Crops. — As  regards  the  question 
of  crops  growing  on  the  mortgaged  premises  at  the  time  of  the 
foreclosure  sale,  it  is  the  general  rule  that  the  doctrine  of  em- 
blements does  not  apply,  and  that  such  crops  properly  belong 
to  the  purchaser  at  the  foreclosure  sale.^  As  between  the  mort- 
gagor or  a  stranger  and  the  mortgagee,  a  sale  of  the  mortgaged 
premises  covers  growing  crops.^  If  the  mortgagor  removes  the 
emblements  pending  foreclosure,  the  value  of  them  may  be 
included  in  the  damages  awarded  the  mortgagee.* 

§  881.  After  Severance. — After  severance  of  the  crops,  the 
mortgagor  in  possession,  they  belong  to  him ;  ^  however,  a  mort- 
gagor of  land  who  simply  continues  in  possession  after  right 
of  redemption  under  foreclosure  proceedings  has  expired  has 
no  right  to  cut  and  sell  hay  from  the  premises.^     But  prior  to 

1  Moses  V.  Johnson,  88  Ala.  517.  See,  also,  Harrill  v.  Stapleton,  55 
Ark.  1. 

''Crews  V.  Pendleton,  1  Leigh  (Va.),  297. 

3  Wallace  v.  Cherry,  32  Mo.  App.  436. 

*Aldrich  v.  Reynolds,  1  Barb.  Ch.  (N.  Y.)  613. 

5  Rankin  v.  Kinsey,  7  111.  App.  215  ;  Welp  v.  Gunther,  48  Wis.  543  ;  Wood- 
ward V.  Pickett,  8  Gray  (Mass.),  617 ;  Cooper  v.  Cole,  38  Vt.  185 ;  Allen  v.  El- 
derkin,  62  Wis.  627 ;  Column  v.  Duke,  3  Ves.  Jr.  25 ;  Toby  v.  Reed,  9  Conn: 
216. 

«  Perley  v.  Chase,  79  Me.  519. 


THE    RIGHTS    OF    THE    MORTGAGOR.  893 

the  foreclosure  the  mortgagee  has  no  right  to  the  emble- 
ments. Thus  the  mortgagee  does  not  acquire  title  to  ice  cut 
and  stored  in  an  ice-house  prior  to  the  foreclosure  of  the 
mortgage.* 

A  mortgagee  out  of  possession  cannot  maintain  trespass 
quare  clausum  against  one  who  cuts  and  removes  the  grass  or 
other  annual  crop ; "  but  when  the  foreclosure  becomes  perfect 
the  mortgage,  if  the  premises  are  of  sufficient  value,  thereby 
becomes  paid.^ 

§  882.  Trees  and  Shrubs. — Trees  and  shrubs  planted  in  an 
inclosure  for  the  temporary  purpose  of  cultivation  and  growth 
so  that  they  shall  become  sufficiently  mature  for  the  market, 
when  they  are  to  be  taken  up  and  sold,  pass  by  a  mortgage  of 
the  land  on  which  they  are  planted,  so  that  the  mortgagor  or 
his  assignee  cannot  remove  them  as  personal  chattels.^ 

But  a  purchaser  could  make  a  valid  agreement  with  the 
mortgagee  to  remove  such  shrubs  and  trees.^  And  if  the  mort- 
gagee had  notice  that  they  were  planted  on  the  land  of  one  of 
a  firm,  and  that  they  belonged  to  the  firm,  the  firm  has  a 
right  to  remove  them.^ 

When  the  purchaser  has  permission  to  remove  the  trees,  this 
implies  a  reasonable  time  according  to  the  circumstances,  in 
the  absence  of  contract.^  And  when  the  mortgagee  in  posses- 
sion allows  the  mortgagor  to  enter  and  cut  bark  from  the 
trees,  which  the  mortgagee  agrees  to  sell  and  apply  the  pro- 
ceeds on  the  mortgage  debt,  a  sale  of  the  bark  to  an  innocent 
purchaser  by  the  mortgagor  will  divest  the  lien  of  the  mort- 
gagee.^ 

^  Gregory  v.  Rosenkrans,  72  Wis.  220.    See,  also.  Wood  v.  Trask,  7  Wis.  56G ; 
Brinknian  v.  Jones,  44  Wis.  498. 
''Hewes  v.  Bickford,  49  Me.  71 ;  Page  v.  Robinson,  10  Cush.  (Mass.)  99. 
'  Hurd  V.  Colman,  42  Me.  182 ;  Morse  v.  Merritt,  110  Mass.  458. 

*  Maples  V.  Millon,  31  Conn.  598.    This  rule  is  different  between  landlord 
and  tenant. 

*  Chiles  V.  Wallace,  83  Mo.  84 ;  Glasscock  v.  Glasscock,  66  Mo.  627. 
8  King  V.  Wilcomb,  7  Barb.  (N.  Y.)  263. 

^Salisbury  v.  Renick,  44  Mo.  558 ;  Glasscock  v.  Glasscock,  66  Mo,  627. 
^^Moisant  v.  McPhee,  92  Cal.  76. 


894  RIGHTS   OF    TARTIES   BEFORE   DEFAULT. 

§  883.  Tenant  at  "Will — and  at  Sufferance. — A  mort- 
gagor is  not  entitled  to  emblements  as  a  tenant  at  will.  Hence, 
a  mortgagee  may  evict  the  mortgagor  without  notice  and  re- 
tain the  emblements,  after  foreclosure,  no  statute  to  the  con- 
trary as  to  giving  notice.^  So  if  the  mortgagor  continues  in 
possession  after  the  determination  of  the  particular  estate  he 
thereby  brings  himself  within  the  definition  of  tenant  at  suf- 
ferance at  common  law ;  ^  and  if  a  tenant  at  sufferance  he  is 
not  entitled  to  emblements.^ 

An  evicted  mortgagor  cannot  maintain  trespass  against  the 
mortgagee.*  But  if  the  mortgagor  occupies  the  premises  by 
assent  of  the  mortgagee  by  agreement,  then  he  has  an  action 
against  him  for  trespass  for  appropriating  the  crops.^ 

While  a  mortgagor  after  foreclosure  and  sale  is  a  tenant  at 
sufferance  at  common  law,"  yet  a  statute  may  make  it  neces- 
sary to  give  such  a  mortgagor  notice  to  quit  and  to  allow  him 
the  ripened  crops  upon  the  land.^ 

§  884.  As  TO  Lessee  of  Mortgagor. — The  law  applies  to  a 
lessee  of  the  mortgagor.  Hence,  a  mortgagee  may  evict  Such  a 
lessee  without  notice  and  retain  the  emblements,  because 
every  person  who  takes  under  a  mortgagor  takes  subject  to  all 
the  rights  of  the  mortgagee,  unimpaired  and  unaffected.® 

So  when  the  mortgagee  obtains  the  absolute  estate  in 
fee  of  the  mortgaged  premises  by  becoming  the  pur- 
chaser under  a  foreclosure  and  sale,  he  is  entitled  to  the  em- 
blements, and  may  maintain  trespass  against  the  mortgagor  or 
his  lessee  for  taking  and  carrying  away  the  crops  growing  at 
the  time  of  the  sale.^     The  title  and  interest  of  the  mortgagor 

^  Downard  v.  GrofF,  40  Iowa,  597. 

"Livingston  v.  Tanner,  12  Barb.  (N.  Y.),  481,  484  ;  1  Washb.  on  Eeal  Prop. 
534,  sect.  2. 
3  Bennett  v.  Turner,  7  Mees.  &  Wei.  226. 

*  Gilman  v.  Wills,  66  Me.  273. 
^Gilman  v.  Wills,  66  Me.  273. 

«  Livingston  v.  Tanner,  12  Barb.  (N.  Y.)  481,  484. 
^  Allen  V.  Carpenter,  15  Mich.  25. 

*  Downard  v.  GrofF,  40  Iowa,  597. 

8  Jones  ('.  Thomas,  8  Blackf.  (Ind.)  428;   Lane  t;.  King,  8  Wend.  (N.  Y.) 
584 ;  Anderson  v.  Strauss,  98  III.  485. 


THE    RIGHTS    OP    THE    MORTGAGOR.  895 

or  his  lessee  being  subject  to  the  mortgage  are  liable  to  be 
divested  by  the  foreclosure  sale  of  the  premises.^  And  then 
the  mortgagee  may  evict  the  mortgagor  without  notice  and 
retain  the  emblements.^ 

In  Ohio  the  rule  is  different,  and  seems  to  be  based  upon 
the  construction  of  the  appraisement  law.  The  decision  is 
conspicuous  because  it  stands  alone  and  unsupported  by 
authority.  It  declares  that  where  lands,  subject  to  a  mort- 
gage, are  sold  under  a  decree  of  foreclosure,  the  emble- 
ments of  the  lessee  are  protected  and  do  not  pass  to  the  pur- 
chaser under  the  decree.^ 

§  885.  Estoppel  of  Purchaser  to  Take  the  Emblements. 
— A  purchaser  may  be  estopped  from  claiming  the  emblements. 
Thus,  a  mortgagor  who  was  in  default  sowed  grain  on  the 
mortgaged  premises.  He  died  and  the  administrator  sold  the 
crop.  The  mortgage  was  foreclosed  before  severance  of  the 
crop,  and  the  mortgagee  announced  at  the  sale  that  the  crop 
would  not  be  sold,  as  it  had  already  been  sold.  Under  these 
circumstances  the  purchaser  was  estopped  to  claim  the  emble- 
ments.'* 

1  Shepard  v.  Philbrick,  2  Den.  (N.  Y.)  174 ;  Keech  v.  Hall,  1  Doug.  21 ;  Thun- 
der V.  Belcher,  3  East,  149. 

2  Scriven  v.  Moote,  36  Mich.  64 ;  Coote  on  Mort.  351 ;  2  Cruise  Dig.  108 ;  1 
Powell  on  Mort.  149,  160,  161,  162, 163 ;  Com.  Dig.  L.,  tit.  Liens,  G.  2  ;  Co.  Litt. 
55 ;  Aldrich  v.  Reynolds,  1  Barb.  Ch.  (N.  Y.)  613. 

3  Cassilly  v.  Rhodes,  12  Ohio,  88. 

*  Sherman  v.  Willett,  42  N.  Y.  146. 


CHAPTER  XXII. 

the  rights  of  the  mortgagee. 

Article  1. 

Ilie  Mortgagee's  Interest. 

§  886.  Right  to  Possession.  ^  892.  Right  to  Partition, 

i  887.  His  Interest  Passes  to  His  Ad-  ^  893.  Parties. 

ministrator.  I  894.  Prior  Mortgagees. 

§  888.  His  Interest  is  not  Subject  to  1 895.  Mortgage  on   One  of   Several 

Levy.  Separate  Parcels. 

§  889.  The  INIortgagor  Holds  the  Title  §  896.  The  Mortgage  Cannot  be  Ex- 
in  Privity  with  the  Mortgagee.  tended  over  Land  not  Cov- 

§  890.  Tenants  in  Common.  ered  by  it. 

§  891.  Joint  Tenancy. 

§  886.  Right  to  Possession. — At  common  law  the  mortgagee, 
or  trustee  in  a  deed  in  the  nature  of  a  mortgage,  is  entitled 
to  immediate  possession,  and  may  maintain  an  action  for  use 
and  occupation  against  a  tenant  in  possession,  unless  the  mort- 
gage contains  some  stipulation,  express  or  implied,  postponing 
his  right  to  take  possession.^  And  this  right  is  recognized  by 
statute  in  some  States.^ 

And  when  there  is  no  stipulation  that  the  mortgagor  shall 
retain  possession,  the  mortgagee  may  maintain  an  action  of 
ejectment  against  the  mortgagor  or  those  claiming  under  him.^ 

The  mortgagee  has  any  action  at  law  which  an  owner  could 
bring  to  oust  the  mortgagor  and  those  claiming  under  him.* 

In  some  of  the  States  the  mortgagee's  right  of  possession  has 

1  Barrett  v.  Hinckley,  124  HI.  32;  Finlon  v.  Clark,  118  111.  32;  Watford  r. 
Gates,  57  Ala.  290  ;  McMillan  v.  Otis,  74  Ala.  560 ;  Taylor  v.  Adams,  115  III. 
574 ;  Woodward  v.  Parsons,  59  Ala.  625. 

2  Hadley  v.  Hadley,  80  Me.  459  ;  Maine's  Rev.  Stat.,  ch.  90,  sect.  2. 
nValcop  V.  McKinney,  10  Mo.  229. 

*  Fletcher  v.-  Chamberlin,  61  N.  H.  438  ;  Shute  v.  Grimes,  7  Blackf.  (Ind.) 
1 ;  Jackson  v.  Hull,  10  Johns.  (N.  Y.)  481 ;  Brown  v.  Stewart,  1  Md.  Ch.  87  ; 
Clark  V.  Reyburn,  1  Kan.  281 ;  Den  v.  Stockton,  12  N.  J.  L.  322 ;  Ely  v.  Mc- 
Guire,  2  Ohio,  223  ;  Fuller  v.  Eddy,  49  Vt.  11. 
896 


THE   RIGHTS   OF    THE    MORTGAGEE.  897 

been  changed  so  that  he  cannot  take  possession.  But  such 
statutes  do  not  prevent  the  mortgagor's  allowing  the  mortgagee 
to  go  into  possession  and  hold  possession  until  the  mortgage  is 
paid.^ 

This  subject  is  fully  treated  in  the  first  chapter,  where  the 
law  of  the  States  is  explained. 

§  887.  His  Interest  Passes  to  His  Administrator. — 
Though  the  legal  title  to  the  mortgaged  lands  on  the  death  of 
the  mortgagee  descends  to  his  heirs,  they  hold  it  in  trust  for 
the  administrator  as  an  incident  to  the  debt ;  and  he  may 
release  it,  or  transfer  it  by  an  assignment  of  the  debt.^  The 
mortgage  is  a  mere  chose  in  action  and  devolves  upon  the 
personal  representatives  of  the  mortgagee  in  event  of  his 
death. ^ 

At  common  law,  on  the  death  of  the  mortgagee  the  legal 
title  or  estate  descends  to  his  heirs ;  but  it  is,  however,  a  mere 
drj'-,  naked,  legal  estate,  subsisting  only  for  the  purpose  of 
keeping  the  mortgage  alive  as  a  security  for  the  debt,  and  is 
held  in  trust  by  the  heir,  for  the  benefit  of  the  personal  repre- 
sentative, to  whom  the  debt  passes  as  an  asset.*  The  personal 
representatives  may  handle  the  mortgage  in  the  same  manner 
as  the  mortgagee  could  if  living/  and  this  is  provided  by 
statute  in  some  States.^ 

The  assignment  of  the  mortgage  cannot  be  made  by  an 
heir  ;  ^  and  when  devised  it  passes  only  as  a  bequest  of  personal 
property.* 

^  Fee  V.  Swingly,  6  Mont.  596 ;  Hennesy  v.  Farrell,  20  Wis.  42 ;  Edwards  v. 
Wray,  11  Biss.  c'  C.  251 ;  Minkler  v.  Minkler,  10  Johns.  (N.  Y.)  480 ;  Sahler 
V.  Signer,  44  Barb.  (N.  Y.)  606. 

'  Baldwin  v.  Hatchett,  56  Ala.  461 ;  Collamer  v.  Langdon,  29  Vt.  32 ;  Conner 
V.  Whitmore,  52  Me.  185. 

*  Wilson  r.  Troup,  2  Cow.  (N.  Y.)  195  ;  Scott  v.  McFarland,  13  Mass.  309  ; 
Knox  V.  Easton,  38  Ala.  345. 

*Taft  V.  Stevens,  3  Gray  (Mass.),  504. 

*  Collamer  v.  Langdon,  29  Vt.  32. 

^  Ohio,  Rev.  Stat.  1880,  sect.  6070;  Wisconsin,  Rev.  Stat.  1878,  sect,  3829 ; 
Massachusetts,  Gen.  Stat.,  ch.  96,  sects.  9, 10. 
''Douglass  V.  Durin,  51  Me.  121. 
«  Martin  v.  Smith,  124  Mass.  111. 
57 


898  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

§  888.  His  Interest  is  Not  Subject  to  Levy. — The  inter- 
est of  the  mortgagee  in  the  mortgaged  premises  before  foreclos- 
ure or  entry  for  condition  broken,  is  not  liable  to  levy  and  sale 
under  execution.^  Neither  can  his  interest  be  sold  under  exe- 
cution against  him  and  the  mortgagor..^  And  his  interest 
cannot  be  taken  in  execution,  whether  his  title  be  considered 
legal  or  equitable.^  And  so  the  beneficiary's  interest  in  a  deed 
of  trust  cannot  be  sold  under  execution,*  and  the  same  rule 
applies  as  to  an  absolute  deed  with  agreement  to  recovery.^ 

§  889.  The  Mortgagor  Holds  the  Title  in  Privity  with 
the  Mortgagee. — The  mortgagor  or  his  assignee  holds  in 
privity  with  the  mortgagee  and  in  subordination  to  his  rights. 
Judge  Stiness  says  whether  we  regard  one  who  owns  the  equity 
of  redemption  as  a  tenant  or  as  one  holding  in  privity  with 
and  subject  to  the  mortgagee's  right  to  enter,  his  holding  is.  not 
inconsistent  with  the  title  to  a  purchaser  at  the  mortgagee's 
sale.  There  is,  therefore,  no  adverse  holding,  no  ouster  of  the 
owner,  and  no  disseisin  until  the  possession,  before  consistent 
with  the  title  of  the  real  owner,  becomes  tortious  and  wrongful 
by  the  disloyal  action  of  the  tenant,  which  must  be  open  and 
notorious,  so  as  to  preclude  all  doubt  as  to  the  character  of  the 
holding  or  want  of  knowledge  on  the  part  of  the  owner.^ 

The  mortgagee  may  treat  any  person  found  on  the  mortgaged 

1  Blanchard  v.  Colburn,  IG  Mass.  346 ;  Huntington  v.  Smith,  4  Conn.  237 ; 
Glass  V.  Ellison,  9  N.  H.  69 ;  Jackson  v.  Willard,  4  Johns.  (N.  Y.)  41 ;  Free- 
man on  Ex.,  sects.  118,  184  ;  Nicholson  v.  Walker,  4  111.  App.  404. 

nCing  V.  Cushman,  41  111.  31. 

3  Rickert  v.  Madeira,  1  Eawle  (Pa.),  325 ;  Brown  v.  Bates,  55  Me.  520 ;  Trap- 
nail  V.  Bank,  18  Ark.  53  ;  Scott  v.  Mewhirter,  49  Iowa,  487 ;  Buck  v.  Sanders, 
IDana  (Ky.),  187;  Cooch  v.  Gerry,  3  Harr.  (Del.)  280;  Marsh  v.  Austin,  1 
Allen  (Mass.),  235;  Eaton  v.  Whiting,  3  Pick.  (Mass.)  484;  Drake  on  Attach. 
(6th  ed.)  sect.  235 ;  Freeman  on  Ex.,  sect.  184  ;  Morris  v.  Barker,  82  Ala.  272 ; 
Collins  V.  Torry,  7  Johns.  (N.  Y.)  277  ;  Brooks  v.  Kelly,  63  Miss.  616. 

*  Beckett  v.  Dean,  57  Miss.  232. 

*  Scott  V.  Mewhirter,  49  Iowa,  487. 

6  Doyle  V.  Mellen,  15  R.  I.  523;  Whittington  v.  Flint,  43  Ark.  504;  51  Am. 
Rep.  572 ;  Hunt  v.  Hunt,  14  Pick.  (Mass.)  374  ;  Jones  v.  Williams,  5  Adol.  & 
Ell.  291 ;  Partridge  v.  Bere,  5  Barn.  &  Aid.  604  ;  Zeller  v.  Eckert,  4  How.  (U.  S.) 
289 ;  Kruse  v.  Scripps,  11  111.  98 ;  Conner  v.  Whitmore,  52  Me.  185  ;  Herbert 
V.  Hanrick,  16  Ala.  581 ;  Medley  v.  Elliott,  62  111.  532.    See  section  836. 


THE    RIGHTS    OF   THE   MORTGAGEE.  899 

premises  without  a  good  title  as  a  disseisor.^  Between  the 
mortgagor  and  the  mortgagee,  so  long  as  the  latter  does  not 
treat  the  former  as  holding  adverse  possession,  the  possession 
of  the  mortgagor  is  not  hostile  to  or  inconsistent  with  the 
mortgagee's  right ;  to  this  extent  the  possession  of  the  mort- 
gagor is  the  possession  of  the  mortgagee.^  But  there  cannot 
be  a  mixed  possession  by  a  mortgagor  and  a  mortgagee  as 
tenants  in  common,  after  condition  broken,  as  the  law  would 
adjudge  the  possession  to  the  latter.^  The  mortgagee  is 
in  privity  of  estate  with  the  mortgagor  only  in  respect  to  the 
estate  as  it  existed  when  the  mortgage  was  executed/ 

§  890.  Tenants  in  Common. — Mortgagees  may  become  ten- 
ants in  common.  Thus,  where  a  mortgage  is  given  to  two  or 
more  mortgagees  jointly,  but  to  secure  the  amount  of  the 
separate  indebtedness  of  the  mortgagors  to  each  of  them,  they 
take  as  tenants  in  common,^  each  having  an  undivided  in- 
terest in  proportion  to  his  claim  ;  therefore  the  fact  that  the 
mortgage  is  void  as  to  one  of  the  mortgagees  as  against  his 
creditors  does  not  affect  the  validity  as  to  the  others.^ 

In  such  case  the  mortgagees  do  not  take  as  joint  tenants, 
but  as  tenants  in  common ;  each  taking  an  undivided  interest 
as  tenant  in  common  of  the  property  conveyed  by  the  mort- 
gage in  proportion  to  the  respective  debts,^  and  each  may 
enforce  his  claim  according  to  law,^  and  his  personal  represen- 
tative may  enforce  the  lien  after  his  death.^ 

1  Wheeler  v.  Bates,  21  N.  H.  460. 

2  Doe  r.  Barton,  11  Adol.  &  El.  307;  Smartle  v.  Williams,  1  Salk.  245; 
Nichols  V.  Reynolds,  1  R.  I.  30 ;  Boyd  v.  Beck,  29  Ala.  703. 

3  Hall  V.  Tunnell,  1  Houst.  (Del.)  320. 
*  Mathes  v.  Cover,  43  Iowa,  512. 

^Farwell  v.  Warren,  7(5  Wis.  527  ;  Brown  v.  Bates,  55  Me.  520  ;  Donnels  v. 
Edwards,  2  Pick.  (Mass.)  617. 

^Farwell  v.  Warren,  76  Wis.  527. 

'  Donnels  t-.  Edwards,  2  Pick.  (Mass.)  617 ;  Tyler  v.  Taylor,  8  Barb.  (N.  Y.) 
585;  Howard  v.  Chase,  104  Mass.  249;  Alderson  v.  Schulze,  64  Wis.  460; 
Burnett  v.  Pratt,  22  Pick.  (Mass.)  556. 

« Burnett  v.  Pratt,  22  Pick.  (Mass.)  556 ;  Gilson  v.  Gilson,  2  Allen  (Mass.),  115. 

9  Kinsley  r.  Abbott,  19  Me.  430;  Smith  v.  Trenton  Delaware  Falls  Co.,  4 
N.  ^.  Eq,  505. 


900  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

If  there  be  a  joint  mortgage  made  to  two,  to  secure  a  debt 
due  to  one  of  them  the  legal  estate  vests  in  them  as  tenants  in 
common,  the  one  having  no  interest  in  the  mortgage  debt 
being  a  trustee  of  the  estate  for  the  benefit  of  him  who  owns 
the  debt.' 

The  estate  of  a  tenant  in  common  is  chargeable  in  favor  of 
his  co-tenant  for  his  share  of  the  expenses  necessarily  incurred 
by  the  latter  for  the  repairs  and  preservation  of  the  property, 
and  a  mortgagee  of  an  undivided  interest,  whose  mortgage  lien 
is  subject  to  such  charge,  may  protect  his  security  by  paying 
the  claim  of  his  mortgagor's  co-tenant,  and  holding  the  mort- 
gage estate  for  his  reimbursement.^ 

§  891,  Joint  Tenancy. — The  estate  may  be  held  as  a  joint 
tenancy.  Thus,  a  mortgage  made  to  partners  to  secure  a  joint 
debt  is  a  joint  tenancy,  because  the  debt  itself  would  in  case 
of  the  death  of  one  partner  vest  in  the  survivor  for  the  purpose 
of  collection,  so  that  the  mortgage  security  may,  by  the  doctrine 
of  survivorship,  accompany  the  debt.^  By  foreclosure  of  such 
mortgage,  then  the  estate  would  be  a  tenancy  in  common.* 

If  one  of  two  joint  mortgagees  die  before  foreclosure  of  the 
mortgage,  the  survivor  may  bring  an  action  to  foreclose  the 
same.^  But  if  the  debts  are  distinct,  the  survivor  of  the  mort- 
gagees cannot  sustain  an  action  in  his  own  name  to  foreclose 
the  mortgage  for  the  debt  due  the  deceased.® 

§  892.  Right  to  Partition. — Though  the  mortgagees  are 
tenants  in  common  in  proportion  to  the  amount  of  the 
balance  of  their  several  debts,  yet,  until  foreclosure,  their 
estate  in  the  land  is  not  subject  to  partition.^     But  when  an 

1  Root  V.  Bancroft,  10  Met.  (Mass.)  44. 

^Darling II.  Harmon,  47  Minn.  166. 

='Appleton  V.  Boyd,  7  Mass.  131.  See  Randall  v.  Phillips,  3  Mason,  C.  C. 
378. 

*  Goodwin  v.  Richardson,  11  Mass.  469 ;  Johnson  r.  Brown,  31  N.  H.  405 ; 
Rigden  v.  Vallier,  2  Ves.  Sr.  252 ;  Tyler  v.  Taylor,  8  Barb.  (N.  Y.)  585. 

5  Williams  v.  Hilton,  35  Me.  547  ;  Appleton  v.  Boyd,  7  Mass.  131. 

« Burnett  v.  Pratt,  22  Pick.  (Mass.)  556. 

''Ewer  V.  Hobbs,  5  Met.  (Mass.)  1. 


THE    RIGHTS    OF    THE    MORTGAGEE.  901 

owner  allows  the  mortgagee  to  a  portion  of  the  land  to  fore- 
close before  condition  broken,  he  does  not  thereby  become 
tenant  in  common  with  him  ;  and  a  judgment  creditor  of  such 
mortgagor  cannot  on  levying  an  execution  on  the  land  main- 
tain against  the  mortgagee  a  petition  for  partition/  But  when 
the  mortgagee  has  foreclosed  his  lien  on  one  part  of  the  land, 
then  he  may  have  partition  with  the  owner  of  the  other  part.^ 
If  one  of  the  tenants  mortgage  his  share  to  his  co-tenant,  he 
cannot  have  partition  against  him,  since  in  respect  to  his  co- 
tenant  he  has  not  sufficient  seisin  to  maintain  partition  against 
his  own  mortgagee.^ 

§  893.  Parties. — Judgment  of  partition  on  a  petition  by 
one  tenant  in  common  against  a  co-tenant,  who  has  mortgaged 
his  interest  in  the  land,  is  not  binding  on  the  mortgagee  if  he 
is  not  made  a  party  to  the  suit  and  does  not  elect  to  affirm  the 
petition.* 

When  tenants  in  common,  for  the  purpose  of  making  par- 
tition, execute  mutual  deeds  of  release  of  specific  portions  of 
the  land  to  each  other,  and  the  mortgagee  who  has  a  mortgage 
from  tenant  upon  an  undivided  half  of  the  land  joins  with  the 
mortgagor  in  his  release,  such  release  and  partition  have  as  to 
the  interest  of  both  the  mortgagor  and  the  mortgagee,  the  effect 
to  substitute  for  an  undivided  half  of  the  whole  the  part  set 
off  to  the  mortgagor  in  severalty.^  And  a  mortgage  executed 
by  a  tenant  in  common  upon  his  interest,  pending  a  suit  for 
partition,  is  subordinate  to  the  rights  of  the  other  co-tenants 
whose  right  is  superior  to  that  of  such  mortgage.^  And  where 
a  mortgage  was  executed  by  a  tenant  in  common  upon  his 
interest  in  the  land,  pending  suit  for  partition,  and  he  became 
the  purchaser  of  part  of  the  property  at  the  sale,  and  the 
amount  of  his  share  of  the  proceeds  was  allowed  to  him  upon 

'  Norcross  v.  Norcross,  105  Mass.  265. 

*  Phelps  V.  Townsley,  10  Allen  (Mass.),  554. 

*  Bradley  r.  Fuller,  23  Pick.  (Mass.)  1. 
*Loomi8  V.  Riley,  24  111.  307. 

*Torrey  v.  Cook,  116  3Iass.  163 ;  Bradley  v.  Fuller,  23  Pick.  (Mass.)  1. 
8  United  States,  etc.,  Co.  v.  Long  Dock  Co.,  42  N.  J.  Eq.  547. 


902  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

his  bid,  it  was  held  that  although  if  a  stranger  had  bought  the 
property  the  lieu  of  the  mortgage  would  have  been  cut  off,  yet 
since  the  mortgagor  had  bought  it  the  lien  still  subsisted  in 
equity  upon  the  land  so  purchased,  but  only  to  the  extent  of 
the  mortgagor's  interest  in  the  proceeds  of  the  sale  of  the  whole 
of  the  lands  held  in  common  and  sold  under  the  decree.  The 
liens  of  mortgages  given  upon  the  property  of  the  purchaser  to 
other  tenants  in  common,  for  their  shares  of  the  proceeds  of 
the  sale,  were  held  to  be,  of  course,  prior  to  the  lien  of  that 
mortgage.^ 

A  voluntary  partition  of  land  between  the  owners  thereof  is 
not  binding  upon  the  holders  of  existing  liens  upon  the  prop- 
erty unless  they  consent  thereto.^ 

§  894,  Prior  Mortgagees. — The  general  rule  is  that  prior 
mortgagees  cannot  be  compelled  to  join  in  the  partition  pro- 
ceedings between  co-tenants.  Prior  mortgagees  or  incum- 
brancers are  not  necessary  or  proper  parties  to  partition 
proceedings  between  co-tenants ;  and  the  rights  of  such  prior 
mortgagees  are  not  affected  by  such  partition  proceedings.^ 
And  the  lien  of  a  mortgage  executed  by  one  co-tenant  prior  to 
the  institution  of  a  suit  for  partition,  and  for  the  recovery  of 
rents  and  profits,  is  superior  to  the  claim  for  rents  and  profits 
decreed  in  such  suit.* 

If  partition  is  had,  a  prior  mortgage  by  one  of  the  co-tenants 
may  be  foreclosed  and  enforced  after  partition  against  the  lot 
set  apart  to  the  mortgagor,  though  this  lien  is  not  named  in 
the  suit.^ 

If  one  tenant  in  common  take  an  assignment  of  a  mortgage 

^Westewelt  v.  Haff,  2Sandf.  Ch.  (N.  Y.)  98. 

2  Emson  v.  Polhemus,  28  N.  J.  Eq.  439. 

^McArthur  v.  Scott,  31  Fed.  Rep.  521,  opinion  by  Jackson,  J. ;  Wotten  v. 
Copeland,  7  Johns.  Ch.  (N.  Y.)  140;  Hannan  v.  Osborn,  4  Paige  (N.  Y.),  343; 
Meads  v.  Lansingh,  Hopk.  (N.  Y.)  125 ;  Freem.  Co-Tenancy,  sects.  452, 
478,  479. 

*McArthur  v.  Scott,  31  Fed.  Rep.  521.  Compare  Hines  v.  Munnerlyn,  57 
Gra.  32.  But  this  case  does  not  say  when  the  mortgage  was  executed,  whether 
before  or  after  the  co-tenant's  claim  for  rents  and  profits  accrued,  hence  it 
is  not  direct  authority  on  this  subject. 

*  Watson  V.  Priest,  9  Mo.  App.  263. 


flii 


THE    RIGHTS    OF    THE    MORTGAGEE.  903 

upon  the  estate,  his  co-tenant  is  debarred  from  partition 
against  him.  The  co-tenant  must  redeem  the  whole  mort- 
gage or  contribute  his  share  of  the  incumbrance.' 

§  895.  Mortgage  ox  One  of  Several  Separate  Parcels. 
— It  is  settled  in  Massachusetts  as  a  rule  of  law,  in  relation  to 
land,  that  the  conveyance  of  any  separate  estate,  by  a  tenant 
in  common,  by  metes  and  bounds,  is  void  as  against  the  co- 
tenants,  and  is  available  only  by  way  of  estoppel  against  the 
grantor  and  his  heirs.^ 

Generally  when  the  estate  covers  several  separate  parcels, 
and  one  tenant  has  mortgaged  his  undivided  interest  in  one 
parcel,  then  this  separate  parcel  should  be  considered  as  a  sep- 
arate estate,  and  should  be  separately  partitioned.^ 

In  some  States  it  is  held,  against  the  weight  of  authority, 
that  one  of  two  or  more  tenants  in  common  cannot  convey  his 
interest,  or  any  part  of  his  interest,  in  less  than  the  entire 
estate  so  as  to  bind  his  co-tenant ;  that  this  rule  invalidates 
the  conveyance  or  mortgage  of  an  undivided  interest  in  one 
or  more  of  several  distinct  estates  which  are  held  in  common, 
unless  all  the  estates  so  held  are  embraced.* 

But  this  rule  carried  to  this  extent  is  disapproved  by  other 
courts,  which  hold  that  the  rule  is  applicable  only  to  prevent 
the  dismemberment  of  a  single  estate,  and  not  to  prevent  a 
tenant  from  selling  his  interest,  or  any  part  of  his  interest,  in 
any  one  of  several  distinct  estates,  provided  he  does  not  sell  it 
in  less  than  the  whole  of  any  of  such  estate.  Thus,  it  was 
held  improper  to  levy  on  an  undivided  interest  in  two  parcels 
when  an  undivided  interest  in  one  of  them  could  have  satisfied 
the  claim .^      So  it  has  been  held  that  platting  lots  for  sale 

iBlodgett  V.  Hildreth,  8  Allen  (Mass.),  186. 

^  Peabody  v.  Minot,  24  Pick.  (Mass.)  329 ;  Bartlet  v.  Harlow,  12  Mass.  348  ; 
Adam  r.  Briggs  Iron  Co.,  7  Cush.  (Mass.)  361. 

*  Carroll  v.  Norwood,  1  Harr.  &  J.  (Md.)  167  ;  Reinicker  v.  Smith,  2  Harr.  & 
J.  (Md.)  421 ;  Primm  v.  Walker,  38  Mo.  94 ;  Butler  v.  Roys,  25  Mich.  53. 

*  Peabody  v.  Minot,  24  Pick.  (Mass.)  329 ;  Thompson  v.  Barber,  12  N.  H. 
563 ;  Freeman  on  Co-Tenancy  and  Partition,  sects.  197-208 ;  Marks  v.  Sewall, 
120  Mass.  174. 

,  5  Starr  v.  Leavitt,  2  Conn.  243. 


904  RIGHTS    OF    PARTIES    BEFORE   DEFAULT. 

converts  the  lots  into  separate  estates,  and  that  an  undivided 
interest  in  any  one  of  the  lots  so  platted  may  be  lawfully  sold 
and  conveyed,^ 

It  is  held  in  Rhode  Island  that  the  aggregate  parcels  cov- 
ered by  each  single  mortgage  of  one  co-tenant  must,  for  the 
purpose  of  partition,  be  considered  as  one  separate  estate,  in 
equity,^ 

In  Massachusetts,  where  parcels  are  subject  to  a  mortgage, 
in  a  suit  under  the  statute  by  the  mortgagor,  the  mortgagee 
objecting,  partition  was  refused.^  But  when  the  suit  is  brought 
in  equity  by  the  mortgagee,  the  mortgagor  assenting,  partition 
can  be  made.*     This  conflict  of  authority  cannot  be  reconciled. 

§  896.  The  Mortgage  Cannot  be  Extended  over  Land 
NOT  Covered  by  it. — As  between  tenants  in  common  a  sale 
or  mortgage  of  land  by  one  of  them  is  valid,  provided  such 
sale  or  mortgage  covers  the  vendor's  or  mortgagor's  interest  in 
the  whole  or  any  separate  parcel  or  estate,  notwithstanding  the 
tenancy  in  common  may  extend  to  other  parcels  or  estates.^ 
But  a  mortgage  cannot  be  extended  over  land  which  it  does 
not  cover.^  Where  one  of  two  or  more  tenants  in  common 
mortgages  his  entire  interest  in  the  common  estate,  the  mort- 
gage will  cover  the  part  allotted  to  the  mortgagor  in  a  partition 
subsequently  made.^  And  where  one  of  several  tenants  in 
common  mortgages  less  than  his  entire  interest  in  the  whole 
of  the  common  estate,  and  the  estate  is  afterward  divided,  the 
mortgage  will  cover  a  proportional  interest  in  the  whole  of  the 
part  allotted  to  the  mortgagor.  * 

^  Primm  v.  Walker,  38  Mo.  94. 

"  Green  v.  Arnold,  11  R.  I.  364. 

'  Fuller  V.  Bradley,  23  Pick.  (Mass.)  8 ;  Blodgett  v.  Hildreth,  8  Allen  (Mass.), 
186. 

*  Green  v.  Arnold,  11  R.  1. 364,  and  see  Moore  v.  Moore,  47  N.  Y.  467. 

^  Green  v.  Arnold,  11  R.  I.  364. 

« Jackson  r;.  Fierce,  10  Johns.  (N.  Y.)  417;  Crosby  v.  Allyn,  5  Me.  453; 
Williams  College  v.  Mallett,  12  Me.  398. 

'  Crosby  v.  Allyn,  5  Me.  453 ;  Watson  v.  Priest,  9  Mo.  App.  263.  See,  also, 
Loomis  V.  Riley,  24  111.  307  ;  Thurston  v.  Minke,  32  Md.  571. 

« Randell  v.  Mallett,  14  Me.  51. 


the  rights  of  the  mortgagee.  905 

Article  2. 
Relative  Rights  as  to  Mortgagor. 

^  897.  Privity  of  Estate.  ^  903.  May  Have  a  Reasonable  Com- 
§  898.  Eight  to  Condemnation  Money  pensation. 

Arising  from  the   Mortgaged  §  904.  Rents  and  Profits. 

Premises.  ?  905.  Improvements. 

§  899.  The  Mortgagee  May  Purchase  |  906.  Grantee  in  a  Deed  of  Trust. 

the  Right  of  Redemption.  ^  907.  Accounting. 

§  900.  Mortgagee  in  Possession.  §  908.  Taxes. 

§  901.  Must  Exercise  Reasonable  Care.  ?  909.  Mortgagee  Out  of  Possession — 
§  902.  He  May  Take  Possession  by  Taxes. 

Agreement. 

§  897.  Privity  of  Estate. — The  mortgagee  is  in  privity  of 
estate  with  the  mortgagor  only  in  respect  to  the  estate  as  it 
existed  when  the  mortgage  was  executed.^  It  is  a  well-settled 
rule  that  mortgagees  are  not  bound  by  judgments  or  decrees 
rendered  against  the  mortgagor  and  affecting  the  mortgaged 
premises  in  suits  begun  by  third  parties  subsequent  to  the  exe- 
cution of  the  mortgage,  unless  the  mortgagees  themselves  are 
made  parties  to  the  litigation.^ 

The  doctrine  of  privity  cannot  be  invoked  to  bind  mort- 
gagees by  decrees  against  the  mortgagor  in  suits  between  him 
and  third  parties,  unless  the  mortgage  was  executed  pendente 
lite  or  after  decree.^ 

The  mortgagee  is  entitled  to  a  lien  on  the  whole  property 
mortgaged.* 

He  must  be  made  a  party  in  an  application  to  set  apart  a 
homestead;^  to  a  bill  to  set  aside  a  previous  sale  under  proceed- 
ings in  insolvency ]^  to  a  bill  to  compel  performance  of  a  con- 
tract by  the  owner  to  convey  the  estate;^  to  a  suit  to  avoid  a  pur- 

1  Mathes  v.  Cover,  43  Iowa,  512. 

"^  Secor  V.  Singleton,  41  Fed.  Rep.  725. 

3  Campbell  v.  Hall,  16  N.  Y.  575  ;  Scales  v.  King,  110  111.  456  ;  Cutter  i-.  Jones, 
52  111.  84 ;  Zoeller  v.  Riley,  100  N.  Y.  102 ;  Doe  v.  Derby,  1  Adol.  &  E.  783. 

*  Spencer  v.  Waterman,  36  Conn.  342 ;  Tarbell  v.  Page  (Mass.),  29  N.  E.  Rep. 
585. 

^Lies  V.  De  Diablar,  12  Cal.  327. 

«Coiron  v.  Millaudon,  19  How.  (U.  S.)  113. 

J  Hoxie  V.  Carr,  1  Sumner,  C.  C.  173. 


906  RIGHTS   OF    PARTIES   BEFORE    DEFAULT. 

chase  of  real  estate  by  an  administrator  who  had  given  a  mort- 
gage while  in  possession  and  claims  title  under  his  purchase.^ 
He  is  not  a  necessary  party  to  a  proceeding  which  relates  to 
an  injury  done  to  the  possession  of  the  mortgagor.^ 

§  898.  Right  to  Condemnation  Money  Arising  from  the 
Mortgaged  Premises. — The  mortgagee  of  land  which  is  con- 
demned for  public  improvements  has  a  lien  on  the  money 
paid  for  damages,  notwithstanding  the  amount  has  already 
been  paid  to  the  mortgagor.^  A  foreclosure  and  sale  under  the 
mortgage  to  secure  the  purchase-money  avoid  a  previous 
dedication  by  the  mortgagor,  and  a  purchaser  at  such  sale 
buys  free  from  it.*  But  if  the  mortgagee  releases  lots  laid  out 
as  an  addition  to  a  city,  by  referring  to  the  map  of  the  land  as 
laid  out,  such  a  release  discharges  the  lien  on  those  lots  and 
half  of  the  street  in  front  of  them.^ 

The  surplus  arising  from  the  sale  of  a  prior  mortgage  is  sub- 
ject to  the  lien  of  the  junior  mortgage.^ 

The  condemnation  money  is  substituted  in  the  place  of  the 
land  and  must  be  applied  in  payment  of  the  mortgage  debt.^ 

The  sum  awarded  arises  from  and  grows  out  of  the  land  by 
reason  of  the  injury  which  has  diminished  its  value.  In  equity 
it  is  the  land  itself.^ 

There  is  much  reason  for  providing  that  a  mortgagee,  whose 
security  is  enhanced  in  value  by  the  construction  of  a  public 

iWoodruflfr.  Cook,  2  Edw.  (N.  Y.)  259. 

^  Paine  v.  Woods,  108  Mass.  160. 

3  Sherwood  v.  Lafayette,  109  Ind.  411 ;  Parks  v.  Boston,  15  Pick.  (Mass.) 
198,  203 ;  Baltimore,  etc..  Railroad  Co.  v.  Thompson,  10  Md.  76 ;  White  v. 
Rittenmeyer,  30  Iowa,  268  ;  Choteau  v.  Thompson,  2  Ohio  St.  114  ;  Kennedy 
V.  Milwaukee,  etc..  Railroad  Co.,  22  Wis.  581 ;  Philadelphia,  etc..  Railroad  Co. 
V.  Williams,  54  Pa.  St.  103 ;  Astor  v.  Hoyt,  5  Wend.  (N.  Y.)  603  ;  Piatt  v. 
Bright,  31  N.  J.  Eq.  81  ;  Bank  v.  Roberts,  44  N.  Y.  192 ;  Railroad  Co.  v. 
Chamberlain,  84  111.  333. 

*  Moore  v.  Little  Rock,  42  Ark.  66. 

5  Hague  V.  West  Hoboken,  23  N.  J.  Eq.  354. 

«Bartlett  v.  Gale,  4  Paige  (N.  Y.),  503. 

^  Astor  V.  Hoyt,  5  Wend.  (N.  Y.)  603  ;  Sherwood  v.  Lafayette,  109  Ind.  411 ; 
Astor  r.  Miller,  2  Paige  (N.  Y.),  68  ;  Gimbel  v.  Stolte,  59  Ind.  446 ;  In  re  John 
and  Cherry  Streets,  19  Wend.  (N.  Y.)  659. 

8  Bank  v.  Roberts,  44  N.  Y.  192.    See  sect.  858. 


THE    RIGHTS    OF    THE    MORTGAGEE.  907 

drain  should  have  the  lien  of  his  mortgage  subordinated  to 
the  lien  of  a  fair  assessment  for  the  cost  of  its  construction. 
But  if  the  statute  contains  no  such  provision,  the  mortgage 
will  not  be  affected.^  A  mortgagee  cannot,  before  maturity  of 
the  debt,  recover  compensation  for  the  impairment  of  his 
security  by  condemning  part  of  the  mortgaged  land  for  the  pur- 
pose of  a  public  road.^ 

§  899.  The  Mortgagee  May  Purchase  the  Equity  of 
Redemption. — The  mortgagee  may  become  the  purchaser  of 
the  equity  of  redemption,  if  he  does  not  use  his  power  over 
the  estate  to  induce  the  mortgagor  to  part  with  it.^ 

The  mortgagee  is  under  no  obligations  to  protect  the  equity 
of  redemption,  and  under  circumstances  showing  a  bona  fide 
purchase,  and  that  no  unconscionable  advantage  was  taken,  has 
a  right  to  purchase  it.*  Where  such  a  sale  to  the  mortgagee 
is  fair  under  all  the  circumstances,  it  will  be  sustained.^ 

In  Minnesota,  however,  it  is  held  that,  when  a  mortgagor 
could  not  pay  the  debt  and  asked  for  an  extension  which  was 
refused,  and  then  agreed  to  take  a  certain  amount  of  money 
and  the  notes  back  from  the  mortgagee  and  convey  him  the 
land  absolutely,  such  transaction  did  not  discharge  the  right 
of  the  mortgagor  to  redeem.^ 

^Pierce  v.  Ins.  Co.  (Ind.),  31  N.  E.  Eep.  68.  See,  also,  Killian  v.  Andrews 
(Ind.),  30  N.  E.  Rep.  700. 

^'Aggs  V.  Shackelford  Co.  (Tex.),  19  S.  W.  Rep.  1085. 

3  Hinkley  v.  Wheelwright,  29  Md.  348  ;  Hicks  v.  Hicks,  5  Gill  &  J.  (Md.)  85 ; 
Russell  V.  Southard,  12  How.  (U.  S.)  154 ;  Villa  v.  Rodriquez,  12  Wall.  (U.  S.) 
333,  3.39 ;  Walker  v.  Bank  (Del.),  10  At.  Rep.  94. 

*  Knight  V.  Majoribanks,  2  Mac.  &  G.  10  ;  Shelton  r.  Hampton,  6  Ired.  L.  (N. 
Car.)  216 ;  Dennis  v.  Tomhnson,  49  Ark.  568  ;  Ten  Eyck  v.  Craig,  62  N.  Y.  406 ; 
Remsen  v.  Hay,  2  Edw.  (N.  Y.)  535.  Compare  Whitehead  v.  Hellen,  76  N. 
Car.  99  ;  Lee  v.  Pearce,  68  N.  Car.  76 ;  McLeod  v.  Bullard,  84  N.  Car.  515,  531. 

nVest  V.  Reed,  55  111.  242 ;  1  Washb.  Real  Prop.  62 ;  1  Powell  on  ]Mort.  122, 
note  n ;  Hyndman  r.  Hyndman,  19  Vt.  1 ;  Green  r.  Butler,  26  Cal.  595 ;  Pugh 
V.  Davis,  96  U.  S.  332 ;  Thompson  v.  Lee,  31  Ala.  292 ;  2  White  &  Tudor's 
Lead.  Cas.  in  Eq.  (4th  Am.  ed.)  pt.  2,  pp.  1983-4-5 ;  Trull  v.  Skinner,  17  Pick. 
(Mass.)  213 ;  Wynkoop  v.  Cowing,  21  111.  570 ;  Oliver  v.  Cunningham,  7  Fed. 
Rep.  689 ;  Blythe  v.  Richards,  10  Serg.  &  R.  (Pa.)  261 ;  WalthaU  v.  Rives, 
34  Ala.  91 ;  Harrison  v.  Roberts,  6  Fla.  711. 
^  ^  Jones  V.  Blake,  33  Minn.  362. 


908  RIGHTS    OF    TARTIES   BEFORE    DEFAULT. 

If  the  mortgagee  in  bujang  the  redemption  gains  an  uncon- 
scionable advantage,  and  has  j^urchased  it  for  a  less  sum  than 
others  would  have  given,  then  a  court  of  equity  will  set  the 
sale  aside/ 

When  the  mortgagee  has  taken  a  mortgage  he  is  a  bo7ia  fide 
purchaser,^  and  is  not  affected  by  his  mortgagor's  fraud  iu 
acquiring  his  title.^ 

The  mortgagee  can  likewise  purchase,  in  good  faith,  the 
equity  of  redemption,  though  he  be  in  possession  of  the 
premises/ 

Constructive  fraud,  however,  is  enough  to  set  aside  such  a 
sale,*  and  a  grossly  inadequate  price  will  render  such  sale 
voidable."  And  when  the  mortgagee  has  taken  the  property 
in  full  satisfaction  of  his  debt,  there  being  subsequent  liens, 
the  burden  of  proof  is  on  him  to  show  that  his  debt  was  equal 
to  the  value  of  the  property/ 

§  900.  Mortgagee  in  Possession. — In  some  States  where 
the  mortgage  is  only  a  lien  the  mortgagee  cannot  take  posses- 
sion before  foreclosure  without  the  mortgagor's  consent.  Thus, 
in  Oregon,  where  he  takes  possession  of  such  premises  in  a 
peaceable  manner,  without  foreclosure,  he  may  retain  posses- 
sion as  against  the  mortgagor  or  any  person  claiming  under 
him  subsequent  to  the  mortgage,  and  hold  possession  until  the 
mortgage  debt  is  paid.^  And  in  general,  when  he  has  right- 
ful possession,  he  may  hold  it  until  his  debt  is  satisfied.^ 

1  Webb  V.  Rorke,  2  Sch.  &  Lef.  661 ;  Ford  v.  Olden,  L.  R.  3  Eq.  461 ;  Russell 
V.  Southard,  12  How.  (U.  S.)  154. 

^Plaii^ted  r.  Holmes,  58  N.  H.  619. 

'  Stockton  V.  Craddick,  4  La.  Ann.  282 ;  Bailey  r.  Crim,  0  Biss.  C.  C.  95. 

*  King  V.  Ins.  Co.,  7  Cush.  (Mass.)  1 ;  Duval  v.  Bank,  10  Ala.  636 ;  Clark  v. 
Bush,  3  Cow.  (N.  Y.)  151;  Cholmondeley  v.  Clinton,  2  Jac.  &  Walk.  183; 
Austin  V.  Bradley,  2  Day  (Conn.),  406;  Trimm  v.  Marsh,  54  N.  Y.  599; 
Woodlee  v.  Burch,  43  Mo.  231 ;  Harrison  v.  Roberts,  6  Fla.  711 ;  Walthall  v. 
Rives,  34  Ala.  92. 

s  Perkins  v.  Drye,  3  Dana  (Ky.),  170 ;  Lee  v.  Pearce,  68  N.  Car.  76 ;  McLeod 
V.  Bullard,  84  N.'Car.  515,  531.' 

«McKinstry  v.  Conly,  12  Ala.  678. 

'  Yates  V.  Mead,  68  Miss.  787. 

®  Cooke  r.  Cooper,  18  Oreg.  142. 

"Van  Duyne  v.  Thayre,  14  Wend.  (N.  Y.)  234;  Phyfe  v.  Riley,  15  Wend. 


« 


THE    RIGHTS    OF    THE    MORTGAGEE.  909 

And  if  the  mortgagee  obtains  possession  lawfully,  after  for- 
feiture, the  mortgagor  cannot  recover  possession  without  satis- 
fying the  mortgage ;  ^  the  assignee  of  the  mortgagor  has  no 
better  right." 

If  the  mortgagee  gets  possession  by  some  other  title  than  by 
the  mortgagor,  before  maturity  of  the  debt,  he  will  be  deemed  as 
holding  as  a  mortgagee  at  forfeiture.^  But  obtaining  possession 
by  collusion  of  mortgagor's  tenant  confers  no  right  where  the 
legal  title  is  not  conveyed  by  the  mortgage  on  condition  broken,^ 

And  after  the  expiration  of  the  time  within  which  a  mort- 
gage may  be  enforced  by  foreclosure,  the  mere  entering  into  pos- 
session b}^  the  mortgagee,  without  objection  on  the  part  of  the 
mortgagor,  does  not  restore  the  mortgage  to  efficacy,  but  entitles 
the  mortgagee  to  the  rights  of  a  mortgagee  in  possession.^ 

When  the  mortgagee  is  in  possession  with  the  right  of  re- 
demption in  the  mortgagor,  if  anything  is  found  due  the  mort- 
gagor, it  is  error  to  grant  a  writ  of  assistance  to  recover 
possession  before  an  accounting  is  made.*'  A  release  by  the 
mortgagor  to  the  mortgagee  of  the  premises  passes  all  the 
former's  right  to  the  land.'^ 

§  901.  Must  Exercise  Reasonable  Care. — The  mortgagee 
in  possession  must  exercise  reasonable  diligence  in  taking  care 
of  the  income  of  the  premises  ;  because,  by  taking  possession 
he  imposes  upon  himself  the  duty  of  a  provident  owner,  and 

(N.  Y.)  248  ;  Hubbell  v.  IMoulson,  53  N.  Y.  225 ;  Dickason  v.  Dawson,  85  111. 
53 ;  Nicholson  v.  Walker,  4  111.  App.  404 ;  Fee  v.  Swingly,  0  Mont.  57G ;  Brink- 
man  V.  Jones,  44  Wis.  498  ;  Martin  v.  Fridley,  23  Minn.  13  ;  Roberts  v.  Suth- 
erlin,  4  Oreg.  219 ;  Chase  v.  Peck,  21  N.  Y.  581 ;  Rodriguez  v.  Havnes,  76  Tex. 
225. 

1  Wills  V.  Rice,  34  Ark.  346;  Brobst  v.  Brock,  10  Wall.  (U.  S.)  519  ;  Harper 
V.  Ely,  70  111.  581 ;  Hennesy  v.  Fan-ell,  20  Wis.  42 ;  Pace  v.  Chadderdon,  4 
Minn.  499. 

2  Kilgour  V.  Gockley,  83  111.  109. 

3  Winslow  r.  McCail,  32  Barb.  (N.  Y.)  241 ;  Bolton  r.  Brewster,  32  Barb. 
(N.  Y.)  389.    Compare  Cable  v.  Ellis,  86  111.  525. 

*  Sahler  v.  Signer,  44  Barb.  (N.  Y.)  606 ;  Russell  v.  Ely,  2  Black  (U.  S.),  575. 
^  Banning  v.  Sabin,  45  Minn.  431. 
«  Dickerson  v.  Thomas,  68  IMiss.  156. 
,  'Clark  V.  Clough,  65  N.  H.  43. 


910  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

is  bound  to  recover  what  such  owner  would,  with  reasonable 
diligence,  have  received.'  When  he  has  used  due  diligence 
he  is  only  chargeable  with  the  receipts  actually  coming  to  him.^ 
And  a  mortgagee  in  possession  under  an  agent  selected  by 
both  parties  is  held  to  the  exercise  of  reasonable  diligence  in 
the  management  of  the  mortgaged  property,  and  is  not  liable 
as  a  trustee.^ 

§  902.  He  May  Take  Possession  by  Agreement. — The 
mortgagee  can  go  into  possession  at  any  time  by  consent  of  the 
mortgagor,'*  and  the  mortgagor's  assent  to  such  possession  of 
the  mortgagee  may  be  inferred  by  circumstances.*  And  this 
possession  may  be  presumed  sometimes  from  the  mortgage 
itself,  unless  there  be  some  agreement  to  the  contrary.^ 

§  903.  May  Have  a  Reasonable  Compensation. — The 
mortgagee  for  his  own  services  may  have  in  some  States  a  rea- 
sonable compensation.  He  may  have  a  compensation  for  the 
care  and  management.^  But  he  is  not  allowed  any  com- 
pensation for  his  personal  trouble  in  taking  care  of  the  estate 
and  renting  it,  when  such  allowance  would  facilitate  usury 
and  oppression.^ 

§  904.  Rents  and  Profits. — A  mortgagee  in  actual  posses- 
sion must  devote  the  entire  rents  and  profits  to  the  payment  of 
the  mortgage,  and  cannot  divert  any  part  thereof  toward  the 
satisfaction  of  other  unsecured  claims  due  him  from  the  mort- 
gagor, without  express  assent  of  the  latter.* 

^  Moshier  v.  Norton,  100  111.  63 ;  Gresham  v.  Ware,  79  Ala.  199  ;  Shaeffer  v. 
Chambers,  6  N.  J.  Eq.  548 ;  Scruggs  v.  Railroad  Co.,  108  U.  S.  375. 

■■'  Brown  v.  Bank,  148  Mass.  300. 

^Murdock  v.  Clarke,  90  Cal.  427. 

*Snowr.  Warwick  Inst.  (R.  I.),  20  At.  Rep.  94. 

^  Rogers  v.  Benton,  39  Minn.  39. 

« Madison  Ave.  Church  v.  OUver  St.  Church,  41  N.  Y.  Superior  Ct.  369 ;  73 
N.  Y.  82. 

^  Brown  v.  Bank,  148  Mass.  300. 

8 Snow  V.  Warwick  Inst,  for  Savings  (R.  I.),  20  At.  Rep.  94.  See,  also,  Mil- 
ler V.  Curry,  124  Ind.  48. 

®  Harrill    v.    Stapleton,    55    Ark.    1 ;    Jefferson    v.    Edrington,    53    Ark. 


THE    RIGHTS    OF    THE    MORTGAGEE.  911 

He  is  chargeable  for  such  income  which  may  be  set  oflf 
against  him  under  the  mortgage  in  a  suit  for  foreclosure.^ 

But  he  may  enter  into  a  contract  with  the  mortgagor  that 
such  rents  and  profits  in  excess  of  the  interest  due  on  the 
mortgage,  may  be  applied  to  other  unsecured  debts  due  or  to 
become  due  from  the  mortgagor  to  the  mortgagee,^  and  such 
contract  will  be  enforced  if  it  be  not  unconscionable  and  op- 
pressive.^ 

But  where  the  mortgagee  is  only  in  possession  as  the  husband 
of  one  of  the  mortgagors,  and  emploj^ed  a  party  to  care  for  the 
premises,  and  received  no  rents  and  profits,  he  cannot  be  held 
for  the  rents  and  profits.*  And  a  party  who  is  put  in  trust 
or  charge  of  personal  property  in  the  hands  of  the  law,  upon 
the  mortgaged  premises,  is  not  responsible  for  rents  and  profits.^ 

And  when  the  mortgagor  has  possession  by  will  of  the  mort- 
gagee, the  crops  raised  by  him  must  go  to  the  mortgagee  until 
the  secured  debt  is  paid.^ 

The  mortgagee  in  possession  may  defend  against  the  owner 
of  the  equity  of  redemption  or  his  representative  except  where 
it  is  an  action  for  accounting  for  the  rents  and  profits  and  to 
redeem.'^ 

Where  the  mortgagee  has  been  in  possession,  and  fails  to  ac- 
count for  the  rents  and  profits,  his  mortgage  will  be  declared 
satisfied.^ 

§  905.  Improvements. — A  mortgagee  in  possession  may 
lawfully  take  down  and  carry  away  buildings  erected  by  him 

545 ;  Caldwell  v.  Hall,  49  Ark.  508 ;  Swegle  v.  Belle  (Oreg.),  25  Pac.  Rep. 
633. 

1  Clark  V.  Clark,  62  N.  H.  267. 

^Demick  v.  Cuddihy,  72  Cal.  110. 

^  Bryson  r.  James,  55  N.  Y.  Superior  Ct,  374.  See,  also,  Simpson  v.  Deane, 
39  Mo.  App.  635. 

*  Young  r.  Omohundro,  69  Md.  424. 

*  Davis  V.  Flagg,  44  N.  J.  Eq.  109. 
«Coor  V.  Smith,  101  N.  Car.  261. 

'  Case  V.  Buttolph,  12  Barb.  (N.  Y.)  637 ;  Winslow  v.  McCall,  32  Barb.  (N.  Y.) 
241 ;  Trimm  v.  Marsh,  54  N.  Y.  599  ;  Cummings  v.  Cummings,  75  Cal.  434  ; 
Fee  )•.  Swingly,  6  Mont.  576. 
^  «  Morgan  v.  Morgan,  48  N.  J.  Eq.  399. 


912  EIGHTS   OF    PARTIES    BEFORE    DEFAULT. 

on  the  land  mortgaged,  and  materials  which  were  his,  and  not 
so  connected  with  the  soil  that  they  cannot  be  removed  with- 
out injury  to  it.^  And  he  is  entitled  to  compensation  for  taxes 
and  judgment  liens  paid  by  him  and  repairs  made,  but  not 
for  improvements  though  the  mortgage  is  on  its  face  an  abso- 
lute deed,  and  he  believes  himself  to  be  the  owner  in  fee.^  If 
the  mortgagor  be  in  possession  and  removes  buildings,  which 
are  attached  in  a  permanent  manner,  to  other  realty,  the  mort- 
gagee's remedy  is  at  law  and  not  in  equity  against  the  mort- 
gagor.^ 

The  devisee  of  a  grantee  of  land  by  absolute  deed  as  a  se- 
curity, holds  it  in  trust  for  the  grantor  or  mortgagor,  and  the 
mortgagor  is  not  guilty  of  laches  for  the  mere  delay  in  fore- 
closing.* 

The  mortgagee  in  possession  cannot  be  allowed  anj^thing  for 
improvements  except  those  for  the  necessary  repairs.*^  But  the 
mortgagor  may  agree  to  allow  the  mortgagee  for  improve- 
ments, which  will  be  considered  in  a  settlement  of  the 
debt."  But  a  third  person  cannot  make  improvements  on 
the  mortgaged  premises  by  agreement  with  the  mortgagor 
so  as  to  affect  the  right  of  the  mortgagee  to  sell  them  with 
the  land.'' 

When  the  mortgagee  has  agreed  with  the  mortgagor  for 
compensation  for  his  improvements,  he  can  only  have  such 
recompense  for  those  that  he  has  made  on  the  premises,  and 
not  for  those  previously  put  upon  the  land.^  In  Louisiana  the 
respective  values  of  the  land  and  improvements  are  ascer- 
tained and  the  mortgagee  receives  the  value  which  the  land 
bears  relatively  to  the  amount  of  the  sale.* 

^  Cooke  V.  Cooper,  18  Oreg.  142. 

2  Miller  v.  Curry,  124  Ind.  48. 

3  Verner  v.  Betz,  46  N.  J.  Eq.  256. 
*  Jackson  v.  Lynch,  129  111.  72. 

6  Robertson  v.  Read,  52  Ark.  381. 
^Harrill  v.  Stapleton,  55  Ark.  1. 
'  Meagher  v.  Hayes,  152  Mass.  228. 

®  Harrill  v.  Stapleton,  55  Ark.  1.    S'ee,  also,.  Miller  v.  Curry,  124  Ind.  48 ; 
Verner  v.  Betz,  46  N.  J.  Eq.  256. 
9  Taylor  v.  Marshall,  43  La.  Ann.  10601 


THE    RIGHTS    OF    THE    MORTGAGEE.  913 

§  906.  Grantee  in  a  Deed  op  Trust. — After  condition 
broken,  but  without  entry  or  attornment,  the  grantee  in  a  deed 
of  trust  has  no  right  to  collect  rents  from  a  person  in  posses- 
sion who  was  not  a  party  to  the  deed.^ 

A  beneficiary  in  a  trust  deed,  after  condition  broken,  entered 
upon  the  premises,  no  sale  under  the  trust  deed  having  taken 
place,  and  sold  the  estate.  The  trustor  brought  an  action  of 
ejectment  against  the  purchaser,  and  it  was  held  that  the  pur- 
chaser was  an  assignee  of  the  ec{uity  of  the  beneficiary,  and 
could  hold  possession  until  the  grantor  paid  the  money  se- 
cured ;  ^  that  he  was  not  a  mere  stranger  setting  up  a  title  in  a 
third  person.^ 

A  condition  in  a  note  and  trust  deed  that,  on  default  in 
payment  of  interest,  the  holder  of  the  note  may  declare  the 
entire  debt  due,  is  not  the  enforcement  of  a  penalty  or  forfeit- 
ure, and  is  valid  even  in  equity.* 

§  907.  Accounting. — Where  the  amount  of  the  mortgage 
trust  was  filed  and  confirmed,  and  the  fund  shown  thereby  dis- 
tributed by  a  court  of  competent  jurisdiction,  its  decree  is  con- 
clusive in  all  collateral  proceedings,  not  only  as  to  the  matters 
that  were  actually  raised,  but  as  to  all  that  might  have  been 
raised.^ 

And  when  a  conveyance  absolute  in  form  is  made  as  a 
security  for  advances  to  nearly  the  full  value  of  the  property, 
conveyed,  the  debtor  has  no  right  to  vary  the  form  of  the 
security,  and  demand  a  conveyance  of  the  equity  of  redemjD- 
tion." 

And  under  the  New  York  statute,''  providing  that  when  real 
estate  is  subject  to  a  mortgage  and  shall  descend  to  the  heir  of 
the  mortgagor,  the  heir  shall  discharge  such  mortgage  himself 

1  Forlouf  V.  Bowlin,  29  111.  App.  471. 

^  Johnson  v.  Houston,  47  INIo.  227.    See,  also,  Stallings  v.  Thomas,  55  Ark. 
326. 

*  Woods  V.  Hilderbrand,  46  :\ro.  284. 

*  Magnusson  r.  Williams,  111  111.  450. 

°  Estate  of  Helfenstein,  135  Pa.  St.  293  ;  26  Week.  N.  Cas.  194. 
®  Rawson  r.  Plaisted,  151  Mass.  71. 
'  1  Eev.  Stat.,  p.  749,  sect.  4. 
58 


914  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

without  resorting  to  the  ancestor's^  estate,  unless  tlic  ancestor 
directs  that  the  mortgage  shall  be  paid  from  the  estate,  the 
mortgagee  can  maintain  an  action  for  the  amount  of  the  de- 
ficiency directly  against  the  heir/ 

A  court  upon  entering  the  final  decree,  may  make  a  supple- 
mental finding,  showing  the  expenditures  and  receipts  since 
the  former  accounting.^ 

If  the  mortgagee  makes  up  his  account  from  memory  after 
the  lapse  of  several  years,  the  court  may  disregard  it,  and  fix 
his  liability  from  other  evidence.^  And  where  a  mortgagee  in 
possession  of  an  undivided  interest  in  a  milling  projDerty  forms 
a  partnershi]^  with  another  to  carry  on  the  business,  he  will 
be  charged,  on  an  accounting  in  equity,  with  the  fair  rental 
value  of  the  half  interest.* 

The  mortgagee's  accountability  for  rents  and  profits  is  not 
the  same  when  he  enters  under  a  tax  title  as  it  would  be  if  he 
enters  under  the  mortgage.^ 

§  908.  Taxes. — The  mortgagee  in  possession  must  apph'-  the 
rents  and  profits  in  payment  of  the  taxes.^  The  j^ayment  of 
taxes  is  a  duty  on  his  part,  and  he  is  like  a  trustee,  and  can  get 
no  title  by  payment  of  the  taxes.^  But  he  can  pay  the  taxes 
and  add  the  amount  to  the  mortgage  debt,  but  he  cannot  ob- 
tain an  adverse  title  by  a  purchase  at  a  tax  sale.^  The 
same  rule  applies  as  between  a  subsequent  and  a  prior  mort- 
gagee.^ 

iHauselt  v.  Patterson,  51  Hun  (N.  Y.),  321. 

2  Murdock  v.  Clarke,  88  Cal.  384.  See,  also,  Estate  of  Helfenstein,  135  Pa. 
St.  293  ;  26  Week.  N.  Cas.  194. 

3  Hall  V.  Westcott  (R.  I.),  23  At.  Rep.  25. 

*  Engleman  Transp.  Co.  v.  Longwell,  48  Fed.  Rep.  129. 

^Hall  V.  Westcott  (R.  I.),  23  At.  Rep.  25. 

«  Gorham  v.  Farson,  119  111.  425. 

'  Burchard  v.  Roberts,  70  AVis.  Ill ;  Eck  v.  Swennumson,  73  Iowa,  423 ;  Ten 
Eyck  V.  Craig,  62  N.  Y.  406,  422 ;  Moore  v.  Titman,  44  111.  367 ;  Chickering  v. 
Failes,  26  111.  508 ;  Brown  v.  Simons,  44  N.  H.  475. 

8  Brown  v.  Simons,  44  N.  H.  475 ;  Johnson  v.  Payne,  11  Nebr.  269 ;  Martin 
V.  Swofford,  59  Miss.  328 ;  Brevort  v.  Randolph,  7  How.  Pr.  (N.  Y.)  398 ; 
Moore  v.  Titman,  44  HI.  367. 

»Horton  v.  Ingersoll,  13  Mich.  409 ;  Smith  v.  Lewis,  20  Wis.  350. 


THE    RIGHTS    OF    THE    MORTGAGEE.  915 

The  mortgagee  is  regarded  as  holding  the  title  in  trust  for 
the  mortgagor's  benefit.^ 

The  mortgagee  of  lands  has  a  right  to  raise  the  question  of 
the  invalidity  of  tax  sales  subsequent  to  his  mortgage.^  The 
grantee  of  mortgaged  land  cannot  acquire  a  title  superior  to  the 
mortgage  by  permitting  the  land  to  be  sold  for  taxes  and 
buying  it  in.^ 

In  Minnesota  a  mortgagee  may  acquire  a  tax  title  to  the 
mortgage  premises  as  against  the  mortgagor,  where  the  mort- 
gagee is  neither  legally  nor  equitably  bound  to  protect  the 
property  against  the  taxes  for  which  the  sale  is  made,  since 
the  mortgagee  is  not  among  the  persons  forbidden  by  the 
statute  to  acquire  tax  titles.* 

A  mortgagee  may  sue  to  set  aside  an  illegal  tax  sale  of  part 
of  the  mortgaged  land,  even  though  the  mortgage  debt  could 
be  collected  by  a  sale  of  the  rest  of  the  mortgaged  land,  and 
a  suit  against  the  mortgagor.^ 

§  909.  Mortgagee  out  of  Possessiox — Taxes. — Where  the 
mortgagee  is  out  of  possession,  then  a  different  rule  applies,  and 
he  may  lawfully  acquire  for  his  own  benefit  any  outstanding 
paramount  title  to  the  mortgagor's."  He  being  out  of  posses- 
sion, is  under  no  obligation  to  pay  the  taxes  on  the  mortgaged 
premises ;  so  he  may  acquire  title  to  the  property  by  a  fair 
purchase  at  a  tax  sale  ;  "^  so  out  of  possession,  he  may  buy  in 
the  land  at  a  tax  sale  and  hold  it  like  any  other  purchaser.^ 

^  Gorham  v.  Farson,  119  111.  425. 

2  Cromwell  v.  MacLean,  12,3  N.  Y.  474.  See,  also,  Rawson  v.  Plaisted,  151 
Mass.  71 ;  Mandeville  v.  Avery,  57  Hun  (N.  Y.),  78. 

^  Harding  v.  Durand,  36  111.  App.  238. 

*  Eeimer  v.  Newell,  47  Minn.  237. 

5  Miller  v.  Cook,  135  111.  190. 

^Gjerness  v.  Mathews,  27  Minn.  320. 

'  Eastman  v.  Thayer,  60  N.  H.  408 ;  Summers  v.  Kanawha,  26  W.  Va.  159  ; 
Waterson  v.  Devoe,  18  Kan.  223 ;  Coombs  v.  "Warren,  34  Me.  89 ;  Smith  v. 
Lewis,  20  Wis.  350 ;  Chapman  v.  Mull,  7  Ired.  Eq.  (N.  Car.)  292. 

^Waterson  v.  Devoe,  18  Kan.  223  ;  Williams  v.  Townsend,  31  N.  Y.  411 ; 
Morrow  v.  Dows,  28  N.  J.  Eq.  459 ;  Cornell  v.  Woodruff,  77  N.  Y.  203. 


916  rights  of  parties  before  default. 

Article  3. 
Remedies  Against  the  Mortgagor. 

§  910.  Ejectment.  |  913.  Writ  of  Entry. 

I  911.  Evidence.  I  914.  Limitation. 

§  912.  Forcible  Entry  and  Detainer. 

§  910.  Ejectment. — In  those  States  where  the  mortgagee  is 
not  allowed  to  take  possession,  he  cannot  bring  ejectment 
against  the  mortgagor  for  the  premises ;  ^  and  so,  when  the 
mortgagee  gets  possession  without  the  mortgagor's  consent,  the 
mortgagor  can  oust  him  by  ejectment.^ 

Under  the  common-law  rule,  after  the  maturity  of  the  mort- 
gage, the  mortgagee  has  a  right  to  the  possession,  and  may 
bring  ejectment  against  the  mortgagor  v/ithout  foreclosure  and 
sale,  and  without  giving  him  previous  notice.^ 

A  cestui  que  trust  in  a  deed  of  trust  is  not  a  mortgagee  and 
cannot  bring  ejectment.^ 

In  those  States  where  a  mortgage  is  but  a  lien,  the  mortgagee 
cannot  maintain  ejectment  against  the  mortgagor,  even  if  the 
security  is  in  the  form  of  an  absolute  deed.^ 

In  Oregon  the  mortgagee  cannot  take  possession  against  the 
mortgagor's  will,  but  if  allowed  to  take  possession  then  he  can 
hold  it ;  ^  but  in  Michigan  the  mortgagee  cannot  take  posses- 
sion, if  so  agreed  in  the  mortgage,  so  as  to  abridge  the  mort- 
gagor's rights.'' 

At  common  law  a  lease  to  the  mortgagee  by  the  mortgagor 
who  has  not  stipulated  for  possession  in  the  mortgage  does  not 
bar  the  mortgagee  from  bringing  a  real  action  for  the  posses- 

1  Fox  V.  Wharton,  5  Del.  Ch.  200 ;  Teal  v.  Walker,  111  U.  S.  242. 

2  Newton  v.  McKay,  30  Mich.  380 ;  Reading  v.  Waterman,  46  Mich.  107  ; 
Morrow  v.  Morgan,  48  Tex.  304  ;  Mills  v.  Heaton,  52  Iowa,  215,  217. 

3  Ford  ;;.  Steele,  54  Vt.  562 ;  Allen  v.  Ranson,  44  Mo.  263 ;  Johnson  v.  Wat- 
son, 87  111.  535  ;  Carroll  v.  Ballance,  26  111.  9. 

*  Barnum  v.  Cook,  14  Mo.  App.  590. 

5  Berdell  v.  Berdell,  33  Hun  (N.  Y.),  535.    See,  also,  Murray  v.  Walker,  31 
N.  Y.  399  ;  Hazeltine  v.  Granger,  44  ]\Iich.  503. 
^  Cooke  V.  Cooper,  18  Oreg.  142. 
7  Batty  V.  Snook,  5  Mich.  231. 


THE    RIGHTS    OF    THE    MORTGAGEE.  917 

sion  of  the  premises  before  breach  of  the  condition.^  One 
claiming  through  the  mortgagor  who  lias  placed  the  mortgagee 
iu  possession  cannot  maintain  ejectment  against  the  mortgagee 
while  the  mortgage  debt  remains  unsatisfied,  even  though  an 
action  thereon  by  the  mortgagee  is  barred  by  the  statute  of 
limitations.^ 

§  911.  EviDEXCE. — The  mortgage  may  be  introduced  to  show 
the  mortgagee's  title  without  producing  the  notes  which  it 
secures  ;  ^  and  the  admissions  of  the  mortgagee  that  the  mortgage 
is  no  lien  are  not  admissible  as  evidence  for  the  mortgagor ;  only 
subsequent  purchasers  or  incumbrancers  can  avail  themselves 
of  such  declarations.*  Nor  can  the  mortgagor  introduce  evi- 
dence to  show  tliat  the  mortgage  is  one  of  indemnity,  and  that 
the  mortgagee  has  not  been  damnified.^ 

§  912.  Forcible  Entry  and  Detainer. — A  mortgagee  or 
purchaser  under  the  mortgage  having  only  the  right  of  pos- 
session, cannot  maintain  the  action  of  forcible  entry  and 
detainer."  And  the  mortgagor  is  not  a  tenant  within  the  act 
relating  to  this  mode  of  action.'' 

The  mortgagee  cannot  resort  to  the  process  of  forcible  entry 
and  detainer  for  the  purpose  of  obtaining  possession,  as  his 
remedy  is  of  a  different  character.^ 

Nor  can  a  purchaser  at  a  sale  under  the  power  bring  this 
action  for  possession.^ 

But  if  the  grantor  in  a  trust  deed  acknowledges  himself  as  a 
tenant  of  the  trustee,  and   covenants  that  he  may  be  dispos- 

1  Brastow  v.  Barrett,  82  Me.  456. 

^  Spect  V.  Spect,  88  Cal.  4o7.     See,  also,  Bailey  v.  Winn,  101  Mo.  649. 

'Smith  V.  John?,  3  Gray  (Ma«H.),  517. 

*  Jackson  v.  Jackson,  5  Cow.  (N.  Y.)  178. 

^Jackson  v.  Jackson,  5  Cow.  (N.  Y.)  173. 

«  Necklace  i;.  West,  33  Ark.  682. 

'Reed  v.  Elwell,  46  Me.  270;  Hastings  v.  Pratt,  8  Cush.  (Mass.),  121; 
Clement  v.  Bennett,  70  Me.  207. 

«  Pioneer  Sav.  &  L.  Co.  r.  Powers,  47  Minn.  269 ;  Lamed  r.  Clarke,  8  Cash. 
(Mass.)  29;  Gerrish  v.  Mason,  4  Gray  (Mass.),  4.32;  Walker  f.  Thayer,  113 
Mass.  36. 
V  ^  Boyle  V.  Boyle,  121  Mass.  85 ;  Woodside  v.  Ridgeway,  126  Mass.  292. 


918  EIGHTS    OF    PARTIES    BEFORE   DEFAULT, 

sessed  by  an  action  of  forcible  entry  and  detainer  if  he  fails  to 
comply  with  the  condition,  then  this  action  may  be  maintained 
against  him  after  forfeiture.' 

§  913.  Writ  of  Entry. — ^When  the  mortgagee  is  in  posses- 
sion, he  then  may  maintain  his  title  and  his  right  of  possession 
by  a  writ  of  entry,  declaring  on  his  own  seisin,  and  may  be 
awarded  judgment  for  possession  at  common  law,  and  receive 
damages  for  the  rents  and  profits  of  which  he  was  wrongfully 
deprived.  His  action  in  such  case  is  against  wrong-doers  and 
not  against  mortgagors.^ 

If  the  mortgagee  has  the  right  to  possession  he  may  have 
judgment,  but  the  mortgagor  may  redeem  notwithstanding 
this  judgment.^ 

After  entry  he  may  maintain  trespass  for  mesne  profits 
against  one  who  holds  possession  under  the  mortgagor.*  He 
can  maintain  trespass  at  common  law  after  condition  broken, 
for  damages  to  the  freehold  b}^  the  mortgagor.'^ 

§  914.  Limitation. — AVhere  the  mortgagee  has  authority  to 
sell  the  land  and  receive  the  money,  the  statute  of  limitations 
does  not  begin  to  run  against  an  action  for  the  excess  over  the 
mortgage  debt  until  he  assumes  a  position  antagonistic  to  that 
of  the  mortgagor.^  And  when  the  mortgagee's  possession  is  by 
agreement  and  he  is  to  appropriate  the  proceeds  until  his  debt 
is  paid,  such  possession  is  not  adverse  until  his  claims  are  sat- 
isfied or  the  mortgagee  asserts  an  absolute  title  in  himself.^ 

1  Chapin  v.  Billings,  91  111.  539. 

2  Stewart  v.  Davis,  63  Me.  539;  Miner  v.  Stevens,  1  Cush.  (Mass.)  468. 

3  Treat  v.  Pierce,  53  Me.  71,  77 ;  Howard  v.  Houghton,  (M  Me.  445. 

*  Northampton  Paper  Mills  v.  Ames,  8  Met.  (Mass.)  1.     And  see  Ballard  v. 
Ballard  Vale  Co.,  5  Gray  (Mass.),  468  ;  Miner  v.  Stevens,  1  Cush.  (Mass.)  482. 
s  Stowell  V.  Pike,  2  Me.  387  ;  Page  v.  Robinson,  10  Cush.  (Mass.)  99. 
6 Mills  r.  Mills,  48  Hun  (N.  Y.),  97. 
^  McPhersou  v.  Hay  ward,  81  Me.  329. 


the  rights  of  the  mortgagee.  919 

Article  4. 
Relative  Rights  as  to  Junior  Mortgagee. 

I  915.  Foreclosure    by  Second    Mort-  §  920.  Releasing  Part  of  the  Prem- 

gagee.  ises — Mortgagor's    Personal 

I  916.  Cannot  Charge  the  Prior  Mort-  Liability. 

gage.  §  921.  Marshalling  Securities. 

§  917.  Estoppel  by  ^Mortgagee.  I  922.  Mortgages    Embracing    both 

I  918.  The  Second  Mortgagee  May  Ee-  Land  and  Personalty. 

deem.  I  923.  Mortgage  Covering  the  Home- 

I  919.  Subrogation.  stead  with  other  Realty. 

§  915.  Foreclosure  by  Second  Mortgagee. — A  second 
mortgagee,  though  he  has  foreclosed  under  a  power  of  sale, 
and  having  become  the  purchaser,  may,  notwithstanding  the 
time  of  redemption  has  not  expired,  bring  an  action  to  have  a 
prior  mortgage  adjudged  paid.^  And  when  he  has  obtained  a 
decree  of  foreclosure  against  the  mortgagor  and  then  executes 
a  quit-claim  deed  to  the  land  to  the  first  mortgagee,  who,  in  a 
written  contract  accompanying  the  deed,  agrees  to  disj^ose  of 
the  land  to  the  best  advantage,  and  after  satisfying  his  mort- 
gage and  to  apply  the  balance  to  the  second  mortgage,  it  was 
held  that  conveyance  of  the  land  by  the  first  mortgagee  to  the 
mortgagor,  who  had  never  paid  the  second  mortgage,  and  who, 
when  he  paid  the  last  installment  of  the  purchase  price,  had 
actual  notice  of  the  rights  of  the  second  mortgagee  under  the 
written  contract,  clothed  the  mortgagee  with  a  trust  in  favor  of 
the  second  mortgagee,  who  was  entitled  to  an  enforcement  of 
his  equity  as  against  the  mortgagor's  interest  in  the  land." 

§  916.  Cannot  Charge  the  Prior  Mortgage. — The  prior 
incumbrance  will  hold  all  the  property  covered  by  it.  The 
owner  of  land  whicli  was  incumbered  by  a  mortgage  conveyed 
a  portion  of  it  subject  to  the  whole  mortgage  debt,  which 
by  the  terms  of  the  deed  was  assumed  by  the  grantee  who  also 
subsequently  executed  a  second  mortgage  upon  the  land  so 
conveyed.     It  was  held  that  the  fact  of  the  stipulation  in  the 

^Redin  v.  Branhan,  43  Minn.  283. 
^  *  Blandin  v.  Silsby,  62  Yt.  69. 


I 


920  EIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

deed  was  to  charge  the  hind  in  question  with  the  payment  of 
such  prior  mortgage,  and  that  the  second  mortgagee  and  his 
assigns  were  affected  with  notice  of  such  charge  or  incumbrance 
upon  the  land  mortgaged  to  them,  and  were  bound  by  it ;  and 
that  they  cannot  acquire  any  title  to  the  other  portions  under 
a  redemption  of  the  first  mortgage  from  the  sale  upon  fore- 
closure, which  equity  will  permit  them  to  assert  against  the 
first  named  grantor/ 

The  junior  mortgagee  can  redeem  the  property  upon  the 
maturity  of  the  first  mortgage,  and  cannot  be  affected  by  any 
agreement  not  in  the  mortgage.^ 

Where  a  part  of  the  mortgaged  premises  is  conveyed  with 
covenants  of  warranty  by  a  second  mortgage,  the  second  mort- 
gagee is  entitled  to  be  paid  out  of  the  balance  left  after  paying 
the  first  mortgage,  and  before  any  part  thereof  is  applied  on  a 
third  mortgage  covering  the  premises  embraced  in  the  first.^ 

§  917.  Estoppel  of  Mortgagee. — A  mortgagee  under  a 
first  mortgage  who  receives  a  second  mortgage  as  in- 
demnity as  security  to  creditors  of  the  mortgagor,  which  has 
the  usual  covenants  of  warranty,  and  does  not  mention  the 
first  mortgage,  is  not  thereby  estopped  from  claiming  the  se- 
curity of  the  first  mortgage  as  against  any  claims  of  the 
creditors  to  the  benefit  of  the  second  mortgage.*  A  mortgagee 
may  be  estopped  by  statement  of  his  agent.  Thus,  on  sale 
of  the  first  mortgage  his  auctioneer  inserted  in  the  particulars 
a  statement  as  to  the  condition  of  the  roads  on  the  premises 
which  turned  out  to  be  incorrect,  and  the  purchaser  declined 
to  complete  the  purchase  without  compensation.  ComjDensa- 
tion  was  allowed  and  the  sale  was  completed.  It  was  held 
that  the  first  mortgagee  was  liable  to  a  subsequent  mortgagee 

1  Miller  v.  Fasler,  42  Minn.  366  ;  Kellogg  v.  Rand,  11  Paige  (N.  Y.),  59. 

"  Gardner  v.  Emerson,  40  111.  296 ;  Whittacre  v.  Fuller,  5  Minn.  508.  And 
see  Davis  v.  Rogers,  28  Iowa,  413  ;  Kinney  v.  M'Cullough,  1  ISandf.  Ch.  (N. 
Y.)  370. 

'  Converse  v.  Ware  Sav.  Bank,  152  Mass.  407.  See,  also.  Parsons  v.  Little 
(N.  H.),  20  At.  Rep.  958  ;  Orr  v.  Blackwell  (Ala.),  8  South.  Rep.  413  ;  Blandin 
V.  Silsby,  62  Vt.  69. 

*  Gerrish  v.  Gerrish,  62  N.  H.  397. 


I 


THE    EIGHTS    OP    THE    MORTGAGEE.  921 

for  the  loss  occasioned  by  the  mistake,  which  loss  was  not  the 
same  allowed  as  compensation,  but  the  difference  between  the 
price  realized  and  that  which  the  property  would  have  realized 
had  there  been  no  misdescription/ 

§  918.  The  Second  Mortgagee  May  Redeem. — The  second 
mortgagee  may  redeem  the  first  mortgage  and  hold  it  against 
parties  subsequent  in  interest ;  but  such  parties  cannot,  except 
under  unusual  circumstances,  redeem  the  first  mortgage  and 
hold  it  against  the  second  mortgagee.  Equity  will  regard  it 
as  a  payment.^ 

The  holder  of  a  second  mortgage  cannot  control  the  sale  or 
dispose  of  proceeds  under  the  first  mortgage,  without  making 
payment.'^ 

Where  the  first  mortgagee  sells  the  premises  on  foreclosure,  but 
the  purchase  has  not  been  completed,  he  may  be  required,  on 
motion  of  the  junior  mortgagee,  on  payment  of  the  amount  of 
the  first  mortgage,  with  interest  and  cost,  to  assign  it  to  him.^ 
And  where  the  second  mortgagee,  in  order  to  protect  his  mort- 
gage, pays  the  interest  and  costs  of  foreclosure  on  a  prior  mort- 
gage, he  may  "  tack  "  the  amount  thus  paid  to  his  own  mort- 
gage, if  there  be  no  intervening  equity,  but  he  is  not  entitled 
to  an  assignment  of  any  share  of  the  j)rior  mortgage.^ 

And  before  the  right  of  redemption  expires,  a  first  mort- 
gagee in  possession  has  the  rights  of  a  mortgagee  in  possession.^ 

A  purchaser  at  a  sale  under  a  senior  mortgage  cannot  inter- 
vene to  keep  down  the  amount  claimed  in  a  suit  by  the  mort- 
gagor by  a  junior  mortgagee.''  A  subsequent  mortgagee 
cannot  use  a  tax  title  adversely  to  the  first  mortgage.^  , 

§  919.  Subrogation. — It  is  sufficient  to  entitle  a  junior  in- 
cumbrancer to  be  subrogated  to  the  rights  of  the  senior  mort- 

1  Tomlin  r.  Luce,  43  Ch.  Div.  191. 
''Lewis  r.  Hinman,  56  Conn.  55. 

*  Andrews  r.  Fiske,  101  :Mas8.  422  ;  Meysenburg  v.  Schlieper,  46  Mo.  209. 

*  Citizens'  Sav.  Bank  v.  Foster,  22  Abb.'N.  C.  (N.Y.)  425. 
^Magilton  v.  Halbert,  62  Hun  (N.  Y.),  444. 

^  Jones  ('.  Rigby,  41  Minn.  530. 

^  Bronson  v.  Railroad  Co.,  2  Black  (U.  S.),  283.  / 

V    8  Horton  v.  Ingersoll,  13  Mich.  409. 


922  KIGHTS    OF    PARTIES    BEFORE   DEFAULT. 

gagee,  if  he  tender  to  such  senior  mortgagee  the  amount 
secured  by  his  mortgage,  with  interest  and  cost  before  the 
foreclosure  sale,  though  the  amount  tendered  be  not  accepted 
until  after  such  sale.^ 

Where  the  equity  of  redemption  has  been  cut  off  by  the 
foreclosure  of  the  first  mortgage,  the  second  mortgagee  may 
sometimes  have  the  right  to  subrogation,  or  even  be  entitled  to 
an  assignment,  but  it  will  depend  on  circumstances  showing- 
its  equity,  and  he  will  not  be  entitled  to  restrain  the  sale  with- 
out clearly  showing  that  the  payment  of  the  first  or  its  fore- 
closure or  sale  will  work  him  injustice.^  And  where  the  prior 
mortgagee  holds  such  a  second  mortgage  on  another  piece  of 
land,  and  the  first  mortgagee  of  that  piece  is  about  to  foreclose 
and  there  is  a  considerable  value  in  his  second  mortgage,  the 
subsequent  mortgagee  of  the  first  piece  cannot  require  him  lo 
redeem  the  other  piece,  but  can  himself  redeem  the  prior 
mortgage  on  the  first  piece,  and  thus  become  subrogated  to 
that  mortgagee's  rights,  and,  standing  on  those  rights,  can 
himself  redeem  the  other  piece.^ 

With  knowledge  of  subsequent  incumbrances,  a  prior  mort- 
gagee cannot  release  the  security  to  the  injury  of  a  second 
mortgagee,  having  a  lien  on  portions  of  his  security  without 
applying  the  value  of  the  equity  released  to  reduce  his  debt/ 

§  920.  Releasing  Part  of  the  Premises — Mortgagor's 
Personal  Liability. — If  a  first  mortgagee  diminishes  the  se- 
curity of  a  second  mortgagee  by  releasing  the  mortgagor's 
personal  liability,  he  at  least  subordinates  his  lien  to  that  of 
s^ch  second  mortgagee.^  But  where  a  prior  mortgagee  has  a 
second  mortgage  on  another  piece  of  land,  but  does  not  know 
of  a  subsequent  mortgage  on  the  first  piece,  he  may  release 
his  mortgage  on  the  other  piece  without  being  chargeable,  for 

'  Marshall  v.  Ruddick,  28  Iowa,  487 ;  Dings  v.  Parshall,  7  Hun  (N.  Y.),  522; 
Citizens'  Sav.  Bank  v.  Foster,  22  Abb.  N.  C.  (N.  Y.)  425. 

^  Bloomingdale  v.  Barnard,  7  Hun  (N,  Y.),  460  ;  Lewis  v.  Hinman,  56  Conn. 
55. 

^  Lewis  V.  Hinman,  56  Conn.  55. 

*Hawhe  v.  Snydaker,  86  111.  197. 

5  Sexton  V.  Pickett,  24  Wis.  346. 


I 


THE    EIGHTS    OF    THE    MORTGAGEE.  923 

the  benefit  of  the  subsequent  mortgagee,  with  tlie  value  of  tliat 
security  upon  his  mortgage  debt.^ 

The  holder  of  a  second  mortgage  upon  one  of  two  lots  em- 
braced in  a  prior  mortgage  may  compel  the  prior  mortgagee 
to  resort  in  the  first  place  to  the  other  lot  upon  which  there  is 
no  other  mortgage.^  If  the  other  lot  is  also  incumbered  by 
another  party,  then  the  prior  mortgagee  will  be  required  to 
satisfy  his  debt  out  of  the  proceeds  of  both  lots,  in  proportion 
to  the  amount  which  each  has  produced.^  And  when  the 
court  decrees  that  the  prior  mortgage  shall  be  satisfied  out  of 
the  security  on  which  there  is  no  record  lien,  it  will  provide 
for  the  subrogation  of  the  mortgagee  to  the  other  security/ 

The  first  mortgagee  with  notice  of  subsequent  mortgages 
has  no  right  to  release  any  portion  of  the  mortgaged  premises 
to  the  injury  of  subsequent  mortgagees.^  He  is  not  respon- 
sible until  he  has  notice  of  such  liens.^  However,  where  the 
unreleased  parcels  subsequently  mortgaged  are  amj^ls  security 
for  both  mortgages,  no  injury  can  be  claimed  by  the  subsequent 
mortgagee,  and  the  first  mortgagee  is  not  then  responsible  to 
the  second  for  releasing  a  portion  of  the  mortgaged  premises.^ 

§  921.  Marshalling  Securities. — A  prior  mortgagee  hav- 
ing other  security  for  the  payment  of  his  debt  secured  by  the 
mortgage,  with  notice  of  a  second  mortgage  upon  the  same 
premises,  is  bound  in  equity  to  apply  in  the  first  instance  to 
the  payment  of  the  debt  the  security  in  which  the  second 
mortgagee  does  not  share.^ 

Judge  Lurton  says  :  "  That  the  equity  to  marshal  assets  is 
not  one  which  fastens  itself  upon  the  situation  at  the  time  the 
successive  securities  are  taken ;  but  on  the  contrary,  is  one  to 

^  Lewis  V.  Hinman,  56  Conn.  55. 

^Henshaw  v.  Wells,  9  Humph.  (Tenn.)  568. 

^  Green  v.  Ramage,  18  Ohio,  428. 

*King  V.  McVickar,  3  Sandf.  Ch.  (N.  Y.)  192. 

5  Kelley  v.  AVhitney,  45  Wis.  110 ;  Wolf  v.  Smith,  36  Iowa,  454 ;  Cogswell  v. 
Stout,  32N.  J.  Eq.  240 ;  Paxton  v.  Harrier,  11  Pa.  St.  312. 

®  Vanorden  v.  Johnson,  14  N.  J.  Eq.  376. 

^Kelley  v.  Whitney,  45  Wis.  110. 
^  ^  Bergen  Savings  Bank  v.  Barrows,  30  N.  J.  Eq.  89. 


924  EIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

be  determined  at  the  time  tlie  marslialling  is  invoked.  The 
equity  can  only  become  a  fixed  right  by  taking  steps  to  have  it 
enforced ;  and  until  this  is  done  it  is  subject  to  displacement 
and  defeat  by  subsequently  acquired  liens  upon  the  funds. 
The  qualification  upon  the  doctrine  of  marshalling — that  mar- 
shalling will  not  be  permitted  to  the  prejudice  of  the  third 
person,  whether  wholly  or  only  partially  dependent  upon  this 
principle — is  one  well  settled."  ^ 

The  general  rule  is  that  where  a  mortgagee  holds  a  prior 
mortgage  on  two  parcels  of  land,  and  a  subsequent  mortgage 
on  but  one  of  the  parcels  is  given  to  another — the  former  must 
seek  satisfaction  out  of  that  fund  which  the  latter  cannot  touch.^ 

But  where  equity  cannot  be  had  by  all  the  parties,  this  will 
not  be  applied.  Thus,  S.  mortgaged  five  lots  to  R.  Afterward 
four  of  these  became  incumbered  with  a  mechanic's  lien,  and 
the  fifth  lot  by  a  second  mortgage  to  C.  The  contention  was 
that  S.  should  first  exhaust  the  fifth  lot  upon  which  C.  had  his 
mortgage,  so  as  to  disincumber  the  four  lots  upon  which  the 
mechanic's  lien  was  an  incumbrance  secured  to  that  of  S.  This 
was  refused  upon  the  ground  that  the  assets  would  not  be  mar- 
shalled to  the  prejudice  of  C,  who  had  no  notice  of  the  ecpity 
of  the  complainant.^ 

§  922.  Mortgages  Embracing  Both  Land  and  Person- 
alty.— If  the  mortgage  covers  both  land  and  personal  propert}'^, 
or  if  the  first  mortgagee  has  an  additional  security  on  personal 
property  or  pledge  of  stock,  and  releases  it,  or  by  his  negligence 
loses  it,  with  knowledge  of  a  subsequent  mortgage  of  the  land, 
the  subsequent  mortgagee  may  compel  him,  on  foreclosure,  to 
deduct  from  his  mortgage  the  value  of  the  security  released  or 
lost,  so  the  mortgage  can  be  foreclosed  only  for  the  balance.* 

1  Gilliam  v.  McCormack,  85  Tenn.  597,  607. 

^  Pomeroy  Eq.  Jur.,  gcct.  1414. 

3  Leib  V.  kribling,  51  Md.  285.  See,  also,  Green  v.  Eamage,  18  Ohio,  428  ; 
Gilliam  v.  McCormack,  85  Tenn.  597  ;  Marr  v.  Lewis,  31  Ark.  20.3  ;  McArthur 
V.  Martin,  23  Minn.  75 ;  2  White  &  Tudor's  Lead.  Cas.  in  Eq.  (4th  Am.  ed.) 
pt.  1,  205.    Compare  Conrad  v.  Harrison,  3  Leigh  (Va.),  532. 

*  Moody  V.  Haselden,  1  S.  Car.  129 ;  Washington  Build,  and  Loan  Asdo.  v. 


I 


the  rights  of  the  mortgagee.  925 

§  923.  Mortgage  Covering  the  Homestead  with  Other 
Realty. — In  giving  a  mortgage  on  a  homestead,  the  debtor 
waives  the  homestead  right,  but  only  to  the  mortgagee,  and 
does  not  tliereby  open  tlie  door  to  other  creditors  or  increase 
their  equities.^  So,  when  a  first  nnjrtgage  is  made  without  a 
release  of  homestead,  and  a  subsequent  mortgage  is  made  with 
such  release,  the  junior  mortgage  has  priority  to  the  extent  of 
the  homestead  right.^ 

It  is  held,  however,  that  if  a  debtor  waives  his  homestead 
lien  to  one  creditor  he  waives  it  to  all — that  is,  if  he  waives  to 
a  second  mortgagee,  he  thereby  waives  it  as  to  the  first ;  ^  and 
hence  the  two  mortgagees  take  preference  in  payment  of  their 
debts  according  to  the  dates  of  their  liens.* 

The  rule  as  to  marshalling  securities  when  the  homestead  is 
embraced  is  this  : 

If  the  husband  and  wife  give  a  mortgage  on  a  tract  of  land 
part  of  which  is  a  homestead,  and  the  husband  afterward  exe- 
cutes a  mortgage  upon  the  part  not  covered  by  the  homestead 
to  secure  his  debt,  the  second  mortgagee  cannot  insist  that  the 
homestead  shall  be  sold  upon  foreclosure  of  the  first  mortgage. 
The  part  not  covered  by  the  homestead  will  be  first  sold,  and 
if  the  proceeds  satisfy  the  first  mortgage  the  homestead  will 
not  be  sold.  The  second  mortgagee  must  rely  on  the  surplus, 
if  any,  arising  from  the  sale  of  the  part  not  exempt  from  exe- 
cution as  a  homestead.^ 

Beaghen,  27  N.  J.  Eq.  98  ;  Red  Bank  Miit.  Build,  and  Loan  Asso.  v.  Patterson,  27 
N.  J.  Eq.  223 ;  Alexander  v.  Welch,  10  111.  App.  181 ;  George  v.  Wood,  9  Allen 
(Mass.),  80 ;  Gaskill  v.  Sine,  13  N.  J.  Eq.  400 ;  Guion  v.  Knapp,  6  Paige  (N.  Y.), 
35  ;  Deuster  v.  McCamus.  14  Wis.  307 ;  James  v.  Brown,  11  Mich.  25. 

1  McLaughlin  v.  Hart,  46  Cal.  638 ;  Brown  v.  Cozard,  68  111.  178  ;  Mc Arthur 
V.  Martin,  23  Minn.  74 ;  La  Rue  v.  Gilbert,  18  Kan.  220.  Compare  Thomp. 
Home,  and  Ex.,  sects.  656-650. 

^Eldridge  v.  Pierce,  90  111.  474  ;  Shaver  v.  Williams,  87  111.  469. 

^Pittman's  Appeal,  48  Pa.  St.  315. 

*Shelly's  Appeal,  36  Pa.  St.  373  ;  In  re  Coghill,  2  Hughes,  C.  C.  313 ;  White 
V.  Polleys,  20  Wis.  503. 

5  McCreery  v.  SchafFer,  26  Nebr.  173,  opinion  by  Chief  Justice  Reese.  See 
Thompson  on  Homesteads  and  Exemptions,  sects.  660  et  seq. ;  Horton  v. 
Kelly,  40  Minn.  193. 


926  rights  of  parties  before  default. 

Article  5. 
Relative  Rights  as  to  Purchasers  and  Creditors  of  Mortgagor. 

§  924.  Mortgagee  Cannot  Release  Part  §  928.  Releasing  the  Mortgagor  from 

of  the  Security  when  Third  Personal  Liability. 

Persons      have      Subsequent  §  929.  Marshalling  Securities. 

Liens.  §  930.  Mortgage  of  Homestead  with 
§  925.  The  Mortgagee  must  have  No-  other  Lands. 

tice  of  the  Subsequent  Lien.  §  931.  Estoppel  of  Mortgagee. 
§  926.  Surety's  Rights. 
§  927.  A  Mortgage  by  a  Debtor  to  His 

Surety. 

§  924.  Mortgagee  Cannot  Release  Part  of  the  Security 
WHEN  Third  Persons  Have  Subsequent  Liens. — If  the  mort- 
gagee knows  that  portions  of  the  mortgaged  premises  have 
been  subsequently  conveyed  or  incumbered,  he  is  not  allowed 
in  equity  to  release  those  parts  over  which  he  has  the  only 
security  and  to  enforce  his  entire  claim  upon  those  portions  in 
which  others  have  become  interested ;  and  if  he  does  release  a 
part  which  is  liable  to  the  payment  of  his  debt  only,  he  cannot 
charge  the  other  i:)ortions  of  it  without  deducting  the  value  of 
the  parts  released.^  He  has  no  right  to  release  any  part  of  the 
mortgaged  premises  to  the  injury  of  subsequent  lienors.^ 

If  the  mortgagee  releases  part  of  his  security,  a  subsequent 
lienor  may  compel  him,  on  foreclosure,  to  deduct  from  his 
mortgage  debt  the  value  of  the  security  released.^ 

This  rule  does  not  apply  when  the  portion  remaining  subse- 

1  Alexander  v.  Welch,  10  111.  App.  181 ;  Dodds  v.  Snyder,  44  111.  53 ;  Taylor 
V.  Maris,  5  Rawle  (Pa.),  51 ;  Parkman  v.  Welch,  19  Pick.  (Mass.)  231. 

^M'Lean  v.  Lafayette  Bank,  3  McLean,  C.  C.  587;  Wolf  v.  Smith,  36  Iowa, 
454 ;  Kelley  v.  Whitney,  45  Wis.  110  ;  Harrison  v.  Guerin,  27  N.  J.  Eq.  219 ; 
Cogswell  V.  Stout,  32  N.  J.  Eq.  240 ;  James  v.  Brown,  11  Mich.  25  ;  Gaskill  v. 
Sine,  13  N.  J.  Eq.  400 ;  Guion  v.  Knapp,  6  Paige  (N.  Y.),  35 ;  Vanorden  v.  John- 
son, 14  N.  J.  Eq.  376 ;  Paxton  v.  Harrier,  11  Pa.  St.  312 ;  Blair  v.  Ward,  10 
N.  J.  Eq.  119. 

*  Moody  V.  Haselden,  1  S.  Car.  129 ;  Washington  Build,  and  Loan  Asso.  v. 
Beaghen,  27  N.  J.  Eq.  98 ;  Palmer  v.  Hendrie,  27  Bev.  349 ;  Walker  v.  Jones, 
L.  R.  1  P.  C.  50 ;  WulfF  v.  Jay,  L.  R.  7  Q.  B.  756 ;  Polak  v.  Everett,  1  Q.  B. 
669 ;  Red  Bank  Mut.  Build,  and  Loan  Asso.  v.  Patterson,  27  N.  J.  Eq.  223 ; 
Townsend  Sav.  Bank  v,  Munson,  47  Conn.  390. 


THE    RIGHTS   OF    THE    MORTGAGEE.  927 

quently  mortgaged  is  fully  sufficient  to  pay  all  the  liens.^  And 
when  the  several  subsequent  purchasers  have  separate  convey- 
ances from  the  mortgagor,  their  rights  are  several  and  not 
joint,  as  to  the  release  of  the  mortgagee.^ 

§  925.  The  Mortgagee  Must  Have  Notice  op  the  Sub- 
sequent Lien. — To  affect  the  rights  of  the  mortgagee  in  this 
respect  and  oblige  him  to  foreclose  with  reference  to  the  subse- 
quent order  of  alienation  or  incumbrances,  he  must  have  actual 
or  constructive  notice  of  them.  So  long  as  he  claims  under 
his  first  mortgage  only,  the  record  of  subsequent  conveyances 
is  not  constructive  notice  to  him.  He  is  not  bound  to  search 
the  record  from  time  to  time  for  other  incumbrances  ;  only 
subsequent  purchasers  and  incumbrancers  are  charged  with 
notice  by  the  statute.  But  when  the  mortgagee,  or  a  third 
person,  afterward  takes  a  deed  or  mortgage  on  a  part  of  the 
same  property  described  in  the  first  mortgage,  he  is  driven  to 
the  record,  and  is  as  to  such  conveyance  a  subsequent  pur- 
chaser or  incumbrancer,  and  is  bound  by  the  notice  which  the 
record  affords  at  that  time.^  So  long  as  he  claims  under  his 
first  mortgage  only,  the  record  of  subsequent  conveyr.nces  is 
not  constructive  notice  to  him.*  Neither  is  it  the  duty  of  the 
mortgagee  to  make  inquiry  whether  a  junior  incumbrancer  has 
intervened.^ 

A  second  subsequent  purchaser,  in  the  examination  of  title 
to  the  part  he  proposes  to  buy,  is  led  directly  to  the  original 
mortgage,  and  he  finds  that  his  is  but  a  part  of  an  entire  tract 
in  which  his  grantor  has  only  a  right  of  redemption,  and  which 
was  originally  subject  to  a  common  burden,  but  liable  to  be 

^Kelley  i;.  Whitney,  45  Wis.  110. 

2  Hawhe  v.  Snydalier,  86  111.  197. 

3  Alexander  t;.  Welch,  10  111.  App.  181,  186,  opinion  by  Presiding  Judge 
Higbee ;  Benton  v.  Nicoll,  2-1  Minn.  221 ;  Hall  v.  Edwards,  43  :Mich.  473 ;  Gil- 
bert V.  Haire,  43  Mich.  283. 

*  Patty  V.  Pease,  8  Paige  (N.  Y.),  277;  Brown  v.  Simons,  44  N.  H.  475; 
Meacham  v.  Steele,  93  111.  135;  George  v.  Wood,  9  Allen  (Mass.),  80;  Dewey 
V.  IngersoU,  42  Mich.  17. 

*  Gage  V.  McGregor,  61  N.  H.  47  ;  Mcllvain  v.  Mut.  Assur.  Co.,  93  Pa.  St.  30. 
^66,  also,  Johnson  v.  Bell,  58  N.  H.  395. 


928  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

affected  by  a  prior  sale  of  another  part  of  the  entire  tract. 
Under  such  circumstances  the  different  parcels  of  the  tract 
mortgaged  cannot  be  considered  as  separate  and  distinct,  so  as 
to  relieve  him  of  the  duty  of  inquiring  into  the  title  to  the 
other  part  in  examining  the  title  to  the  part  he  proposes  to 
buy ;  he  is  led  directly  to  a  deed  that  puts  him  on  inquiry  as 
to  the  remaining  part  of  the  land/ 

In  general,  a  purchaser  takes  his  title  with  notice,  and  if  he 
wishes  to  protect  himself  lie  should  inform  the  mortgagee  of 
his  interest. 

The  record  is  constructive  notice  only  to  subsequent  pur- 
chasers, or  those  claiming  under  the  same  grantor.^ 

A  letter  to  the  mortgagee  giving  the  name  of  the  purchaser 
is  sufficient,  provided  the  deed  is  on  record.^ 

A  mere  naked  possession  with  no  facts  is  not  a  sufficient  notice 
to  the  prior  mortgagee ;  *  but  if  the  purchaser  goes  upon  the 
premises  and  makes  permanent  imjjrovements,  and  the  mortga- 
gee has  actual  notice  of  the  convej'^ance,  the  notice  is  sufficient,^ 
and  if  he  releases  part  of  the  premises,  he  must  abate  a  propor- 
tionate part  of  the  mortgaged  debt  as  against  such  purchaser.® 

§  926.  Surety's  Rights. — The  surety  has  the  same  rights 
as  subsequent  lienors.  As  the  surety  is  entitled  upon  paying 
the  debt  to  subrogation  to  all  the  securities  which  the  creditor 
may  have  acquired  for  the  payment,  it  results  that  if  this  right 
is  rendered  unavailing  by  the  act  of  the  creditor,  the  surety  is 
discharged  to  the  extent  he  has  been  injured.'^  But  he  should 
not  be  further  discharged  than  this,  as  he  thus  receives  full 
indemnity  for  all  the  injury  he  can  sustain.* 

^  Brown  v.  Simons,  44  N.  H.  475. 

=*  Lake  v.  Shumate,  20  S.  Car.  23, 32 ;  Cheever  v.  Fair,  5  Cal.  337  ;  Mcllvain  v. 
Mat.  Apsur.  Co.,  93  Pa.  St.  30. 

3  Hall  V.  Edwards,  43  Mich.  473. 

*  Cogswell  V.  Stout,  32  N.  J.  Eq.  240. 

^  Dewey  r.  Ingersoll,  42  Mich.  17. 

«  Gilbert  v.  Haire,  43  Mich.  283  ;  Hawhe  v.  Snydakcr,  86  111.  197. 

^  Baker  v.  Briggs,  8  Pick.  (Mass.)  122 ;  American  Bank  v.  Baker,  4  Met. 
(Mass.)  164 ;  Fitchburg  Sav.  Bank  v.  Torrey,  134  Mass.  239. 

**  Worcester  Mech.  Sav.  Bank  v.  Thayer,  136  Mass.  459. 


THE    RIGHTS    OF    THE    MORTGAGEE.  929 

The  creditor  is  bound  to  exercise  reasonable  diligence  in  the 
preservation  and  prosecution  of  such  securities,  and  if  they  are 
lost  by  his  neglect,  the  surety  is  to  that  extent  discharged/ 

The  principal  cannot  do  any  act  impairing  or  releasing  the 
security  as  against  the  surety.' 

§  927.  A  Mortgage  by  a  Debtor  to  His  Surety. — A  mort- 
gage by  a  debtor  to  his  surety  is  in  effect  a  security  for  the 
debt.^  And  the  property  thus  mortgaged  to  one  of  several  co- 
sureties in  several  debts,  is,  in  the  absence  of  special  circum- 
stances, to  be  applied  as  if  still  the  property  of  the  debtor,  to 
the  exoneration  of  all,  by  a  pro  rata  payment  or  reimburse- 
ment of  the  several  debts,  leaving  the  deficit  of  each  to  be 
made  up  by  contribution.^ 

A  surety  cannot  enforce  a  mortgage  of  indemnity  until  he 
has  been  injured  ;  ^  nor  can  he  impair  the  rights  of  the  princi- 
pal creditor  so  long  as  the  debt  is  unpaid.® 

When  a  debtor  conveys  his  equity  of  redemption  and 
other  j^roperty  in  trust  to  pay  all  his  debts,  the  mortgagee 
can  enforce  his  mortgage  as  to  the  property  thereby  covered, 
and  then  come  in  and  share  pro  rata  for  his  unsecured  claims 
with  the  other  debtors.^ 

The  surety's  mortgage  must  stand  as  security  for  the  debt  of 
the  principal  creditor.^ 

In  case  the  mortgagor  becomes  bankrupt  and  makes  an  as- 

1  White  V.  Life  Asso.,  63  Ala.  419 ;  Hayes  v.  Ward,  4  Johns.  Ch.  (N.  Y.)  123  ; 
Shutts  V.  Fingar,  100  N.  Y.  539,  546 ;  Third  Kat.  Bank  v.  Shields,  55  Hun 
(N.  Y.),  274  ;  Stephens  v.  Bank,  88  Pa.  St.  157. 

*  Hayes  v.  Ward,  4  Johns.  Ch.  (N.  Y.)  123;  Henshaw  v.  Wells,  9  Humph. 
(Tenn.")  568. 

^'Bronston  v.  Robinson,  4  B.  Mon.  (Ky.)  142;  AValler  v.  Tate,  4  B.  Men. 
(Ky.)  531. 

*  Morrison  v.  Poyntz,  7  Dana  (Ky.),  307 ;  Clay  v.  Goodloe,  6  B.  Mon.  (Ky.) 
236 ;  More  v.  Moberly,  7  B.  Mon.  (Ky.)  299.  Compare  Moore  v.  Moore,  4 
Hawks  (N.  Car.),  358. 

^  Hall  V.  Cushman,  16  N.  H.  462 ;  Jones  v.  Quinnipiack  Bank,  29  Conn.  25. 
Compare  M'Lean  v.  Lafayette  Bank,  3  McLean,  C.  C.  587. 

«McMullan  v.  Neal,  60  Ala.  552. 

'Bell  V.  Hammond,  2  Leigh  (Va.),  416;  Slack  v.  Emery,  30  N.  J.  Eq.  458. 

8  Durham  v.  Craig,  79  Ind.  117  ;  Rice  v.  Dewey,  13  Gray  (Mass.),  47 ;  Dick  v. 
Truly,  Sm.  &  M.  (Miss.)  Ch.  557. 
69 


930  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

signment,  this  does  not  affect  the  mortgagee.  But  if  he  proves 
his  wliole  claims,  the  secured  debts  and  unsecured,  against  the 
estate  he  thereby  waives  his  mortgage  security.* 

§  928.  Releasing  the  Mortgagor  from  Personal  Lia- 
bility.— If  the  mortgagee  diminishes  the  security  of  a  subse- 
quent purchaser  of  the  mortgaged  premises,  without  liis  consent, 
by  releasing  the  mortgagor  from  his  personal  liability,  the  land 
so  purchased  is  discharged  from  the  lien  of  the  mortgage.^ 

An  agreement  to  extend  the  time  of  payment  of  the  mort- 
gage between  the  holder  and  grantee  covenanting  to  assume, 
made  without  the  consent  of  the  mortgagor,  discharges  the 
mortgagor.^ 

So,  where  a  party  by  deed  assumes  the  payment  of  a  mort- 
gage, executed  by  his  grantor,  he  becomes  the  principal  debtor, 
and  the  relation  created  between  him  and  his  grantor  is  that 
of  principal  and  surety.  The  law  requires  that,  if  there  is  any 
agreement  between  the  principal  with  reference  to  a  contract, 
to  the  performance  of  which  another  is  bound  as  surety,  he 
ought  to  be  consulted  in  regard  to  any  proposed  alteration, 
and  if  he  is  not  or  does  not  consent  to  the  alteration  he  may 
be  no  longer  bound.* 

It  is  held  in  England  that,  if  the  mortgagee  releases  or  con- 
veys any  of  the  mortgaged  property,  except  according  to  the 
terms  or  under  the  authority  of  tlie  mortgage,  there  remains 
no  personal  liability  of  the  mortgagor  for  the  debt  which  the 
mortgage  was  made  to  secure.^ 

But  there  seems  to  be  no  case  in  this  country  that  upholds 

^  Hooker  r.  Olmstead,  6  Pick.  (Mass.)  481.  And  see  Schuelenburg  v.  Mar- 
tin, 1  McCrary,  C.  C.  348 ;  Patton  v.  Page,  4  Hen.  &  M.  (Va.)  449 ;  Jefferson 
CJollege  V.  Dickson,  Freem.  (Miss.)  Ch.  474  ;  Inge  v.  Boardman,  2  Ala.  331  ; 
Grafton  Bank  v.  Doe,  19  Vt.  4G3 ;  Walker  v.  Baxter,  26  Vt.  710  ;  Bennett  v. 
Calhoun  Loan  and  Build.  Asso.,  9  Rich.  Eq.  (S.  Car.)  163. 

^  Coyle  V.  Davis.  20  Wis.  564. 

^Caivo  V.  Davies,  8  Hun  (N.  Y.),  222,  affirmed  in  73  N.  Y.  211. 

♦Grant  v.  Smith,  46  N.  Y.  93  ;  Bangs  v.  Strong,  7  Hill  (N.  Y.),  250;  Paine 
V.  Jones,  76  N.  Y.  274. 

5  Palmer  v.  Hendrie,  27  Beav.  347  ;  28  Beav.  341 ;  Walker  v.  Jones,  L.  R.  1 
P.  C.  50 ;  Wulff  V.  Jay,  L.  R.  7  Q.  B.  756  ;  Polak  v.  Everett,  1  Q.  B.  Div.  669. 


THE    RIGHTS    OF    THE    MORTGAGEE.  931 

this  doctrine,  except  Townsend  Sav.  Bank  v.  Munson/  which 
holds  that  where  a  mortgagee  had  released,  without  the  con- 
sent of  the  mortgagor,  to  a  third  party  a  portion  of  the  prem- 
ises, the  mortgagee  had  assumed  the  risk  of  the  sufficiency  of 
the  portion  retained  to  pay  the  mortgage  debt,  and  could  not, 
therefore,  maintain  an  action  against  the  mortgagor  to  make 
good  the  loss.  But  it  appears  in  this  case  that  the  mortgagee 
had  originally  received,  under  mortgage,  land  of  sufficient 
value  to  pay  the  mortgage  notes,  and  a  case  presented  where, 
without  authority  of  the  mortgagor,  the  mortgagee  had  dis- 
posed of  property  held  as  security  to  the  full  value  of  the 
miortgage  debt. 

It  is  certainly  the  duty  of  the  mortgagee  not  to  release  any 
security  which  he  may  hold,  if  the  mortgagor  is  thereby  ex- 
posed to  personal  liability  for  the  debt  secured,  which  he  would 
not  otherwise  incur.^ 

§  929.  Marshalling  Securities. — As-  between  the  grantees 
of  different  parcels  of  the  mortgaged  premises,  their  respective 
parcels  are  liable  in  the  inverse  order  of  their  alienation  by  the 
mortgagor,  and  this  rule  applies  also  to  subsequent  purchasers 
who  have  notice  actual  or  constructive.^  But  the  operation  of 
this  rule  may  be  waived,  limited  or  modified  by  the  terms  of 
the  deed  to  the  earlier  grantee,  which  will  bind  those  claiming 
under  him.* 

When  the  judgment  debtor  sells  or  mortgages  his  land  at 
different  times  to  successive  purchasers  and  mortgagees,  the 
prior  purchasers  and  mortgagees  have  an  equity  to  require  the 
creditor  to  enforce  his  judgment  against  the  several  parcels  in 
the  inverse  order  according  to  the  date  of  the  several  sales  and 
mortgages.^ 

§  930.  Mortgage  of  Homestead  with  Other  Lands. — 
Where  the  husband  and  wife  have  conveyed  lands  in  whicli 

1 47  Conn.  390. 

^  Worcester  ]\Iech.  Sav.  Banks  v.  Thayer,  1.36  Mass.  459. 
^ Iglehart  v.  Crane,  42  111.  261 ;  Vogelr.  Brown,  120  111.  338. 
*  Vogel  V.  Shertliff,  28  111.  App.  516. 
V    ^  Moore  v.  Trimmier,  32  S.  Car.  511. 


932  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

they  were  entitled  to  homestead  to  secure  the  husband's  debts, 
the  mortgagors  are  entitled,  as  against  the  husband's  general 
creditors  to  homestead  out  of  any  surplus  realized  at  fore- 
closure sale,  and  the  equity  of  marshalling  securities  will  not 
be  enforced  in  favor  of  such  creditors  to  defeat  the  rights  of 
the  mortgagors.^ 

When  no  equities  intervene  the  mortgagee  may  release  the 
claim  on  the  other  land  and  still  hold  his  security  on  the  home- 
stead.^ 

If  other  equities  intervene,  it  is  proper  to  order  that  the  other 
land  than  the  homestead  be  first  sold  at  foreclosure  sale.  Thus, 
where  a  judgment  has  been  rendered  against  the  mortgagor 
after  the  execution  of  the  mortgage,  the  other  land  will  be 
first  sold.^ 

But  in  giving  a  mortgage  on  a  homestead,  the  debtor  waives 
this  homestead  right,  but  only  to  the  mortgagee,  and  does  not 
thereby  increase  the  equities  of  other  creditors. 

§  931.  Estoppel  op  Mortgagee. — A  mortgagee  may  be 
estopped  from  asserting  his  mortgage.  Thus,  where  a  mort- 
gagee induces  another  to  take  a  mortgage  on  the  premises  by 
stating  that  his  mortgage  had  been  discharged,  he  cannot 
afterward  set  up  a  claim  to  a  mortgaged  property,  nor  can 
his  assignee  with  notice,  to  the  prejudice  of  the  second  mort- 
gagee.* 

So  a  mortgagee  is  estopped  to  set  up  his  mortgage  title,  who 
stands  by  at  an  auction  sale  and  allows  the  auctioneer  to  state, 
without  contradiction,  that  the  land  has  a  free  title  from  all 
incumbrances.^ 

The  fact  that  the  mortgagor  and  wife  signed  a  written  state- 

iGwynne  v.  Estes,  14  Lea  (Tenn.),  673 ;  Gilliam  v.  McCormack,  85  Tenn. 
609;  White  v.  Fulghum,  87  Tenn.  281,  overruling  on  this  point,  Parr  v. 
Funibanks,  11  Lea  (Tenn.),  392.  See,  also,  Dickson  v.  Chorn,  6  Iowa,  19; 
Marr  v.  Lewis,  31  Ark.  203  ;  McArthur  v.  Martin,  23  Minn.  75. 

''Abbott  V.  Powell,  6  Saw.  C.  C.  91 ;  Searle  v.  Chapman,  121  Mass.  19  ;  Chap- 
man V.  Lester,  12  Kan.  592  ;  White  v.  Polleys,  20  Wis.  503. 

» La  Rue  v.  Gilbert,  18  Kan.  220. 

*Lasselle  v.  Barnett,  1  Blackf.  (Ind.)  150. 

^Markham  v.  O'Connor,  52  Ga.  183.    See  Mason  v.  Philbrook,  69  Me.  57. 


THE    RIGHTS    OF    THE    MORTGAGEE.  933 

ment  that  the  entire  mortgage  debt  was  for  money  advanced  to 
the  husband  to  pay  for  the  land  mortgaged  does  not  estop 
them  to  deny  such  statement  in  a  foreclosure  suit,  when  the 
mortgagee  knew  that  the  statement  was  false/ 

And  when  a  mortgagee  stands  by  at  an  auction  sale  of  the 
right,  title,  and  interest  of  a  bankrupt's  estate  he  is  not  estojjped 
to  assert  his  mortgage  which  is  duly  recorded.^ 

But  he  may  be  estopped  from  asserting  his  mortgage  for  a 
larger  sum  than  he  states  to  a  purchaser  of  the  equity  of 
redemption  to  be  due  him.^ 

A  mortgagee  is  not,  in  the  absence  of  fraud,  precluded  from 
recovering  upon  a  mortgage  debt,  because  he  permits  the  prop- 
erty covered  by  the  mortgage  to  be  sold  under  an  inferior 
lien/ 

A  mortgagor  who,  by  his  representations  induces  a  third 
party  to  receive  an  absolute  deed  from  the  mortgagee,  is  estopped 
afterward  to  deny  that  the  mortgagee  had  a  right  to  convey  an 
absolute  title/  And  where  a  mortgagor  conveys  land  subject 
to  a  mortgage,  and  as  an  inducement  to  the  vendees  tells  them 
that  they  can  cut  and  convert  into  firewood  the  timber  growing 
thereon,  he  is  estopped  from  enjoining  them/ 

1  Kline  v.  Ragland,  47  Ark.  111. 

*  Mason  v.  Philbrook,  69  Me.  57. 
3  Preble  v.  Conger,  66  111.  370. 

*  Jones  V.  Turck,  33  Iowa,  246. 
^Gruber  v.  Baker,  20  Nev.  453. 

«  Hurst  V.  Elliott,  52  Hun  (N.  Y.),  273. 


934  rights  of  parties  before  default. 

Article  6. 

Relative  Rights  as  to  Lessee  of  Mortgagor. 

I  932.  Taking    Mortgages    of    Leased  I  940.  Iowa  Rule. 

Lands.  ^  941.  Attornment    of    Subsequent 
§  933.  Lease  Subsequent  to  the  Mort-  Lessee. 

gage.  ?  942.  Improvements  by  Lessee. 

§  934.  In  those  States  where  the  Mort-  §  943.  Emblements  Under  the  Lease. 

gagee  is  Prohibited  from  Tak-  g  944.  Who  May  Attack  the  Lease. 

ing  Possession.  §  945.  Lease  by  Moitgagee  in  Lawful 
^  935.  Subsequent    Mortgage — Attorn-  Possession. 

ment.  ^  946.  Assignment  by  Mortgagee  in 
§  936.  Prior  Mortgagee's  Remedy.  Possession. 

I  937.  The  Mortgagor  Cannot  Bind  the  I  947.  Leasehold  Estate. 

Mortgagee.  \  948.  Rule  When  the  Mortgage  Is 
§  938.  Avoiding  the  Lease.  Considered  a  Lien. 

I  939.  Alabama  Rule. 

§  932.  Taking  Mortgages  of  Leased  Lands. — By  the  com- 
mon law  the  entire  interest  of  the  mortgagor  in  the  property, 
which  is  the  subject  of  the  mortgage,  is  generally  conveyed  to 
the  mortgagee,  subject  to  the  condition  that  if  the  money  be 
repaid  upon  a  certain  day,  the  mortgagor  may  re-enter  and  re- 
possess himself  of  his  former  estate,  otherwise  the  estate  to  the 
mortgagee  is  to  become  absolute.  In  most  of  the  cases  the 
mortgagor  remains  in  possession  by  contract  in  the  mortgage, 
and  continues  to  receive  the  rents  and  profits  just  as  before  and 
pays  to  the  mortgagee  the  interest  of  the  borrowed  money.  So 
far  as  regards  the  possession  of  the  land,  the  mortgagor  is  not 
even  a  tenant  at  will  to  the  mortgagee,^  but  he  receives  the 
profits  of  the  land  for  his  own  use,  and  not  as  an  agent  of  the 
mortgagee,  and  when  he  has  once  received  them,  is  absolutely 
entitled  to  keep  them  as  his  own. 

After  forfeiture,  if  the  mortgagor  leases  the  premises  to  a 

tenant,  the  devise  is  absolutely  void  as  against  the  mortgagee, 

but  is  good  between  the  mortgagor  and  his  tenant  until  the 

mortgagee  interferes.     And  the  mortgagor  is  entitled  to  receive 

the  rent  for  his  own  absolute  use,  and  distrain  for  it  in  his  own 

name  if  not  paid  when  due.^ 

^  Moss  V.  Gallimore,  1  Doug.  283. 
"  Trent  v  Hunt,  9  Exch.  14,  22. 


THE    EIGHTS    OF    THE    MORTGAGEE.  935 

But  when  the  premises  are  leased  before  the  conveyance  by 
mortgage,  the  operation  of  the  mortgage  is  to  transfer  to  the 
mortgagee  the  reversion  expectant  upon  the  term  demised,  and 
with  it  the  rent ;  and  that  the  mortgagee  is  the  owner  in  law 
of  the  reversion  and  all  its  incidents,  of  which  the  rent  is  one, 
and  that  any  action  for  the  rent  must  be  brought  in  his  name, 
he  being  the  legal  owner  of  it/  But  if  instead  of  giving  notice 
to  the  tenant  to  pay  the  rent  to  himself,  he  permits  the  mort- 
gagor to  go  on  receiving  the  rent  as  before,  and  never  interferes 
with  the  tenancy  at  all,  but  receives  the  interest  upon  his 
mortgage  money  as  on  an  unsecured  debt,  the  tenant  then  may 
pay  his  rent  to  the  mortgagor.^ 

Hence,  if  the  lessor  has  mortgaged  his  reversion,  and  is 
permitted  by  the  mortgagee  to  continue  in  receipt  of  the  rent 
incident  to  that  reversion,  after  condition  broken,  he,  having 
such  permission,  is  presumptione  juris  authorized,  if  it  becomes 
necessary,  to  realize  the  rent  by  distress,  and  to  distrain  for  it.^ 
But  he  receives  it  for  his  own  use  and  not  for  the  mortgagee/ 

Until  the  mortgagee  takes  possession  the  mortgagor  is  owner 
to  all  the  world,  and  is  entitled  to  all  the  profits  made/  In 
case  the  mortgagor  is  left  in  possession,  he  is  not  liable  to  the 
mortgagee  for  the  rents  and  profits/ 

§  933.  Lease  Subsequent  to  the  Mortgage. — When  the 
lease  is  subsequent  to  the  mortgage,  the  rule  is  well  settled  in 
this  country  that,  as  no  reversion  vests  in  the  mortgagee,  and 
no  privity  of  estate  or  contract  is  created  between  him  and  the 
lessee,  he  cannot  proceed,  either  by  distress  or  action,  for  the 
recovery  of  the  rents.^ 

'  Doe  V.  Edwards,  5  Barn.  &  Adol.  10(35  ;  27  E.  C. 

^4  Anne,  ch.  1(5,  pect.  10. 

3  Trent  v.  Hunt,  9  Exch.  14,  24. 

*Keyper  v.  Hitz,  4  Mackey  (Dipt.  Col.),  179 ;  Clarke  v.  Curtis,  1  Gratt.  (Va.) 
289 ;  Noyes  v.  Rich,  .52  Me.  11.5 ;  Gibson  v.  Farley,  16  Mass.  280 ;  Long  v. 
Wade,  70  Me.  358  ;  Colman  v.  Duke,  3  Ves.  Jr.  25  ;  M'Kircher  v.  Hawley,  16 
Johns.  (N.  Y.)  289  ;  Gresley  r.  Adderley,  1  Swan.  573. 

^  Chinnery  v.  Blackman,  3  Douci.  391. 

«Higgins  r.  York  Build.  Co.,  2  Atk.  107  ;  Mead  v.  Lord  Orrery,  3  Atk.  235; 
Ex  parte  Wilson,  2  Ves.  &  B.  252. 

'Mayo  V.  Shattuck,  14  Pick.  (Mass.)  525;  Watts  v.  Coffin,  11  Johns.  (X.  Y.) 


936  EIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

Until  notice  is  given  or  a  demand  is  made  by  the  mort- 
gagee, the  tenant  may  pay  the  rent  to  the  mortgagor.^ 

The  mortgagee's  remedy  is  to  foreclose  upon  default  of  the 
mortgagor,  or  to  take  possession  of  the  premises,  and  thereby 
place  himself  in  position  to  obtain  the  future  profits.  Either 
step  operates  as  an  eviction  of  the  tenant  by  title  paramount, 
and  leaves  him  at  liberty  to  terminate  the  lease  and  quit.^  The 
mortgagee  has  no  claim  uj^on  the  rents  and  profits  until  he 
has  taken  possession,^  and  he  is  not  entitled  to  have  a  receiver 
appomted  to  take  such  rents  until  the  debt  is  due.* 

§  934.  In  Those  States  Where  the  Mortgagee  is  Pro- 
hibited FROM  Taking  Possession. — In  many  of  the  States  a 
mortgage  is  a  mere  security  for  a  debt,  and  establishes  abso- 
lutely the  rule  that  the  mortgagee  is  not  entitled  to  the  rents 
and  profits  until  he  gets  possession  under  a  decree  of  fore- 
closure. For  if  a  mortgage  is  not  a  conveyance,  and  the 
mortgagee  is  not  entitled  to  possession,  his  claim  to  the  rents 
is  without  support.^  The  assignee  of  the  rents  and  profits 
from  the  mortgagor  may  enforce  his  right  to  them  by  an  action 
in  the  nature  of  a  foreclosure  suit.^  And  when  the  mortgagor 
makes  a  contract  contrary  to  the  public  policy  of  the  State,  as 

495 ;  M'Kircher  v.  Hawley,  16  Johns.  (N.  Y.)  289  ;  Sanderson  v.  Price,  21  N. 
J.  L.  637 ;  Price  v.  Smith,  1  Green  Ch.  (N.  J.)  516. 

1  Teal  V.  Walker,  111  U.  S.  242 ;  Weidner  v.  Foster,  2  Pen.  &  W.  (Pa.)  23 ; 
Myers  v.  White,  1  Rawle  (Pa.),  355  ;  Massachusetts  L.  Ins.  Co.  v.  Wilson,  10 
Met.  (INIass.)  126 ;  Borden  v.  Thayer,  3  Met.  (Mass.)  79 ;  Coker  v.  Pearsall,  6 
Ala.  542 ;  Smith  v.  Taylor,  9  Ala.  633. 

^Simers  v.  Saltus,  3  Denio  (N.  Y.),  214;  Lane  v.  King,  8  Wend.  (N.  Y.) 
584 ;  Burr  v.  Stenton,  52  Barb.  (N.  Y.)  377  ;  Austin  v.  Ahearne,  61  N.  Y.  6 : 
Magill  V.  Hinsdale,  6  Conn.  469 ;  Taylor's  Land  and  Ten.,  sects.  121-125 ; 
Bogers  v.  Humphreys,  4  Adol.  &  Ell.  299-313 ;  Partington  v.  Woodcock,  6 
Adoll.  &  Ell.  690 ;  Eawle's  Cov.  (3d  ed.)  265  ;  Moran  v.  Pittsburgh,  etc..  Rail- 
road Co.,  32  Fed.  Rep.  878 ;  Teal  v.  Walker,  111  U.  S.  242. 
Reeder  v.  Dargan,  15  S.  Car.  175. 

*Bank  v.  Arnold,  5  Paige  (N.  Y.),  38 ;  Keyser  v.  Hitz,  4  Mackey  (Dist.  Col.), 
179. 

*Besser  v.  Hawthorn,  3  Oreg.  129;  Anderson  v.  Baxter,  4  Oreg.  105  ;  Rob- 
erts V.  Sutherlin,  4  Oreg.  219. 

«  Dewey  .  Latson,  6  Cal.  609 ;  Bank  v.  Tallman,  31  Barb.  (N.  Y.)  201.  See, 
also,  Clason  v.  Corley,  5  Sandf.  (N.  Y.)  447. 


THE    RIGHTS    OF    THE    MORTGAGEE.  937 

expressed  by  statute,  the  contract  is  not  binding  on  the  mort- 
gagor or  his  vendee,  and,  although  not  expressly  prohibited 
by  law,  like  all  contracts  opposed  to  the  public  policy  of  the 
State,  it  cannot  be  enforced.^ 

At  common  law  and  in  equity,  if  the  mortgagee  wishes  to 
receive  the  rents  and  profits,  he  must  take  possession.^ 

When  the  rents  and  profits  are  not  mortgaged,  they  belong 
to  the  tenant  in  possession.^ 

§  935.  Subsequent  Mortgage — Attornment. — The  mere 
execution  of  a  mortgage  subsequent  to  the  lease  operates  as  an 
assignment  of  the  reversion,  and  carries  the  rent  as  incident  to 
it,  and  the  mortgagee  is  entitled,  by  giving  the  tenant  notice,  to 
the  rents  and  profits  whenever  he  is  entitled  to  possession ;  he 
is  entitled  to  all  rents  accruing  and  becoming  due  subsequent 
to  the  execution  of  the  mortgage,  as  well  as  that  in  arrears  at 
the  time  of  giving  notice  as  that  which  accrues  afterward.^ 

There  is  no  apportionment  of  the  rent  between  the  lessor  and 
his  assignee ;  but  whoever  owns  the  reversion  at  the  time  the 
rent  falls  due  is  entitled  to  the  entire  sum  then  due ;  and  a 
lessor  who  has  parted  with  the  reversion,  wdthout  specially  re- 
serving the  rent,  has  no  claim  to  it.^    The  mortgagor  may  at  the 

^  Meguire  v.  Corwine,  101  U.  S.  108 ;  Marshall  v.  Baltimore,  etc.,  Eailroad 
Co.,  16  How.  (U.  S.)  314  ;  Bank  v.  Adams  Ex.  Co.,  93  U.  S.  174  ;  Railroad  Co. 
V.  Lockwood,  17  Wall.  (U.  S.)  357. 

2  Wilder  v.  Houghton,  1  Pick.  (Mass.)  87 ;  Boston  Bank  v.  Reed,  8  Pick. 
(Mass.)  459  ;  Noyes  v.  Rich,  52  Me.  115  ;  Hughes  v.  Edwards,  9  Wheat.  (U.S.) 
500  ;  Oilman  v.  Illinois,  etc.,  Telegraph  Co.,  91  U.  S.  603  ;  Kountze  r.  Omaha 
Hotel  Co.,  107  U.  S.  378  ;  American  Bridge  Co.  v.  Heidelbach,  94  U.  S.  798  ; 
Clarke  v.  Curtis,  1  Gratt.  (Va.)  289  ;  Bank  v.  Arnold,  5  Paige  (N.  Y.),  38 ;  Hun- 
ter V.  Hays,  7  Biss.  C.  C.  362  ;  Souter  v.  La  Crosse  Railway,  1  Woolw.  C  C.  80, 
85  ;  Foster  v.  Rhodes,  10  Bank.  Reg.  523. 

3  Hutchins  v.  King,  1  Wall.  (U.  S.)  53, 57, 58 ;  Reeder  r.  Dargan,  15  S.  Car.  175. 
*  Moss  V.  Gallimore,  1  Doug.  279  ;  Trent  v.  Hunt,  9  Exch.  14,  22 ;  Mirick  v. 

Hoppin,  118  ]\Iass.  582 ;  King  v.  Housatonic  Railroad  Co.,  45  Conn.  226 ;  Kim- 
ball V.  Pike,  18  N.  H.  419 ;  Rogers  v.  Humphreys,  4  Adol.  &  Ell.  299  ;  Rawson 
V.  Eicke,  7  Adol.  &  Ell.  451 ;  1  Smith's  Lead.  Cas.  310. 

=  Burden  v.  Thayer,  3  Met.  (Mass.)  76 ;  Van  Wieklen  v.  Paulson,  14  Barb. 
(X.  Y.)  654;  Demarest  r.  Willard,  8  Cow.  (N.  Y.)  206;  Martin  r.  Martin,  7 
Md.  368 ;  Peck  v.  Northrop,  17  Conn.  217  ;  Breeding  v.  Taylor,  13  B.  ]\Ion. 
(Ky.)  477  ;  Sampson  v.  Crimes,  7  Blackf.  (Ind.)  176 ;  Birch  v.  Wright,  1  Term 
Rep.  378. 


938  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

time  of  making  the  mortgage  of  the  reversion  release  the  ten- 
ant from  the  rents  then  due.^  Prior  rent  does  not  j)as3  as  an 
incident  to  the  mortgage.^ 

So  long  as  the  tenant  attorns  to  the  mortgagee  in  such  case 
he  has  the  same  rights  against  the  tenant  as  the  mortgagor 
had.*  The  tenant  is  estopped,  in  any  proceeding  by  his  land- 
lord for  the  recovery  of  rent  or  possession,  from  denying  the 
title  of  the  latter ;  yet  he  may  show  that  he  has  been  evicted 
under  a  paramount  title,  or  that  his  landlord's  title  has  been 
extinguished,  or  has  passed  from  him,  either  by  his  own  act,  or 
by  operation  of  law.* 

§  936.  Prior  Mortgagee's  Remedy. — If  the  tenant  refuses 
to  attorn  to  the  mortgagee  before  his  possession,  the  mortgagee 
cannot  distrain  or  bring  action,  nor  can  he  enforce  the  cove- 
nants of  the  lease. 

Judge  Jackson  says,  that  when  the  lease,  having  been  exe- 
cuted subsequent  to  the  mortgage,  no  privity  of  estate  or  con- 
tract is  thereby  created  between  the  mortgagee  and  lessee  ;  and 
inasmuch  as  no  reversion  vests  in  the  mortgagee  under  such 
circumstances,  he  cannot  distrain  or  bring  an  action,  either  at 
law  or  in  equity,  for  the  rents  payable  by  the  tenant,  nor 
is  he  entitled  to  enforce  the  covenants  and  provisions  of  the 
lease. 

He  has  no  election,  either  before  or  after  the  mortgagor's 
default,  to  adopt  and  demand  the  benefits  of  the  lease  without 
the  consent  of  the  lessee.  His  remedy  is  to  foreclose  upon  de- 
fault of  the  mortgagor,  or  to  take  possession  of  the  premises, 
and  thereby  place  himself  in  position  to  obtain  future  profits. 
Either  step  operates  as  an  eviction  of  the  tenant  by  title  para- 
mount, and  leaves  him  at  liberty  to  terminate  the  lease  and 

1  De  NichoUs  v.  Saunders,  L.  E.  5  C.  P.  589. 

^  King  V.  Hougatonic  Railway  Co.,  45  Conn.  226. 

'  Rogers  v.  Humphreys,  4  Adol.  &  Ell.  299,  313 ;  Globe  Marble  Mills  Co. 
V.  Quinn,  7G  N.  Y.  23. 

*  Clue's  Case,  10  Coke,  128 ;  Salmon  v.  Smith,  1  Wm.  Saunders,  206,  note  ; 
Wood  V.  Partridge,  11  Mass.  488  ;  Boardman  v.  Osborn,  23  Pick.  (Mass.)  295  ; 
Morse  v.  Goddard,  13  Met.  (Mass.)  177 ;  George  v.  Putney,  4  Cush.  (Mass.) 
351 ;  Smith's  Land  and  Ten.  134  ;  Greenl.  Cruise,  tit.  28,  ch.  3,  sects.  1  et  seq. 


THE    RIGHTS    OF    THE    MORTGAGEE.  939 

quit.^  Taking  possession  with  notice  to  pay  rent  to  him  is 
sufficient.^  So,  when  the  lease  is  made  by  a  mortgagor,  after 
the  mortgage,  it  does  not  bind  the  mortgagee,  nor  in  any  man- 
ner affect  his  rights.  Hence,  a  mortgagee  of  a  dwelling-house 
is  not  liable  for  misrepresentations  as  to  its  sanitary  condition 
made  by  the  mortgagor  in  possession  in  renting  the  same  to  a 
tenant.^ 

After  notice  by  the  mortgagee  entitled  to  possession  to  pay 
him  the  rent,  if  the  tenant  pays  it  to  the  mortgagor,  he  is  still 
liable  to  the  mortgagee.* 

§  937.  The  Mortgagor  Cannot  Bind  the  Mortgagee. — 
When  a  lease  is  made  by  a  mortgagor,  after  the  mortgage,  it  does 
not  bind  the  mortgagee,  nor  in  any  manner  affect  his  rights.® 
The  mortgagor  cannot  bind  the  mortgagee.®  The  mortgagee 
is  not  liable  for  the  mortgagor's  wrongs  in  leasing  the  prem- 
ises.^ 

After  right  of  possession  by  the  mortgagee  he  may  enter 
and  treat  the  lessee  as  a  trespasser,  and  without  notice  eject 
the  tenant.^ 

However,  if  the  tenant  is  allowed  to  attorn  to  the  mortgagee, 
then  he  cannot  be  treated  as  a  trespasser,^  but  a  tenant  from 
year  to  year. 

^  Moran  v.  Pittsburgh,  etc.,  Railway  Co.,  32  Fed.  Eep.  878,  886 ;  Teal  v. 
Walker,  111  U.  S.  242 ;  Rogers  v.  Humphreys,  4  Adol.  &  Ell.  299-313  ;  Part- 
ington V.  Woodcock,  6  Adol.  &  Ell.  690. 

2  Stone  V.  Patterson,  19  Pick.  (Mass.)  476 ;  Welch  v.  Adams,  1  Met.  (Mass.) 
494 ;  Tilden  v.  Greenwood,  149  Mass.  567 ;  Morse  v.  Goddard,  13  Met.  (Mass.) 
177. 

^Tilden  v.  Greenwood,  149  Mass.  567. 

*  Watford  v.  Gates,  57  Ala.  290.    See,  also,  Crosby  v.  Harlow,  21  Me.  499. 

s  Fitchburg  Cotton  Manuf.  Co.  v.  Melven,  15  Mass.  268 ;  Boston  Bank  v. 
Reed,  8  Pick.  (Mass.)  459,  462 ;  Mayo  v.  Fletcher,  14  Pick.  (Mass.)  525,  531 ; 
Teal  V.  Walker,  111  U.  S.  242. 

6  Tilden  v.  Greenwood,  149  Mass.  567 ;  Russum  v.  Wanser,  53  Md.  92 ; 
McDermott  v  Burke,  16  Cal.  580. 

'  Tilden  v.  Greenwood,  149  Mass.  567. 

8  Rogers  v.  Humphreys,  4  Adol.  &  Ell.  299;  Thunder  v.  Belcher,  3  East, 
449. 

3  Hughes  V.  Bucknell,  8  Car.  &  P.  566 ;  Birch  v.  Wright,  1  Term  R.  378 ; 
Henshuw  v.  Welles,  9  Humph.  (Tenn.)  568. 


940  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

§  938.  Avoiding  the  Lease. — When  the  lease  is  given,  after 
the  mortgage,  the  mortgagor  has  the  right  to  the  rents  and 
profits  until  interference  of  the  mortgagee  under  the  law.  As 
between  the  mortgagor  and  the  lessee,  the  contract  is  valid,  and 
if  the  mortgage  debt  is  paid,  the  defect  in  the  lessee's  title  is 
removed.  If  the  lessee  is  damnified  by  the  mortgagor,  his 
remedy  is  at  law  for  damages.^  It  is  avoided  only  by  the  pos- 
session of  the  mortgagee  under  the  mortgage. 

§  939.  Alabama  Rule. — In  Alabama  a  statute  provides  that 
every  conveyance  of  an  estate  is  good  and  effectual  witliout 
attornment  of  the  tenant,  but  no  tenant  is  liable  who  has  paid 
his  rent  without  notice  of  such  conveyance.^  So  the  mortgagee, 
after  right  of  possession,  is  entitled  to  the  rents  upon  giving 
notice  to  the  tenant.^ 

§  940.  Iowa  Rule. — In  Iowa  the  provision  of  the  statute  is 
that  the  attornment  of  a  tenant  to  a  stranger  is  void,  unless 
made  to  a  mortgagee  after  the  mortgage  has  been  forfeited ; 
and  that  the  mortgagor  may  redeem  within  one  year  after  fore- 
closure sale,  and  that  in  the  meantime  he  is  entitled  to  posses- 
sion. So  there  can  be  no  valid  attornment  of  a  tenant  to  a 
mortgagee  until  the  expiration  of  the  mortgagor's  right  of 
redemption.* 

§  941.  Attornment  op  Subsequent  Lessee. — Until  the 
mortgagee  enters  he  cannot  recover  the  rent.  If,  however,  the 
tenant  attorns  to  him  after  right  of  possession,  he  becomes  the 
mortgagee's  tenant,^  and  the  mortgagor  cannot  collect  rent  from 
the  lessee,"  nor  recover  possession  of  the  property.      But  he  is 

1  Costigan  v.  Hastier,  2  Sch.  &  Lef.  160. 

2  Code  1867,  sect.  1568. 

3  Marx  V.  Marx,  51  Ala.  222 ;  Branch  Bank  v.  Fry,  23  Ala.  770 ;  Knox  v. 
Easton,  38  Ala.  345. 

*  Mills  V.  Hcaton,  52  Iowa,  215  ;  Mills  v.  Hamilton,  49  Iowa,  105. 

^  Evans  v.  Elliot,  9  Adol.  &  Ell.  159  ;  Kimball  r.  Lockwood,  6  R.  I.  139 ; 
Rogers  v.  Humphreys,  4  Adol.  &  Ell.  299,  313  ;  Hemphill  v.  Giles,  66  N.  Car. 
512;  Adams  r.  Bigelow,  128  Mass.  365. 

«  Blain  v.  Rivard,  19  111.  App.  477  ;  Cook  v.  Johnson,  121  Mass.  326 ;  Magill 
V.  Hinsdale,  6  Conn.  464 ;  Jones  v.  Clark,  20  Johns.  (N.  Y.)  51. 


THE    RIGHTS    OF    THE    MORTGAGEE.  941 

liable  to  the  mortgagor  until  he  has  attorned  to  the  mortgagee.^ 
But  in  those  States  where  the  mortgagee  has  no  right  to  enter 
until  foreclosure,  this  rule  has  no  application.^ 

§  942.  Improvements  by  Lessee. — The  right  of  the  mort- 
gagor to  improvements  cannot  co-exist  with  the  right  of  the 
mortgagee  to  enter,  foreclosure,  and  sell.  So  it  is  not  strained 
construction  to  say  that  this  doctrine  clearly  limits  his  right  to 
lease  to  others,  in  order  that  they  may  possess,  occupy,  and 
improve.  For  the  right  of  the  lessee  cannot  co-exist  with  the 
right  of  the  mortgagee  to  enter,  foreclose,  and  sell.^ 

So  a  tenant  having  taken  title  pendente  lite,  cannot  be  al- 
lowed compensation  for  any  building  and  improvements  made 
or  entered  on  the  premises  by  him,  although  he  had  rea- 
son to  believe  his  title  to  be  good.*  And  if  the  tenant  pays 
the  mortgagor  in  advance,  according  to  agreement,  that  the 
mortgagor  will  make  improvements  upon  the  .land,  which  is 
accordingly  done,  after  the  lawful  entry  by  the  mortgagee,  he 
cannot  be  allowed  compensation  for  the  buildings  and  improve- 
ments, although  he  had  reason  to  believe  that,  under  the  terms  of 
the  mortgage,  the  mortgagor  had  the  right  to  execute  such  lease.^ 

§  943.  Emblements  Under  the  Lease. — The  mortgagor 
until  foreclosure  or  lawful  possession  taken  by  the  mortgagee, 
is  entitled  to  emblements  when  they  are  severed,  as  an  absolute 
right  to  them,  without  any  liability  to  account  for  them.  But 
if  the  land  be  sold  for  condition  broken  before  severance,  the 
purchaser  will  be  entitled  to  the  growing  crops  not  only  as 
against  the  mortgagor  but  against  all  persons  claiming  in  any 
manner  through  or  under  him  subsequently  to  the  recording 
of  the  mortgage.® 

1  McDowell  V.  Hendrix,  67  Ind.  513.   See,  also,  Ca^ds  v.  Mcaary,  5  N.  H.  529. 

^  Hogsett  r.  Ellis,  17  Mich.  351 ;  Besser  v.  Hawthorn,  3  Oreg.  129  ;  Ander- 
son V.  Baxter,  4  Oreg.  105  ;  Roberts  v.  Sutherlin,  4  Oreg.  219. 

•''Haven  v.  Adams,  4  Allen  (Mass.),  80. 

*  Havens  v.  Adams,  8  Allen  (Mass.),  363. 

^  Haven  v.  Boston,  etc.,  R.  R.  Co.,  8  Allen  (Mass.),  369. 

« Jones  r.  Thomas,  8  Blackf.  (Ind.)  428  ;  Lane  r.  King,  8  Wend.  (N.  Y.)  584; 
Gillett  V.  Balcom,  6  Barb.  (N.  Y.)  370 ;  Rankin  v.  Kinsey,  7  111.  App.  215. 


942  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

At  a  foreclosure  and  sale,  if  a  lease  has  been  given  subsequent 
to  the  execution  of  the  mortgage,  without  the  concurrence  of 
the  mortgagee,  he  may  evict  the  lessee  without  notice  and 
retain  the  emblements/ 

§  944.  Who  May  Attack  the  Lease. — It  appears  that  no- 
body but  the  mortgagee  can  take  advantage  of  the  invalidity 
of  a  subsequent  lease.  Because  if  the  mortgagee  does  not  ob- 
ject to  the  lessee's  possession  of  the  j)remises  after  he  has  a  law- 
ful right  to  enter,  no  stranger  should  be  allowed  to  complain. 
So  while  the  lessee  so  remains  in  possession  he  may  protect  his 
rights  and  bring  trespass  against  a  third  party  who  interferes 
with  his  possession.^ 

§  945.  Lease  by  Mortgagee  in  Lawful  Possession. — If 
the  mortgagee  be  in  possession,  he  cannot  lease  it  for  a  period 
exceeding  the  time  allowed  for  redemption ;  if  the  land  is  re- 
deemed within,  that  time  the  lease  is  thereby  determined.^ 

The  payment  of  the  mortgage  debt  by  the  mortgagor  termi- 
nates the  right  of  possession  by  a  lessee  under  the  mortgagee, 
unless  there  has  been  some  express  or  implied  authority  from 
the  mortgagor  to  lease  for  a  given  time.^ 

But  the  mortgagee  having  neither  the  possession  nor  the 
right  of  possession  of  the  mortgaged  property,  has  no  interest 
therein  which  he  can  convey  by  a  lease.^ 

§  946.  Assignment  by  Mortgagee  in  Possession. — There 
is  no  principle  of  law  or  equity  which  will  authorize  an  as- 
signee of  a  mortgage  to  claim  the  rent  due  before  the  assign- 
ment to  him,  or  allow  him  to  bring  any  action  that  the  mort- 
gagee had  a  right  to  maintain  against  the  mortgagor  or  third 
person,  for  any  appropriation  of  the  rents  and  profits  of  the 
mortgaged  premises.*' 

^Downard  v.  GrofF,  40  Iowa,  597 ;  Anderson  v.  Strauss,  98  111.  485. 

*  Kennett  v.  Plummer,  28  Mo.  142. 

nVillard  v.  Harvey,  5  N.  H.  252;  Hungerford  v.  Clay,  9  Mod.  1. 

*  Holt  V.  Rees,  46  111.  181 ;  44  111.  30. 

^  Union  Mutual  Life  Ins.  Co.  v.  Lovitt,  10  Nebr.301. 

^  Salmon  v.  Dean,  3  MacN.  &  Gord.  344 ;  Kimball  v.  Lewiston  Steam  Mill 
Co.,  55  Me.  494. 


THE    RIGHTS    OP   THE   MORTGAGEE.  943 

§  947.  Leasehold  Estate. — A  mortgage  of  a  leasehold 
estate  is  equivalent  to  an  assignment  of  the  lease.  And  thus 
the  mortgagee  takes  an  assignment  of  the  whole  term,  and 
subjects  himself  to  the  covenants  in  the  original  lease.^  And 
so  when  A.  takes  an  assignment  of  a  lease  by  way  of  mortgage 
as  a  security  for  a  debt,  the  whole  interest  j^asses  to  him,  and 
he  becomes  liable  on  the  covenant  for  payment  of  rent,  though 
he  never  occupied,  or  became  possessor  in  fact.  Lord  Chief 
Justice  Dallas  shows  from  authority  that  the  lessee  is  liable  for 
the  rent  whether  he  enter  or  not,  that  he  is  liable  by  virtue  of 
his  lease,  and  that  the  assignee  is  under  the  same  liability, 
whether  he  takes  an  absolute  assignment  or  only  by  way  of 
security,  for  the  lessee  conveys  by  the  assignment  his  whole  in- 
terest, which  the  assignee  takes ;  and  as  the  lessee  was  liable 
before  entry,  so  must  the  assignee  be  liable  in  like  manner. 
He  further  holds  that  there  was  privity  of  estate ;  for  the  ac- 
ceptance of  the  assignment  was  equal  to  actual  entry  and 
privity  of  contract,  because  the  contract  was  with  the  lessee 
and  his  assigns,  and  the  mortgagee  is  an  assign ;  therefore  the 
contract  was  between  the  lessor  and  assignee.^ 

In  Sparkes  v.  Smith, ^  the  court  said,  it  was  the  mortgagee's 
folly  to  take  an  assignment  of  the  whole  term,  whereby  he 
subjected  himself  to  the  covenants  in  the  original  lease.  So 
under  this  rule,  which  is  well  established  in  England,  if  the 
mortgagee  does  not  take  for  the  whole  term  he  will  not  become 
liable  to  pay  rent  according  to  the  covenant  of  the  lease,  but 
if  he  takes  for  the  whole  term  he  becomes  liable.* 

The  mortgagee  has  no  right  to  rents  due  before  he  took  his 
mortgage  ;  ^  his  lien  attaches  to  a,  renewal  lease.*^ 

^  See  Sparkes  v.  Smith,  2  Vern.  275 ;  Pilkington  v.  Shaller,  2  Vern.  374 ; 
Lucas  V.  Comerford,  1  Ves.  Jr.  235. 

^  Williams  v.  Bosanquet,  1  Brod.  &  Bing.  "238  ;  5  Eng.  C.  L.  fi09,  overruling 
Eaton  V.  Jaques,  2  Doug.  455.  See,  also,  Farmers'  Bank  r.  Mut.  Assn.,  4 
Leigh  (Ya.),  69 ;  Pingrey  v.  Watkins,  15  Vt.  479 ;  Colvert  v.  Bradley,  16  How. 
(U.  S.)  580  ;  Lester  v.  Hardesty,  29  Md.  50. 

*  2  Vern.  275. 

*  M'Murphy  v.  Minot,  4  N.  H.  251. 

^  Burden  v.  Thayer,  3  Met.  (JNIass.)  76. 
«Slee  V.  Manhattan  Co.,  1  Paige  (N.  Y.),  48. 


944  RIGHTS   OF    PARTIES    BEFORE   DEFAULT. 

In  those  States  where  the  assignment  of  the  mortgage  as 
well  as  the  mortgage  itself  must  be  recorded  in  order  to  be 
valid,  if  not  recorded  it  does  not  pass  the  legal  estate,  and  lia- 
bility upon  the  covenants  does  not  affect  a  person  taking  such 
unrecorded  instrument.' 

§  948.  Rule  When  the  Mortgage  is  Considered  a 
Lien. — Where  the  mortgage  is  considered  a  mere  lien,  a  mort- 
gagee of  a  term  not  in  possession  cannot  be  considered  as  an 
assignee ;  but  if  he  takes  possession  of  the  mortgaged  premises, 
he  has  the  estate  with  its  liabilities.^  Under  this  view  the  as- 
signee is  liable  only  in  respect  of  the  possession  ;  so  a  mortgagee 
out  of  possession  is  not  liable  as  an  assignee,  though  he  has 
taken  the  whole  term  of  the  lease.^  So  making  a  mortgage  of 
a  leasehold  estate  is  not  a  breach  of  a  covenant  not  to  assign, 
under  this  rule  of  a  mortgage  being  a  mere  security.* 

An  assignee  is  not  liable  for  breaches  which  have  wholly 
accrued  before  the  assignment.  The  assignee  is  not  person- 
ally liable  for  rent  due  before  the  assignment ;  no  action  of 
covenant  will  lie  against  him  for  such  rent  due  before  the  as- 
signment ;  no  action  of  covenant  will  lie  against  him  for 
such  rent,  as  it  will  for  rent  accrued  subsequent  to  the 
assignment,  and  before  he  conveys  away  the  demised  prem- 
ises. If  the  landlord  is  entitled  by  law  or  by  his  lease  to 
proceed  in  rem  to  recover  his  rent,  the  assignment  does  not 
affect  the  remedy.  If  he  can  distrain  and  re-enter  for  want  of 
distress  as  against  the  lessee,  he  may  do  the  same  against  the 
assignee  for  rent  accrued  before  the  assignment.  But  when 
the  remedy  for  the  breach  of  the  covenant  is  merely  personal, 
then  the  assignee  is  not  liable.^ 

1  Mayhew  v.  Hardesty,  8  Md.  479. 

2  Astor  V.  Hoyt,  5  Wend.  (N.  Y.)  604. 

3  Walton  V.  Cronly,  14  Wend.  (N.  Y.)  63;  Astor  v.  Miller,  2  Paige  (N.  Y.), 
68 ;  Childs  V.  Clark,  3  Barb.  Ch.  (N.  Y.)  52. 

*  Riggs  V.  Pursell,  66  N.  Y.  193 ;  the  rule  is  otherwise  where  a  mortgage  is 
considered  as  a  transfer  of  title. 

5  Astor  V.  Hoyt,  5  Wend.  (N.  Y.)  604,  617 ;  Grescot  v.  Green,  1  Salk.  199 ; 
Church  Wardens  v.  Smith,  3  Burr.  1271. 


CHAPTER  XXIII. 

assignment  of  mortgage  and  debt. 

Article  1. 

Rule  at  Common  Law. 

§  949.  Must  Be  By  Deed.  §  953.  Consideration. 

§  950.  Statutory  Provisiona.  §  954.  After  the  Mortgagee  has  been 

§  951.  Subsequent  Assignee.  Disseised. 

S  952.  Consent  of  Mortgagor.  ^  955.  Delivery. 

§  949.  Must  Be  By  Deed. — It  is  the  settled  rule  of  the 
adjudged  cases  in  all  those  States  where  a  mortgage  j^reserves 
its  character  as  conferring  an  estate  in  land  rather  than  a  mere 
lien  or  a  security,  that  an  assignment  must  be  by  deed  ;  the 
general  rule  prevailing  is  that  the  legal  title  of  a  mortgaged 
estate  can  only  be  transferred  by  deed.^  Therefore  an  assign- 
ment of  a  mortgage  to  be  effectual  in  these  States  to  convey 
the  mortgagee's  title  and  enable  the  assignee  to  maintain 
ejectment,  must  be  by  such  a  conveyance  in  form  and  words 
as  is  required  to  convey  the  legal  title  to  land  in  ordinary 
cases.^ 

Hence,  where  lands  are  sold  under  a  power  contained  in  a 
mortgage  at  the  instance  of  the  mortgagee,  who  has  not 
acquired  the  legal  title,  the  auctioneer's  deed  to  the  purchaser 
does  not  invest  him  with  the  legal  title.^ 

If  the  legal  title  is  vested  in  the  assignee  by  the  transfer,  he 
can  foreclose  the  mortgage.*  But  if  the  instrument  is  not  under 
seal  and  does  not  purport  to  convey  an  estate  in  land,  it  does 

1  Adams  v.  Parker,  12  Gray  (Mass.),  63 ;  Smith  v.  Kellcy,  27  Me.  237  ;  46 
Am.  Dec.  295. 

2  Sanders  v.  Cassady,  86  Ala.  246 ;  Givan  v.  Doe,  7  Blackf.  (Ind.)  210  ;  Hen- 
derson V.  Pilgrim,  22  Tex.  464,  478  ;  Torrey  v.  Deavitt,  53  Vt.  331. 

3  Sanders  v.  Cassady,  86  Ala.  246  ;  Tripp  t-.  Ide,  3  R.  I.  51. 

*  Williams  v.  Teachey,  85  N.  Car.  402  ;  Phelps  v,  Townsley,  10  Allen  (Mass.), 
.  554 ;  Cottrell  v.  Adams,  2  Biss.  C.  C.  351. 

60  945 


946  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

not  give  the  assignee  the  mortgagee's  title  so  he  can  exercise 
the  power  of  sale/ 

An  assignment  by  a  mortgagee,  sealed,  acknowledged,  and 
recorded,  jjurporting  to  pass  absolutely  all  his  interest  in  the 
premises  and  the  debt  secured  by  the  mortgage,  vests  the 
assignee  with  all  the  mortgagee's  rights,  though  no  words  of 
inheritance  are  used  therein.^ 

§  950.  Statutory  Provisions. — In  New  Jersey  the  statute 
provides  that  mortgages  shall  be  assignable  at  law,  and  that 
the  assignee  may  enforce  them  in  his  own  name,  when  the  as- 
signment is  in  writing,  though  it  need  not  be  under  seal.^ 

And  in  North  and  South  Dakota  an  assignee  must  have  a 
written  assignment  to  empower  him  to  foreclose.* 

In  Pennsylvania  the  assignment  should  be  in  writing,  under 
seal  and  attested  by  two  witnesses.^ 

§  951.  Subsequent  Assignee. — For  all  purposes  of  security 
to  an  assignee  and  to  enable  him  to  obtain  any  just  remedy 
under  a  mortgage,  the  assignment  of  the  debt  and  mortgage 
passes  the  legal  estate,  and  the  rights  of  a  second  or  third 
assignee  are  co-extensive  with  those  of  the  first.®  The  assignee 
takes  by  a  duly  executed  assignment  the  interest  in  the  mort- 
gaged premises.^ 

§  952.  Consent  of  Mortgagor. — A  mortgagor  can  waive 
by  parol  the  condition  specified  in  a  written  agreement,  limit- 
ing the  use  of  a  mortgage  given  to  secure  advances,  and  con- 
sent to  its  assignment  as  collateral  security  for  a  loan.^  And 
where  the  mortgagor  is  informed  by  the  mortgagee  that  he 

^  Dameron  v.  Eskridge,  104  N.  Car.  621 ;  Williams  v.  Teachey,  85  N.  Car.  402. 

^  Barnes  v.  Boardman,  149  Mass.  106. 

'Nixon's^tOig.,  p.  613 ;  Mulford  v.  Peterson,  35  N.  J.  L.  127. 

*  Hickey;. '.  Richards,  3  Dak.  345.    See  Civil  Code,  Dak.,  sect.  313. 

*  1  Brigb.:ly's  Purd.  Dig.,  p.  485.  See  McCandless  v.  Engle,  51  Pa.  St.  309. 

e  Hills  v.  Eliot,  12  Mass.  26  ;  Hoitt  v.  Webb,  36  N.  H.  158;  Cook  v.  Cooper, 
18  Oreg.  142. 

^  Torrey  v.  Deavitt,  53  Vt.  331.  See,  also,  Johnson  v.  Beard  (Ala.),  9  South. 
Rep.  535. 

*  Hidden  v.  Kretzschmar,  37  Fed.  Rep.  465. 


ASSIGNMENT    OF    MORTGAGE    AND    DEBT.  947 

wishes  to  assign  the  mortgage  to  a  creditor  of  his  own,  and  the 
mortgagor  makes  no  objection,  he  is  estopped  from  denying 
that  the  assignment  was  made  to  secure  a  debt  of  the  mort- 
gagee, instead  of  one  of  his  own  owing  to  the  assignee.^ 

A  bond  and  mortgage  held  by  a  mortgagee,  which  have  been 
paid,  can  be  assigned  with  the  consent  of  the  mortgagor  ;  and 
in  the  hands  of  an  assignee  for  vahie  they  will  be  available  as 
against  the  mortgagor  and  the  mortgagee.^ 

§  9-":3.  Consideration. — Marriage  is  such  a  consideration  as 
will  make  the  assignee  a  purchaser  for  full  value.^ 

The  consideration  of  a  mortgage  made  or  negotiated  is  the 
amount  paid  by  the  assignee.* 

If  the  assignee  get  the  mortgage  and  debt  at  a  discount,  this 
does  not  give  the  mortgagor  any  right  to  have  the  debt  corre- 
spondingly reduced  ;  ^  and  the  assignment  to  an  attorney  for 
collection  is  a  valid  assignment."  The  rule  adopted  by  the 
courts  as  to  a  pre-existing  debt  being  a  consideration  applies 
to  assignments.^  To  be  entitled  as  a  bona  fide  purchaser  of  the 
notes  and  mortgage,  the  party  must  have  received  them  and 
made  a  substantial  payment  before  notice  of  other  party's 
rights  ;  a  nominal  payment  without  having  received  the  notes 
and  mortgage  is  not  sufficient  when  the  purchaser  has  notice 
that  another  party  than  the  vendor  owns  the  securities.^  And 
the  assignee  of  a  mortgage  who  has  given  no  other  considera- 
tion therefor  than  his  own  promissory  note,  upon  which  he 
has  paid  nothing,  is  not  a  bona  fide  holder  for  value.® 

^  Matthews  v.  Warner,  33  Fed.  Rep.  3fi9. 

'^  Purser  v.  Anderson,  4  Edw.  Ch.  (N.  Y.)  17;  Hoy  r.  Bramhall,  19  N.  J. 
Eq.  503 ;  Hubbell  v.  Blakeslee,  71  N.  Y.  63 ;  Houseman  v.  Bodine,  122  N.  Y. 
158. 

'Mellick  r.  Mellick,  47  N.  J.  Eq.  86. 

*  Croft  V.  Bunpter,  9  "Wis.  503 ;  Schafer  v.  Reilly,  50  X.  Y.  61  ;  Westen^elt 
V.  Scott,  3  Stoc-kt.  (N.  J.)  80 ;  McCurdy  v.  Agnew,  4  Halst.  (N.  J.)  733. 

*  Knox  V.  Galligan,  21  Wis.  470 ;  Pease  v.  Benson,  28  Me.  336.  See  Adair  v. 
Adair,  5  Mich.  204. 

*  Russum  V.  Wanser,  53  Md.  92. 

'  Yates  County  Nat.  Bank  v.  Baldwin,  43  Hun  (X.  Y.),  136. 
^Haescig  v.  Brown,  34  Mich.  503. 
9  Chancellor  v.  Bell,  45  N.  J.  Eq.  538. 


948  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

The  extension  of  the  time  for  payment  and  the  forbearance 
of  the  creditor  is  a  sufficient  consideration.'  A  bona  fide  as- 
signee may  convey  the  assigned  mortgage  to  the  children  of 
the  mortgagor  without  any  consideration,  so  far  as  the  second 
mortgagee  is  concerned.^ 

§  954,  After  the  Mortgagee  Has  Been  Disseised. — A 
mortgagee  of  land,  who  has  been  disseised  cannot  make  a  valid 
assignment  of  his  mortgage.^  The  doctrine  that  the  disseisee, 
without  entry  and  delivery  of  the  deed  of  the  land,  cannot  con- 
ve}^  any  title  which  will  be  valid  as  against  the  disseisor  is 
well  settled.* 

But  the  possession  of  the  mortgagor  is  not  adverse  to  the 
mortgagee,  and  does  not  j)revent  an  assignment.^   ■ 

But  if  the  mortgagor  is  desseised,  then  no  valid  assignment 
can  be  made,^  unless  the  mortgagee's  possession  is  recognized/ 

§  955.  Delivery. — Delivery  of  the  deed  is  necessary  to  a 
valid  assignment.  When  there  is  not  an  actual  transfer  of  the 
deed,  it  must  appear  satisfactorily,  either  from  the  circum- 
stances of  the  transaction  or  the  acts  or  words  of  the  grantor 
that  it  was  intended  to  part  with  the  deed  and  title  in  the  se- 
curity ;  ^  the  intention  must  be  shown,  and  the  acts  lawful.^ 
In  Massachusetts,  the  assignee  may  execute  and  acknowledge 
an  assignment  in  blank,  and  orally  instruct  his  agent  to  fill  it 
up  when  transferred,  and  it  will  be  a  valid  assignment.^" 

1  Worcester  Nat.  Bank  v.  Cheeney,  87  111.  602. 

^  Saenger  v.  Nightingale,  48  Fed.  Rep.  708. 

3  Poignard  v.  Smith,  6  Pick.  (Mass.)  172 ;  8  Pick.  (Mass.)  272 ;  Richardson  v. 
Hildreth,  8  Cush.  (Mass.)  225. 

*  Dadmun  v.  Lamson,  9  Allen  (Mass.),  85 ;  Brinley  v.  Whiting,  5  Pick.  (Mass.) 
348  ;  Foster  v.  Abbot,  8  Met.  (Mass.)  596 ;  Barry  v.  Adams,  3  Allen  (Mass.),  493. 

^  Murray  v.  Blackledge,  71  N.  Car.  492. 

8 Poignard  v.  Smith,  6  Pick.  (Mass.)  172;  8  Pick.  (Mass.)  272. 

^  Lincoln  v.  Emerson,  108  Mass.  87.  See,  also,  Nichols  v.  Reynolds,  1  R.  I. 
30 ;  Clark  v.  Clark,  56  N.  H.  106. 

« Folly  V.  Vantuyl,  4  Halst.  (N.  J.)  153 ;  Crawford  v.  Bertholf,  Sax.  (N.  J.) 
458 ;  Pringle  v.  Pringle,  59  Pa.  St.  281 ;  Rankin  v.  Major,  9  Iowa,  297  ;  Ruck- 
man  V.  Ruckman,  33  N.  J.  Eq.  354. 

»Shurtleffv.  Francis,  118  Mass.  154. 

10  Phelps  V.  Sullivaji,  140  Mass.  36;  54  Am.  Rep.  442. 


ASSIGNMENT    OP    MORTGAGE    AND    DEBT.  949 

The  delivery  is  necessary  as  against  bona  fide  assignees. 
Thus,  a  second  assignment  to  a  bona  fide  assignee,  with  de- 
livery, after  a  previous  assignment,  which  has  been  recorded, 
but  the  delivery  never  having  been  made,  is  entitled  to  pri- 
ority.^ 

Article  2, 

Wlio  May  Make  an  Assignment. 

I  956.  Attorney.  I  962.  Corporations. 

I  957.  Unincorporated  Association.  §  963.  Marriage. 

I  958.  Joint  and  Several  Estates.  §  964.  Support. 

I  959.  Joint  Tenants.  |  965.  Surety. 

I  960.  Legatee.  |  966.  Rights    of    Mortgagee   as  to 

§961.  Executors  and  Administrators.  Subsequent  Lienors. 

§  956.  Attorney. — When  a  mortgage  is  considered  an  estate 
in  land  it  can  be  assigned  only  by  deed.  The  general  rule  is 
that  authority  to  execute  a  sealed  instrument  for  another  must 
also  be  under  seal.  But  the  articles  of  a  partnership,  which  are 
under  seal,  can  confer  upon  an  attorney  authority  to  execute 
such  instrument  for  the  partnership.  So  if  a  copartner,  in  the 
course  of  the  business,  under  such  articles,  which  provide  that 
he  shall  transact  the  partnership  business,  assigns  a  mortgage 
of  the  firm,  the  assignment  is  valid.  It  is  not  necessary  to 
have  such  authority  to  execute  an  assignment  recorded.^ 

§  957.  Unincorporated  Association. — An  assignment  by 
the  trustees  of  a  voluntary  association  of  a  mortgage  held  by 
them  passes  the  legal  title,  in  the  absence  of  evidence  that 
their  power  of  alienation  is  restrained  by  the  by-laws  of  the 
association.^  And  when  a  mortgage  is  taken  by  certain  per- 
sons described  as  trustees  of  an  association  which  is  not  in- 
corporated, the  legal  title  under  the  mortgage  vests  in  those 
persons,  and  an  assignment  by  the  association  is  invalid.* 

1  Brown  v.  Johnston,  7  Abb.  N.  C.  (N.  Y.)  188. 
'Morrison  v.  Mendenhall,  18  Minn.  232. 
^Manahan  i'.  Varnum,  11  Gray  (Mass),  405. 

*  Austin  1'.  Shaw,  10  Allen  (Mass),  552;  Chapin  v.  Universalist  Society,  8 
Gray  (Mass.),  580;  Webster  v.  Vandeventer,  6  Gray  (]\Iass.),  428. 


950  RIGHTS    OP    PARTIES    BEFORE    DEFAULT. 

The  association  could  convey  no  title  because  it  was  only  a 
cestui  que  trust.  All  the  trustees  must  join  in  conveyance  in 
order  to  make  a  grant  of  the  estate.' 

§  958.  Joint  and  Several  Estates. — If  a  mortgage  is  given 
to  secure  a  joint  debt,  it  will  be  construed  to  be  a  joint  estate. 
But  if  the  mortgage  is  given  to  secure  separate  debts  or 
obligations,  each  mortgagee  is  entitled  to  enforce  his  rights 
in  his  own  name.^  So,  when  the  conveyance  is  to  the  mort- 
gagees "severally,"  each  may  assign  his  interest.^  And  when 
a  mortgage  note  is  indorsed  by  the  two  mortgagees,  each  trans- 
fers only  one-half  interest.*  Whenever  the  debts  are  separate, 
all  the  mortgagees  must  join  in  the  assignment.^ 

§  959.  Joint  Tenants. — An  assignment  of  a  mortgage  of 
two  persons  as  trustees  of  an  unincorporated  society  vests  the 
title  in  them  as  joint  tenants.     Co-trustees  are  joint  tenants.^ 

And  the  abandonment  of  a  trust  by  one  of  two  joint  trustees 
who  are  joint  tenants  does  not  vest  his  title  in  the  remaining 
trustee  without  deed  or  legal  process,^  and  it  is  impossible  for 
one  of  several  joint  tenants  to  foreclose  a  mortgage  without 
making  the  others  parties.^ 

However,  in  Connecticut,  one  of  several  joint  owners  of  real 
estate  may  recover  the  whole  estate  in  attachment  against  a 
person  who  has  no  title,  and  will  hold  it  when  recovered  as 
well  for  the  other  owners  as  for  himself.  But  this  is  not  the 
rule  of  the  common  law.' 

*  Webster  v.  Vandeventer,  6  Gray  (Mass.),  428;  Chapin  v.  Universalist 
Society,  8  Gray  (Mass.),  580;  Peabody  v.  Methodist  Society,  5  Allen  (Mass.), 
540. 

^  Burnett  v.  Pratt,  22  Pick.  (Mass.)  556. 

'Gilson  V.  Gilson,  2  Allen  (Mass.),  115;  Blake  v.  Sanborn,  8  Gray  (Mass.), 
154. 

*  Herring  v.  Woodhull,  29  111.  92. 

*  Bruce  v.  Bonney,  12  Gray  (Mass.),  107. 
«Appleton  V.  Boyd,  7  Mass.  131. 

''Webster  v.  Vandeventer,  6  Gray  (Mass.),  428;  Wilbur  v.  Almy,  12  How. 
(U.  S.)  180  ;  Austin  v.  Shaw,  10  Allen  (Mass.),  552. 

8  Lowe  V.  Morgan,  1  Bro.  C.  C.  368. 

9  Bush  V.  Bradley,  4  Day  (Conn.),  303,  304. 


ASSIGNMENT    OF    MORTGAGE    AND    DEBT.  951 

An  assignment  to  two  trustees  for  an  unincorporated  associ- 
ation vests  in  these  trustees  the  legal  title,  and  an  assignment 
of  the  mortgage  by  one  of  these  trustees  is  invahd,  and  the 
assignee  caimot  foreclose  the  mortgage.^ 

§  960.  Legatee. — The  validity  of  an  assignment  of  a  mort- 
gage is  not  impaired  by  a  showing  merely  that  the  interest  of 
the  assignor  was  but  a  life  estate,  where  it  is  not  made  to  ap- 
pear that  the  transfer  operates  to  diminish  the  bulk  of  the 
estate  at  the  death  of  the  life  tenant.  And  this  is  so  where  it 
is  necessary  to  make  such  assignment  to  obtain  the  income  and 
to  protect  the  property  from  impairment.^ 

§  961.  Executors  and  Administrators. — The  right  of  ex- 
ecutors and  administrators  to  make  assignments  of  mortgages 
belonging  to  the  estate  or  to  take  assignments  of  mortgages  is 
generally  controlled  by  statutory  provisions. 

Thus,  in  Maine  an  executor  can  assign  a  mortgage  upon 
real  estate  held  by  the  testator  at  the  time  of  his  death.^  And 
it  has  been  held  that  an  executor  or  administrator  can  gener- 
ally assign  a  mortgage  without  an  order  from  court  for  that 
purpose,  because  such  interest  is  only  a  chattel  interest  which 
vests  in  the  personal  representatives  of  the  deceased  mortgagee  ;  * 
but  upon  foreclosure  this  chattel  interest  has  become  real,  and 
the  executor  should  then  apply  to  the  court  for  license  to 
sell.'^ 

It  has  been  held  that  one  of  two  or  more  executors  or  ad- 
ministrators may  make  a  valid  assignment  of  a  mortgage.'' 

A  foreign  administrator  cannot  assign  a  mortgage,^  except 

1  Austin  V.  Shaw,  10  Allen  (Mass.),  552. 

^  Sutphen  v.  Ellis,  35  Mich.  44H. 

3  Libby  v.  Mayberry,  80  iNIe.  137 ;  Crooker  v.  Jewell,  31  Me.  306. 

*  Ladd  V.  Wiggin,  35  X.  H.  421 ;  Baldwin  v.  Hatchett,  56  Ala.  461 ;  Ex  parte 
Blair,  13  Met.  (Mass.)  126. 

»Bald^v•in  v.  Timmins,  3  Gray  (INIass.),  302. 

*  INIutual  Life  Ins.  Co.  r.  Sturges,  33  N.  J.  Eq.  328  ;  George  v.  Baker,  3  Allen 
(Mass.),  326  ;  Bogert  v.  Hertell,  4  Hill  (N.  Y.),  492  ;  Hertell  v.  Bogert,  9  Paige 
(N.  Y.),  52;  Hitchcock  v.  Merrick,  15  Wis.  522. 

'Cutter  V.  Davenport,  1  Pick.  (Mass.)  81;  Hutching  v.  Bank,  12  Met. 
(Mass.)  421. 


952  RIGHTS   OF    PARTIES    BEFORE    DEFAULT. 

in  those  States  where  a  mortgage  is  a  mere  lien  ; '  and  then  he 
cannot  maintain  a  suit  upon  tlie  mortgage.^ 

§  962,  Corporations. — An  assignment  of  a  mortgage  exe- 
cuted by  the  treasurer  of  a  corporation,  though  under  seal  of 
the  corporation,  of  which  he  is  the  keeper,  without  the  direc- 
tion or  knowledge  of  the  managers,  and  no  subsequent  ratifi- 
cation by  the  corporation,  is  void.^  But  an  assignment  in  the 
absence  of  all  proof  would  be  presumed  to  have  been  regularly 
made  by  him.* 

It  is  not  necessary  that  the  assignment  of  a  mortgage  exe- 
cuted by  a  corporation  should  be  made  by  an  attorney  of  the 
corporation,  appointed  for  that  purpose,  as  the  mortgage  has 
no  existence  independently  of  the  debt,  and  is  therefore  assign- 
able as  a  debt  by  the  corporation.^ 

Neither  is  the  assignment  void  by  reason  of  the  omission  of 
part  of  the  corporate  name  of  the  assignor,  where  the  full 
name  appears  in  the  mortgage,  and  the  assignment  is  attested 
according  to  law — that  is,  by  the  corporate  seal — and  the 
identity  of  the  corporation  as  assignor,  is  otherwise  sufficient.^ 

§  963.  Marriage. — Marriage  is  such  a  consideration  for  a 
subsequent  assignment  of  a  mortgage  as  will  make  the  as- 
signee a  purchaser  for  full  value.  It  is  common  learning  that 
marriage  is  a  full  consideration,  quite  as  much  so  as  cash,  and 
the  wife  is  a  bona  fide  purchaser  for  full  value.^ 

§  964.  Support. — The  assignment  by  the  mortgagee  of  a 
mortgage  for  support,  after  condition  broken,  is  not  released 
and  discharged  of  his  claim  for  support  under  the  condition  of 
the  mortgage.     Such  assignee  of  the  mortgagee  may  claim  for 

1  Smith  V.  Tiffany,  16  Hun  (N.  Y.),  552. 

"^  McBride  v.  Bank,  26  N.  Y.  450.    See,  also,  McAdams  v.  Robinson  (S.  Car.), 
14  S.  E.  Rep.  825. 
•■•  Jackson  v.  Campbell,  5  Wend.  (N.  Y.)  572. 

*  Johnson  v.  Bush,  3  Barb.  Ch.  (N.  Y.)  207. 

*  Chilton  V.  Brooks,  71  Md.  445. 
«  Chilton  V.  Brooks,  71  Md.  445. 

'  MeUick  v.  Mellick,  47  N.  J.  Eq.  86. 


ASSIGNMENT    OF    MORTGAGE    AND    DEBT.  953 

the  future  support  of  the  mortgagee  and  other  beneficiaries 
named  in  tlie  condition,  on  the  failure  of  the  assignee  of  the 
mortgagor  to  furnisli  support/  And  such  mortgage  may  be 
assigned,  unless  such  support  is  required  by  the  terms  of  the 
instrument  to  be  furnished  by  one  personally.^ 

§  965.  Surety. — When  a  debt  secured  by  a  mortgage  has 
been  discharged  by  the  debtor,  the  surety  has  no  interest  that 
can  be  passed  by  assignment ;  ^  and  if  the  condition  is  that, 
if  the  mortgage  shall  be  paid  by  renewal  of  the  notes  or  other- 
wise, then  the  mortgage  should  be  void,  and  the  notes  are 
renewed,  then  the  indemnitee  has  no  interest  assignable.* 

But  if  the  mortgagee  as  surety  has  paid  the  debt  for  his 
mortgagor,  then  he  may  assign  the  mortgage ;  ^  or  he  may  have 
a  third  person  pay  the  debt  for  his  benefit,  and  transfer  to  him 
the  mortgage.^  And  the  mortgagee  may  make  this  arrange- 
ment before  the  maturity  of  the  notes.^ 

So  a  mortgage  given  to  secure  partly  a  debt  of  the  mortgagor, 
and  to  indemnify  the  mortgagee  against  loss  as  surety,  is  assign- 
able, and  the  principal  creditor  is  not  entitled  to  subrogation 
to  the  mortgagor.^ 

But  the  assignment  must  be  agreed  upon  or  made  at  the 
time  the  third  party  pays  the  debt,  otherwise  the  payment  will 
discharge  the  debt  for  which  the  mortgage  was  given  as  in- 
demnity.*    An  indemnity  mortgage  may  be  assigned. ^"^ 

§  966.  Rights  of  Mortgagee  as  to  Subsequent  Leinors. 
— It  is  held  in  Massachusetts  that  equity  will  not  compel  the 
first  mortgagee,  who  has  brought  an  action  for  foreclosure,  to 

1  Mitchell  r.  Burnham,  57  Me.  314. 

"^  Bryant  v.  Erskine,  55  Me.  153 ;  Joslyn  v.  Parlin,  54  Yt.  G70  ;  Ottaquecliee 
Sav.  Bank  v.  Holt,  58  Vt.  166. 
3  Abbott  r.  Upton,  19  Pick.  (Mass.)  434. 
*  Bonham  v.  Galloway,  13  111.  68. 

nVeeks  v.  Eaton,  15  N.  H.  145  ;  Wallace  v.  Goodall,  18  N.  H.  439. 
^Murray  v.  Catlett,  4  Greene  (Iowa),  108. 
^  Camp  V.  Smith,  5  Conn.  80. 
«  Waller  v.  Oglesby,  85  Tenn.  321. 
»  Pelton  V.  Knapp,  21  Wis.  63. 
^°  Murray  v.  Porter,  26  Nebr.  288. 


954  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

assign  his  mortgage  to  a  subsequent  lienor  on  receipt  of  pay- 
ment.^ 

The  subsequent  Uenor  may  protect  Iiis  interest  by  paying  the 
prior  mortgage  when  due  and  succeed  by  subrogation,  and  not 
by  assignment  of  the  first  mortgage.^ 

However,  when  the  subsequent  incumbrancer  or  surety  can- 
not be  protected  under  the  principles  of  subrogation,  the  assign- 
ment may  be  made  in  equity  proceedings,^  and  then  to  be  entitled 
to  an  assignment,  the  claimant  must  be  the  holder  of  the  next 
lien/ 

Article  3. 
Priorities. 

§  967.  Notice.  §  969.  Priority    of     Assigned    Notes 

§  968.  Statutory  Provisions   for    Re-  Secured  by  Mortgage, 

cording  As3ignnients. 

§  967.  Notice. — The  assignee  of  a  mortgage,  in  those  States 
where  the  recording  laws  do  not  apply  to  assignments  of  mort- 
gages, should  immediately  inform  the  mortgagor  of  the  transfer, 
so  that  he  will  no  longer  pay  to  the  assignor  or  mortgagee  ;  be- 
cause such  payments,  in  good  faith,  would  be  valid.^ 

When  an  assignee  of  a  mortgage  holds  under  an  assignment 
made  by  the  assignor  to  defraud  a  subsequent  purchaser  of  the 
mortgage  for  value,  constructive  notice  of  the  subsequent  pur- 
chaser of  the  prior  assignment  arising  from  its  record  will  not 
aifect  the  rights  of  such  subsequent  purchaser.® 

When  there  is  no  law  authorizing  the  record  of  an  assign- 

^ Butler  V.  Taylor,  5  Gray  (Mass.),  455  ;  Lamb  v.  Montague,  112  Mass.  352. 
Compare  Cole  v.  Malcolm,  66  N.  Y.  363 ;  Frost  v.  Yonkers  Sav.  Bank,  70  N.  Y. 
553. 

2  Hubbard  v.  Ascutney  Mill  Dam  Co.,  20  Vt.  402 ;  Ellsworth  r.  Lockwood 
42  N.  Y.  89  ;  Burnet  v.  Denniston,  5  Johns.  Ch.  (N.  Y.)  35. 

3  Baker  v.  Terrell,  8  Minn.  195  ;  Johnson  r.  Zink,  52  Barb.  (N.  Y.)  396. 

*  Bishop  V.  Ogden,  9  Phila.  (Pa.)  524.    See,  also,  Lyon's  Appeal,  61  Pa.  St.  15. 

^  Perkins  v.  Matteson,  40  Kan.  165 ;  Union  College  v.  Wheeler,  61  N.  Y. 
88,  111 ;  Johnson  v.  Carpenter,  7  ]\Iinn.  176 ;  Horstman  v.  Gerker,  49  Pa.  St. 
282;  Reed  v.  Marble,  10  Paige  (N.  Y.),  409,  416;  James  v.  Morey,  2  Cow.  (N. 
Y.)  246 ;  James  v.  Johnson,  6  Johns.  Ch.  (N.  Y.)  417,  427. 

^Mellick  V.  Melljck,  47  N.  J.  Eq.  86. 


ASSIGNMENT   OF    MORTGAGE    AND    DEBT.  955 

ment  of  a  mortgage,  such  record,  if  made,  will  not  be  notice  to 
subsecjuent  purchasers  or  mortgagees  in  good  faith.^ 

In  those  States  where  assignments  should  be  recorded,  a 
second  assignment,  taken  without  notice,  actual  or  constructive, 
of  a  prior  assignment,  will  take  preference.^  After  assignment, 
the  assignee  is  entitled  to  recover,  though  the  mortgagor  then 
paj's  the  mortgagee.^ 

§  968.  Statutory  Provisions  for  Recording  Assign- 
ments.— In  many  States  the  recording  acts  apply  to  the  record- 
ing of  assignments  of  mortgages.  Chief  Justice  Mitchell  saj^s 
that  if  the  recording  act  afford  the  assignee  of  a  mortgage  the 
opportunity  of  giving  notice  of  his  rights  by  procuring  and 
putting  on  record  the  assignment  of  mortgage,  neglect  on  his 
part  to  do  so  will  estop  him  from  asserting  the  invalidity  of  a 
duly  recorded  release  executed  by  his  assignor  after  an  innocent 
purchaser  has  paid  his  money  on  the  faith  of  the  public  records.^ 

It  is  settled  everywhere  that  unrecorded  assignments  of 
mortgages  are  void  as  against  subsequent  purchasers,  whose 
interests  ^nay  be  affected  thereby,  and  whose  conveyances  are 
duly  recorded,  provided  such  assignments  are  embraced  by  the 
recording  acts.^ 

So  when  assignments  of  mortgages  are  within  the  recording 
acts,  a  release  executed  by  the  person  who  appears  by  the  re- 
cord to  be  the  owner  of  the  mortgage  is  sufficient  to  protect  a 
purchaser  who  has  in  good  faith  parted  with  his  money  on  the 
faith  of  such  a  release,  and  without  notice  than  that  offered  by 
the  record.^  A  purchaser  is  chargeable  with  notice  of  an  as- 
signment which  has  been  recorded  prior  to  his  own  purchase.^ 

'  Reeves  v.  Hayes,  95  Ind.  521 ;  Purdy  v.  Huntington,  42  N.  Y.  334 ;  1  Am. 
Rep.  532 ;  Westerman  v.  Foster,  57  Ind.  408 ;  1  Story's  Eq.  Jur.,  sect.  404. 

^  Pritchard /u.  Kalamazoo  College,  82  Mich.  587. 

^  Shot  well  V.  Matthews  (X.  J.),  21  At.  Rep.  1067.  See,  also.  Castle  v.  Castle, 
78  Mich.  298. 

'Connecticut  Mut.  L.  Ins.  Co.  r.  Talbot,  113  Ind.  373. 

^  Bacon  v  Van  Schoonhoven,  87  X.  Y.  446  ;  Decker  v.  Boice,  83  N.  Y.  215  ; 
Swartz  V.  Leist,  13  Ohio  St.  419 ;  Yerger  v.  Barz,  56  Iowa,  77 ;  Henderson  v. 
Pilgrim,  22  Tex.  464  ;  Reeves  v.  Hayes,  95  Ind.  521. 

«  Blunt  V.  Norris,  123  Mass.  55  ;  Kenyon  v.  Stewart,  44  Pa.  St.  179. 

'  Brewster  v.  Carnes,  103  N.  Y.  557. 


956  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

It  is  quite  true  that  where  a  mortgage  appears  to  have  been 
discharged  by  an  attorney,  clerk,  or  some  other  than  the  mort- 
gagee, it  has  been  held  sufficient  to  excite  inquiry  as  to  the 
reason  of  the  unusual  circumstance.^ 

If  the  assignee  of  a  mortgage  fails  to  notify  the  mortgagor, 
and  leads  the  mortgagor  to  believe  that  the  mortgagee  still 
owns  it,  he  is  estopped  from  denying  the  right  of  the  mort- 
gagor to  deal  with  the  mortgagee.^ 

The  assignment  of  a  mortgage  is  entitled  to  record  as  a  con- 
veyance in  lowa.^  In  New  Hampshire  ^  the  statute  provides 
that  "  no  estate  conveyed  in  mortgage  shall  be  holden  by  the 
mortgagee  for  payment  of  any  sum  of  money  or  the  perform- 
ance of  any  other  thing,  the  obligation  or  liability  to  the  pay- 
ment or  the  performance  of  which  arises,  is  made,  or  contracted 
after  the  execution  and  delivery  of  such  mortgage."  An  as- 
signment by  the  mortgagee  of  a  mortgage  given  for  an  exist- 
ing debt  as  security  for  future  advances  made  by  the  assignee 
to  the  mortgagee  is  not  within  the  provisions  of  this  statute.® 

§  969.  Priority  of  Assigned  Notes  Secured  by  Mort- 
gage.— Notes  are  often  given,  secured  by  a  mortgage,  which 
mature  at  different  times,  and  the  mortgage  contains  no  stipu- 
lation as  to  the  order  in  which  they  shall  be  paid.  Then 
when  the  mortgagee  assigns  them  to  different  parties,  and  at 
different  dates,  without  any  agreement  with  any  of  his  as- 
signees as  to  the  precedence  which  the  notes  shall  have  ;  in  the 
absence  of  such  a  stipulation,  or  special  equities,  the  authorities 
are  not  agreed  as  to  how  the  proceeds  of  the  sale  of  property 
shall  be  appropriated,  when  the  assigned  notes  cannot  be  paid 
in  full  for  lack  of  proceeds  from  the  sale  of  the  mortgaged 
property. 

One  line  of  authorities  holds  that  the  assigned  notes  shall  be 

1  Smith  r.  Kidd,  68  N.  Y.  130 ;  Harris  v.  Cook,  28  N.  J.  Eq.  345 ;  Swarthout 
V.  Curtis,  5  N.  Y.  301. 

'^McCabe  v.  Farnsworth,  27  Mich.  52. 

^  Kenosha  Stove  Co.  v.  Shedd,  82  Iowa,  540,  following  Parmenter  v.  Oakley, 
69  Iowa,  388. 

*  Gen.  Laws,  ch.  136,  sect.  3. 

^Lime-Rock  Nat.  Bank  v.  Mowry  (N.  H.),  22  At.  Rep.  555. 


ASSIGNMENT    OP    MORTGAGE    AND    DEBT.  957 

paid  in  the  order  of  their  assignment/  Another  holds  tliat  the 
notes  shall  be  paid  in  the  order  of  their  maturity.^  And  still 
another  class  holds  that  the  proceeds  shall  be  aj^plied  pro  rata 
in  part  payment  of  the  several  notes,  irrespective  of  their  dates 
of  maturity  or  assignments.^ 

Judge  Battle,  speaking  for  the  court,  says  that  the  simple 
assignment  of  the  notes  does  not  change  the  mortgage  and 
make  it  any  less  security  for  any  of  the  notes  than  it  was  be- 
fore the  assignment.  The  mortgage  security,  in  following  the 
transfer  of  the  notes  as  an  incident,  does  not  pass  by  assign- 
ment any  farther  than  it  was  an  incident  at  the  time  the 
transfer  was  made.  The  holders  of  the  notes,  therefore,  stand 
wquile  jure,  and  consequently  are  entitled  to  participate  ratably 
in  the  fund  derived  from  the  security,  if  there  be  not  enough 
to  satisfy  all  the  notes.* 

And  in  Iowa  it  is  held  that  the  mortgagee  may,  without  the 
consent  of  the  mortgagor,  assign  the  notes  falling  due,  and,  by 
agreement  with  the  assignee,  make  the  assigned  notes  the  first 
lien.^ 

1  McClintic  v.  Wise,  25  Gratt.  (Va.)  448  ;  Waterman  v.  Hunt,  2  E.  I.  298 ; 
Culliim  V.  Erwin,  4  Ala.  452  ;  Griggsby  v.  Hair,  25  Ala.  327. 

2  Winters  v.  Bank,  33  Ohio  St.  250 ;  Kyle  v.  Thompson,  11  Ohio  St.  616 ; 
Wilson  V.  Hayward,  6  Fla.  171,  190  ;  Mitchell  v.  Ladew,  36  Mo.  526,  530 ;  Sar- 
gent V.  Howe,  21  111.  148  ;  A^ansant  v.  Allmon,  23  111.  30  ;  Koester  v.  Burke,  81 
111.  436 ;  State  Bank  v.  Tweedy,  8  Blackf.  (Ind.)  447 ;  Doss  v.  Ditmars,  70 
Ind.  451;  Marine  Bank  ?;.  Bank,  9  Wis.  57,  64;  Eichardson  v.  McKim,  20 
Kan.  .346,  .350 ;  Hinds  v.  Mooers,  11  Iowa,  211 ;  Walker  v.  Schreiber,  47  Iowa, 
529  ;  Morgan  v.  Kline,  77  Iowa,  681 ;  Gordon  v.  Hazzard,  32  S.  Car.  351. 

^  Delespine  v.  Campbell,  52  Tex.  4  ;  Wilson  v.  Eigenbrodt,  30  Minn.  4 ;  Ex- 
change Bank  v.  Beard,  49  Tex.  363 ;  Donley  v.  Hays.  17  Serg.  &  E.  (Pa.)  403, 
404;  Cowden's  Appeal,  1  Pa.  St.  278;  Mohler's  Appeal,  5  Pa.  St.  418,  420; 
Perry's  Appeal,  22  Pa.  St.  43,  45;  Andrews  v.  Hobgood,  1  Lea  (Tenn.),  693  ; 
Parker  v.  Mercer,  6  How.  (Miss.)  320,  324 ;  Cage  v.  Her,  5  Sm.  &  M.  (Miss.) 
410 ;  Pugh  V.  Holt,  27  Miss.  461 ;  Grattan  v.  Wiggins,  23  Cal.  16 ;  Dixon  v. 
Clayville,  44  ]\Id.  573,  578 ;  English  v.  Carney,  25  Mich.  178,  181 ;  McCurdy  v. 
Clark,  27  Mich.  445,  448. 

*Penzel  v.  Brookmire,  51  Ark.  105. 

5  Morgan  v.  Kline,  77  Iowa,  681. 


958  rights  of  parties  before  default. 

Article  4. 

What  Conditutes  an  Assignment. 

§  970.  Assignment    of    the    Mortgage  ?  974.  Conveyance  by  the  Heir. 

without  the  Debt.  ^975.  Wliat    Passes    by  Assign- 

§  971.  Conveying  Part  of   the    Mort-  ment. 

gaged  Estate.  §  976.  The  Note  is  the  Proper  Evi- 

§  972.  The   Doctrine  that  an  Assign-  dence  of  Ownersliij}. 

ment  of  the  Mortgage  witliout  I  977.  Possession  of  Notes  without 

the  Debt  is  a  Nulhty.  Indorsement     by     Persons 

§  973.  Conveyance — Mortgagee  in  Pos-  Other  than  the  Payee. 

session. 

§  970.  Assignment  of  the  Mortgage  without  the  Debt. 
-—In  strict  conformity  with  the  theory  that  the  mortgagee  has 
no  estate  in  the  land,  but  a  mere  Hen  as  security  for  his  debt, 
the  courts  of  New  York,  and  others  taking  the  same  view,  hold 
that  a  conveyance  by  the  mortgagee  before  foreclosure,  without 
as  assignment  of  the  debt,  is,  in  law,  a  nullity.^  And  it  is  said 
that  this  rule  may  be  qualified  in  this,  that  when  the  mort- 
gagee has  lawful  possession,  or  when  not  in  possession,  but  the 
condition  has  been  broken,  a  conveyance  or  assignment  of  the 
mortgaged  joremises  would  be  valid  to  transfer  the  right  of 
possession.^ 

But  these  decisions  are  not  consonant  with  other  courts. 
The  doctrine  is  fundamental,  that  if  one  sui  juris,  having  the 
legal  title  to  land,  intentionally  delivers  to  another  a  deed 
therefor  containing  apt  wof-ds  of  conveyance,  the  title  at  law, 
at  least,  will  pass  to  the  grantee  ;  but  for  what  purpose  or  uses 
the  grantee  will  hold  it  or  to  what  extent  he  will  be  able  to 

1  Jackson  r.  Curtis,  19  Johns.  (N.  Y.)  325  ;  Wilson  v.  Troup,  2  Cow.  (N.  Y.) 
231 ;  Jackson  v.  Willard,  4  Johns.  (N.  Y.)  41 ;  Cooper  v.  Newland,  17  Abb. 
Pr.  (N.  Y.)  342;  Crow  v.  Vance,  4  Iowa,  434;  Swan  v.  Yaples,  35  Iowa,  248; 
Peters  v.  Jamestown  Bridge  Co.,  5  Cal.  335 ;  Carter  v.  Bennett,  4  Fla.  283 ; 
Jordan  v.  Sayre,  24  Fla.  1;  Hamilton  v.  Browning,  94  Ind.  242;  Bailey  i'. 
Gould,  Walk.  (Mich.)  478 ;  Cleveland  v.  Cohrs,  10  S.  Car.  224 ;  O'Mulcahy  v. 
HoUey,  28  Minn.  31.  See,  also,  Duval  v.  McLoskey,  1  Ala.  708 ;  Thayer  v. 
Campbell,  9  Mo.  280 ;  Bell  v.  Morse,  6  N.  H.  205 ;  Hutchins  v.  Carleton,  19 
N.  H.  487  ;  Lunt  v.  Lunt,  71  Me.  377 ;  Delano  v.  Bennett,  90  111.  533. 

^  Campbell  r.  Birch,  60  N.  Y.  214 ;  Welsh  v.  Phillips,  5-1  Ala.  309 ;  Pickett  v. 
Jones,  63  Mo.  195. 


ASSIGNMENT    OF    MORTGAGE    AND    DEBT.  959 

enforce  it  will  depend  upon  circumstances.  If  the  mortgagee 
conve^^s  the  land  without  assigning  the  debt  to  the  grantee, 
the  latter  would  hold  the  legal  title  as  trustee  for  the  holder 
of  the  mortgage  debt.^  And  Chancellor  Kent  says :  "  The 
mortgage  interest,  as  distinct  from  the  deljt,  is  not  a  fit  sub- 
ject of  assignment.  It  has  no  determinate  value.  If  it  should 
be  assigned,  the  assignee  must  hold  the  interest  at  the  will  and 
disposal  of  the  creditor  who  holds  the  bond."  ^  So  it  is  correctly- 
stated  that  by  the  common  law  a  mortgagee  in  fee  of  land  is 
considered  as  absolutely  entitled  to  the  estate,  which  he  may  de- 
mise or  transmit  by  descent  to  his  heirs.^ 

That  is,  in  law,  the  mortgagee  may  convey  the  land  itself 
by  deed,  or  devise  it  by  will,  and  on  his  death,  intestate,  it 
will  descend  to  his  heirs. 

In  equity,  his  interest  is  a  mere  thing  in  action,  assignable 
as  such,  and  a  deed  by  him  would  operate  merely  as  an  assign- 
ment of  the  mortgage  ;  and  in  administering  the  estate  of  a  de- 
ceased mortgagee,  a  court  of  equity  treats  the  mortgage  as  per- 
sonal assets,  to  be  dealt  with  by  the  executor  or  administrator.* 

Justice  Mulkey  correctly  lays  down  the  rule  when  he  says : 
"  "We  have  alread}'^  seen,  that  under  the  decisions  of  this  court, 
and  by  the  general  current  of  authority,  a  mortgage  is  not  as- 
signable at  law  by  mere  indorsement,  as  in  case  of  commercial 
paper ;  but,  on  the  other  hand,  the  estate  and  interest  of  the 
mortgagee  may  be  conveyed  to  the  holder  of  the  indebtedness, 
or  even  to  a  third  party,  by  deed,  with  apt  words  of  convey- 
ance, and  the  fact  that  it  is,  in  form,  an  assignment,  will  make 
no  difference."^ 

When  the  owner  of  notes  and  mortgage  has  notice  of  the 
custom  of  an  investment  company  to  advance  interest  on  loans 
sold  by  it,  when  due,  whether  the  same  has  been  paid  by  the 
borrower  or  not,  such  payment  is  presumptively  a  transfer  or 

^  Barnard  v.  Eaton,  2  Cufh.  (Mass.)  304 ;  Sanger?'.  Bancroft,  12  Gray  (Mass), 
367.    See,  also,  Jackson  v.  "Willard,  4  Johns.  (N.  Y.)  40. 
2  Jackson  v.  Willard,  4  Johns.  (N.  Y.)  40. 
^4  Wait's  Act.  and  Defen.,  p.  565. 
*3Pom.Eq.  Jur.,  p.  150. 
6  Barrett  v.  Hinckley,  124  111.  32,  46;  2  Washb.  Real  Prop.  115,  116. 


960  RIGHTS    OF    PARTIES   BEFORE    DEFAULT. 

assignment  of  the  coupon,  and  not  an  extinguishment.^  And 
a  court  of  equity  will  treat  a  transaction  as  an  assignment  of 
the  mortgage  in  order  to  protect  a  bona  fide  purchaser  for 
value.^ 

§  971.  Conveying  Part  op  the  Mortgaged  Estate. — A 
conveyance  of  part  of  the  mortgagee's  interest,  in  like  manner, 
is  an  equitable  assignment  of  the  mortgage  proportionate  to 
the  amount  of  the  purchase-money.^ 

So,  a  mortgage  of  a  mortgagee's  title  is  a  legal  assignment 
of  his  mortgage.* 

An  irregular  sale  under  a  decree  of  foreclosure  operates  as 
an  assignment  to  the  purchaser  ;  ^  or  a  defective  sale  under  a 
power  is  only  an  assignment.^  So,  an  assignment  of  a  judg- 
ment on  a  mortgage  note  is  an  equitable  assignment  of  the 
mortgage.'^ 

§  972.  The  Doctrine  that  an  Assignment  of  the  Mort- 
gage without  the  Debt  is  a  Nullity. — The  doctrine  that 
the  assignment  of  the  mortgage  without  the  debt  is  a  nullity  is 
modified  by  some  of  the  States,  where  a  mortgage  is  considered 
merely  as  a  lien.  Thus,  in  Florida  it  is  held  that  though  an 
assignment  of  simply  the  mortgage  or  of  the  mortgagee's  in- 
terest in  the  land  without  the  mortgage  debt  may  be  a  nullity, 

^Champion  t'.  Hartford  Invest.  Co.,  45  Kan.  103. 

^  Short  V.  Currier  (Mass.),  26  N.  E.  Rep.  444.  See,  also,  Rice  v.  McFarland, 
41  Mo.  App.  489. 

'McSorley  v.  Larissa,  100  Mass.  270;  Dudley  v.  Cad  well,  19  Conn.  218; 
Wyman  v.  Hooper,  2  Gray  (Mass.),  141 ;  Grover  v.  Thatcher,  4  Gray  (Mass.), 
526. 

*  Central  Bank  v.  Copeland,  18  Md.  305 ;  Murdock  v.  Chapman,  9  Gray 
(Mass.),  156 ;  Dudley  v.  Cadwell,  19  Conn.  218. 

^  Cooke  V.  Cooper,  18  Oreg.  142 ;  Stackpole  v,  Robbins,  47  Barb.  (N.  Y.)  212 ; 
Brobst  V.  Brock,  10  Wall.  (U.  S.)  519 ;  Johnson  v.  Robertson,  34  Md.  165 ; 
Moore  v.  Cord,  14  Wis.  213 ;  Muir  v.  Berkshire,  52  Ind.  149. 

« Taylor  v.  Association,  68  Ala.  229  ;  Johnson  v.  Sandhoff,  30  Minn.  197  ; 
Brown  v.  Smith,  116  Mass.  108  ;  Robinson  v.  Ryan,  25  N.  Y.  320. 

">  Wayman  v.  Cochrane,  35  111.  152.  See,  also,  Lillibridge  v.  Tregent,  30 
Mich.  i05  ;  Pattison  v.  Hull,  9  Cow.  (N.  Y.)  747  ;  Drury  v.  Morse,  3  Allen 
(Mass.),  445;  Hiltv..More,40  I^Ie.  515;  Olmsted  v.  Elder,  2  Sandf.  (N.  Y.) 
325. 


ASSIGNMENT    OF    MORTGAGE    AND    DEBT.  961 

yet  where  the  language  of  the  instrument  of  assignment  is  suf- 
ficient to  carry  both  tlie  debt  and  the  mortgage  it  will  be  sus- 
tained ;  and  particularly  so  when  it  is  admitted  upon  the  rec- 
ord by  both  the  assignor  and  the  assignee,  as  complainants, 
that  both  the  debt  and  mortgage  were  assigned.^ 

§  973.  Conveyance — Mortgagee  in  Possession. — ^\\''hen 
the  mortgagee  is  in  possession,  his  conveyance  of  the  mortgaged 
property,  is  regarded  as  passing  his  interest  in  the  mortgage, 
although  no  mention  in  terms  is  made  of  the  debt.^  And 
when  there  is  a  void  foreclosure  sale,  and  the  mortgagee  be- 
comes the  purchaser  and  enters  into  possession,  and  then  sells 
and  attempts  to  convey  such  premises  by  deed,  such  deed  oper- 
ates as  an  assignment  of  the  mortgage  debt  as  well  as  the  mort- 
gage securing  the  same,  to  the  grantee  in  such  deed,  and  each 
successive  deed  to  such  premises  by  persons  holding  under  such 
mortgage  has  the  same  effect.^  If  he  fails  to  pass  title,  the  sale 
will  operate  as  an  assignment  of  the  mortgage  to  the  successive 
grantees  in  such  several  deeds.'*  Any  conveyance  is  sufficient 
to  pass  the  interest  of  the  mortgagee  in  the  mortgage,^  and  a 
warranty  deed  would  pass  any  subsequent  title  acquired  by 
the  assignor.'^  This  rule  applies  if  the  grantee  holds  by  a 
deed  absolute,  given  as  a  security,  where  the  purchaser  has 
notice,'^  but  if  a  bona  fide  purchaser  has  no  notice,  then  the 
mortgagee  will  be  treated  in  equity  as  a  constructive  trustee 
for  the  price  received,  after  deducting  the  amount  of  the 
mortgage  debt.* 

^  Jordan  v.  Sayre,  24  Fla.  1,  19,  opinion  by  Raney,  J.,  citing  Johnson  v. 
Leonards,  68  Me.  237  ;  Hunt  v.  Hunt,  14  Pick.  (Mass.)  374  ;  Ruggles  v.  Barton, 
13  Gray  (Mass.),  506  ;  Devlin  v.  Collier,  53  N.  J.  L.  422. 

-  Rodriguez  v.  Haynes,  76  Tex.  225. 

2  Cooke  V.  Cooper,  18  Oreg.  142. 

*  Robinson  t-.  Ryan,  25  N.  Y.  320;  Murdock  ?-.  Chapman,  9  Gray  (Mass), 
156 ;  Hinds  v.  Ballon,  44  N.  H.  619 ;  Lamprey  v.  Nudd,  29  N.  IL  290. 

*Hill  r.  Moore,  40  Me.  515,  525;  Weeks  v.  Eaton,  15  N.  H.  145;  Severance 
V.  Griffith,  2  Lans.  (N.  Y.)  38  ;  Thompson  r.  Kenyon,  100  Mass.  108. 

®  Ruggles  V.  Barton,  13  Gray  (Mass.),  506;  Lawrence  v.  Stratton,  6  Cash. 
(Mass.)  163,  169. 

'  Union  ]Mut.  F.  Ins.  Co.  r.  Slee,  123  111.  222. 

^Linnell  v.  Lyford,  72  Me.  280. 
61 


962  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

If  the  mortgagee  has  already  transferred  the  debt,  the  pur- 
chaser will  hold  a  mere  naked  legal  estate.^ 

And  a  conveyance  of  a  part  of  mortgaged  lands,  operates  as 
an  equitable  assignment  of  a  proportionate  part  of  the  mort- 
gaged debt.^ 

§  974.  Conveyance  by  the  Heir. — A  conveyance  by  the 
heir  of  the  deceased  mortgagee  will  operate  as  a  good  assign- 
ment in  equity  against  all  the  world  except  the  personal  repre- 
sentatives and  creditors  whose  rights  might  be  affected.^ 

It  is  the  right  of  the  administrator  to  take  possession  of 
the  premises  and  foreclose  the  mortgage  if  the  debt  is  not  paid 
at  maturit}',  as  the  mortgage  debt  rests  solely  in  him.* 

§  975.  What  Passes  by  Assignment. — The  sale  and  deliv- 
ery, before  maturity,  of  mortgaged  notes,  carries  with  it  an 
assignment  of  the  real  estate  security,  which,  in  equity,  is  a 
mere  incident  of  the  debt  secured.^  And  the  sale  and  transfer 
of  a  non-negotiable  note  secured  by  a  mortgage  is  valid  and  car- 
ries with  it  the  security,  and  it  is  immaterial  that  the  formal 
assignment  of  the  mortgage  is  defective,^  and  authorizes  the 
transferree  to  foreclose  the  mortgage.^  And  in  Louisiana  the 
transfer  of  a  mortgage  note  of  a  special  mortgage  and  vendor's 
privileges,  carries  with  it  both  the  mortgage  and  privilege.*^ 

Whether  an  assignment  of  a  mortgage,  without  a  transfer  of 
the  notes  passes  the  beneficial  interest  in  the  security  is  deter- 
mined by  the  intention  of  the  parties,  as  gathered  from  the 

1  Hobson  V.  Roles,  20  N.  H.  41 ;  Bell  v.  Morse,  6  N.  H.  205,  210.  See,  also, 
Ellison  V.  Daniels,  11  N.  H.  274. 

^  Smith  i'.  Hitchcock,  130  Mass.  570.  Compare  Greve  v.  Coffin,  14  Minn. 
345  ;  Gale  v.  Battin,  12  Minn.  287  ;  Johnson  v.  Lewis,  13  Minn.  364 ;  Kagle  v. 
Macy,  9  Cal.  426,  428. 

3  Cook  V.  Parham,  63  Ala.  456  ;  Welsh  v.  Phillips,  54  Ala.  309. 

*Taft  V.  Stevens,  3  Gray  (Mass.),  504;  Douglass  v.  Durin,  51  Me.  121; 
Albright  V.  Cobb,  30  Mich.  355. 

^Lee  V.  Clark,  89  Mo.  553  ;  Joerdens  v.  Schrimpf,  77  Mo.  383  ;  Goodfellow  t;. 
Stillwell,  73  Mo.  19 ;  King  v.  Harrington,  2  Aik.  (Vt.)  33  ;  Fletcher  v.  Car- 
penter, 37  Mich.  412 ;  Hewell  v.  Coulbourn,  54  Md.  59. 

®  Lane  v.  Duchac,  73  Wis.  646.     Comi^are  Mason  v.  Ainsworth,  58  111.  163. 

'  O'Neal  V.  Seixas,  85  Ala.  80. 

*  Succession  of  Forstall,  39  La.  Ann.  1052. 


ASSIGNMENT    OF    MORTGAGE    AND    DEBT.  963 

instrument,  situation  of  the  parties,  and  the  nature  of  the  trans- 
action.' An  indorsement  and  dehvery  of  the  mortgage  notes 
by  the  mortgagee  oj^erates  as  an  assignment  of  the  mortgage  to 
the  holder  of  the  notes.^  And  in  the  absence  of  an  express 
agreement  or  controlling  equity  to  the  contrary,  the  assignment 
of  one  of  a  number  of  coupon  interest  notes  secured  thereby 
carries  with  it  a  pro  rata  share  of  the  security.^  So  the  assign- 
ment of  a  part  of  the  debt  secured  carries  the  benefit  and  con- 
trol of  such  security  upon  such  terms  as  the  relation  between  the 
assignee  and  the  holder  of  the  residue  of  the  debt  may  require.* 

§976.  The  Note  is  the  Proper  Evidence  of  Owner- 
ship.— Generally  the  possession  of  the  note  is  direct  evidence 
of  the  debt,  and  if  not  produced  its  absence  must  be  explained.'^ 

It  is  generally  presumed  that  the  note  is  included  in  the  as- 
signment of  the  mortgage,  whether  so  stated  or  not,  when  not 
already  transferred  to  another,^  and  an  adequate  consideration 
has  been  paid  the  mortgagee.^  If  the  purchaser  does  not  find 
the  note  in  the  possession  of  the  mortgagee,  he  takes  the  assign- 
ment subject  to  the  prior  rights  of  the  first  assignee.* 

§  977.  Possession  of  Notes  without  Indorsement  by 
Persons  Other  than  the  Payee. — The  mere  possession  of  a 
note  and  mortgage  securing  the  same,  by  a  person  other  than 
the  payee  or  mortgagee  to  whom  the  note  was  made  payable, 
the  same  being  unindorsed,  is  not  evidence  of  ownership  in 
such  person.^  The  action  to  foreclose  by  a  stranger  can  have 
no  effect."' 

^Bulkley  v.  Chapman,  9  Conn.  5.  See,  also.  Miller  v.  Hicken,  92 
Cal.  229.  " 

^  Converse  v.  Michigan  Dairy  Co.,  45  Fed.  Rep.  18. 

'  Champion  v.  Hartford  Invest.  Co.,  45  Kan.  103. 

*Magloughlin  r.  Clark,  35  111.  App.  251. 

*Edgell  V.  Stanford,  3  Vt.  202. 

«  Philips  V.  Bank,  18  Pa.  St.  394 ;  Merrick  r.  Bartholick,  36  N.  Y.  44. 

^  Fletcher  v  Carpenter,  37  Mich.  412 ;  Hewell  v.  Coulbourn,  54  Md.  50. 

8  Kellogg  V.  Smith,  26  N.  Y.  18 ;  Haescig  v.  Brown,  34  Mich.  503  ;  Wolcott  v. 
Winchester,  15  Gray  (Mass.),  461.  See,  also,  Johnson  v.  Leonards,  68  ]Me.  237. 

®  Bausman  v.  Kelley,  38  ]Minn.  197  ;  Van  Eman  v.  Stanchfield,  10  Minn.  255 ; 
13  Minn.  75 ;  Hay  ward  v.  Grant,  13  Minn.  165. 

1"  Hayes  v.  Lienlokken,  48  Wis.  509 ;  Miller  v.  Clark,  56  Mich.  337. 


I 


964  RIGHTS    OF    PARTIES    BEFORE   DEFAULT. 

So  a  mere  delivery  of  the  mortgage  without  the  bond  or 
note  does  not  constitute  a  transfer  of  either  by  way  of  sale,  or 
pledge,  though  the  full  consideration  was  paid  for  the  debt.^ 

But  if  the  mortgage  has  been  formally  assigned  and  the 
notes  assigned  without  indorsement,  the  assignee  has  good  title 
to  the  debt/  Such  an  assignment  is  a  good  equitable  transfer 
of  the  mortgage  and  notes.^ 

When  no  notes  are  given  and  the  mortgage  has  no  cove- 
nants for  the  payment  of  the  debt,  then  the  remedy  upon  the 
mortgage  is  upon  the  property,  and  an  assignment  then  trans- 
fers all  the  mortgagee's  rights  under  it/  Judgment  can  only 
be  entered  upon  the  debt  when  it  is  separate  from  the  mort- 
gage/ 

Article  5. 
Rule  in  Equity. 

?  978.  In  Equity.  §  982.  Priority  of  the  Secured  Notes. 

1  979.  After  the  Assignment  the  Mort-    §  983.  No     Intention     or     Circum- 

gagee    Cannot     Release    the  stances  to  Control. 

Mortgage.  ^  984.  Remedy  When  the  Assignee 

§980.  The  Mortgage  Goes   with    the  Does  Not  Have  the  Mort- 

Debt.  gage. 

2  981.  Assignment  of  Part  of  the  Notes. 

§  978.  In  Equity. — In  equity  the  assignment  of  a  debt  will 
carry  with  it  the  right  of  the  mortgagee  in  the  mortgaged 
premises.  But  in  a  court  of  law  an  assignment  of  the  mort- 
gage is  a  conveyance  of  lands,  and  will  not  pass  the  legal 
estate  to  the  assignee,  unless  it  be  made  by  deed.® 

When  the  purchaser  takes  no  legal  transfer  by  indorsement 
of  the  note  or  by  assignment  of  the  mortgage,  he  acquires  only 

1  Warden  v.  Adams,  15  Mass.  233  ;  Bowers  v.  Johnson,  49  N.  Y.  432. 

^  Pease  v.  Warren,  29  Mich.  9.  Compare  Kelly  v.  Burnham,  9  N.  H.  20 ; 
Thorndike  v.  Norris,  24  N.  H.  454. 

3  Pratt  V.  Skolfield,  45  Me.  386. 

*  Caryl  v.  Williams,  7  Lans.  (N.  Y.)  416 ;  Hone  v.  Fisher,  2  Barb.  Ch.  (N.  Y.) 
559,  560 ;  Coleman  v.  Van  Renssalaer,  44  How.  Pr.  (N.  Y.)  368. 

"  *  Webb  V.  Flanders,  32  Me.  175. 

«  Kinna  v.  Smith,  2  Green  Ch.  (N.  J.)  14 ;  Den  v.  Dimon,  5  Halst.  (N.  J.)  156  ; 
1  Washb.  Real  Prop.  519  ^  Mulford  v.  Peterson,  35  N.  J.  L.  127. 


ASSIGNMENT    OF    MORTGAGE    AND    DEBT.  965 

an  equitable  interest.  But  that  interest  will  enable  him  to 
deal  with  the  mortgage  for  all  purposes.^ 

And  so  a  valid  transfer  of  a  note  can  be  made  by  parol  so 
as  to  vest  the  same  and  the  mortgage  debt  of  which  it  is  the 
evidence,  in  the  purchaser,  and  such  sale  will  carry  with  it  the 
mortgage,  as  an  incident  of  the  debt  without  any  written  as- 
signment thereof.^  The  purchaser  can  in  such  case  enforce  the 
mortgagee's  interest  thus  obtained  against  the  property  and 
person  liable  upon  it ;  at  common  law,  in  the  name  of  the  as- 
signor, or  in  the  name  of  the  person  owning  the  legal  title  ;  ^ 
under  the  codes  of  practice,  adopted  by  many  States,  in  his 
own  name.'*  Thus  under  the  codes,  the  assignment  is  in  effect 
a  legal  one.^ 

But  where  the  notes  are  not  indorsed  nor  the  mortgage  as- 
signed, the  holder  must  prove  his  ownership."  It  is  a  conclu- 
sion of  law  that  the  mortgage  passes  with  the  debt  as  an  in- 
cident to  it.^ 

It  has  been  held  in  Illinois  that  an  assignment  of  the  mort- 
gage without  indorsement  of  the  note,  inasmuch  as  the  mort- 
gage is  not  assignable,  either  at  common  law  or  by  statute  in 
that  State,  will  not  pass  the  power  of  sale  to  the  assignee,  but 
it  will  remain  in  the  mortgagee,  who  alone  can  exercise  it.^ 
But  if  the  note  be  indorsed  then  the  power  of  sale  rests  in  the 
assignee.^ 

It  is  the  general  rule  that  an  assignment  or  transfer  of  a 
mortgage  debt  carries  with  it  an  equitable  right  to  an  assign- 

1  Nelson  v.  Ferris,  30  Mich.  497. 

^  Lane  v.  Duchac,  73  Wis.  646. 

*Den  V.  Dimon,  5  Ilalst.  (N.  J.)  156;  Young  v.  Miller,  6  Gray  (]Mass.),  152, 
153 ;  Partridge  ;;.  Partridge,  38  Pa.  St.  78. 

*  Reeves  v.  Hayes,  95  Ind.  521  ;  Sangster  v.  Love,  11  Iowa,  580  ;  ^Nlulford  v. 
Peterson,  35  N.  J.  L.  I27 ;  Southerin  v.  Menduni,  5  N.  H.  420 ;  Kuiiyan  v. 
Mersereau,  11  Johns.  (X.  Y.)  534;  Austin  v.  Burbank,  2  Day  (Conn.),  474; 
Clarkson  v.  Doddridge,  14  Gratt.  (Va.)  42,  44;  Paine  v.  French,  4  Ohio,  318, 
320;  Williams  v.  Morancy,  3  La.  Ann.  227. 

SRigney  v.  Lovejoy,  13  N.  H.  247  ;  Dudley  v.  Cad  well,  19  Conn.  218. 

«  Andrews  r.  Powers,  35  Wis.  644  ;  Strause  v.  Josephthal,  77  N.  Y.  622. 

'  Kurtz  V.  Sponable,  6  Kan.  395. 

^Hamilton  v.  Lubukee,  51  111.  415. 

8  Olds  V,  Cummins,  31  111.  189  ;  Pardee  v.  Lindley,  31  111.  174.  * 


966  EIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

ment  of  the  mortgage/  And  a  payment  of  the  debt  at  or  before 
its  maturity  divests  the  mortgagee  of  his  legal  estate,  and  the 
mortgagor  is  then  revested  with  his  estate  without  any  release 
and  without  any  proceedings  for  redemption.^ 

§  979.  After  the  Assignment  the  Mortgagee  Cannot 
Release  the  Mortgage. — The  authority  of  the  mortgagee  to 
release  the  mortgage  terminates  with  the  assignment.^-  The 
transferrer  of  the  note  has  no  authority,  after  its  transfer,  to  re- 
lease the  mortgage  executed  to  secure  it.*  And  if  the  mort- 
gagee, after  assignment  of  the  debt  and  mortgage,  releases 
it,  he  is  liable  to  the  assignee  for  the  amount  secured  by  it.^ 

The  assignee  may  recover  the  full  amount  due  on  the  debt.'' 
And  when  the  mortgagor,  at  the  request  of  the  mortgagee,  pays 
accounts  against  the  mortgagee,  the  payments  to  be  credited  on 
the  mortgage,  \^diich  had  been  assigned  before  the  payments 
by  the  mortgagor,  and  without  his  knowledge,  and  without  any 
record  under  the  law,  the  amounts  paid  should  be  credited  pro 
tanto  on  the  mortgage  debt.^ 

§  980.  The  Mortgage  Goes  with  the  Debt. — The  mort- 
gage is  but  an  incident  to  the  debt  it  secures,  and  the  assign- 
ment of  the  debt  carries  the  mortgage  with  it.^     This  is  the 

^Sturtevant  v.  Jaques,  14  Allen  (Mass.),  523;  Morris  v.  Bacon,  123  Mass. 
58  ;  Batesville  Ini^titute  v.  Kauffman,  18  Wall.  (U.  S.)  151 ;  Carpenter  v.  Lon- 
gan,  16  Wall.  (U.  S.)  271. 

'^  Holman  v.  Bailey,  3  Met.  (Mass.)  55 ;  Barnes  v.  Boardman,  149  Mass. 
100,  114. 

3  Harding  v.  Durand,  36  111.  App.  238 ;  Reeves  v.  Hayes,  95  Ind.  521 ;  2 
Washli.  Real  Prop.  129  ;  Gottschalk  v.  Neal,  6  Mo.  App.  597  ;  Vandercook  v. 
Baker,  48  Iowa,  199. 

*  Hagerman  v.  Sutton,  91  Mo.  519 ;  Lee  v.  Clark,  89  Mo.  553 ;  Ewing  v.  Shel- 
ton,  34  Mo.  518  ;  Schwatz  v.  Leist,  13  Ohio  St.  420 ;  Gordon  v.  Mulhare,  13 
Wis.  22. 

^  Perkins  v.  Matteson,  40  Kan.  165  ;  Ferris  v.  Hendrickson,  1  Edw.  (N.  Y.) 
132 ;  Fox  7'.  Wray,  56  Ind.  423. 

«  Bange  v.  Flint,  25  Wis.  544. 

">  Castle  V.  Castle,  78  Mich.  298. 

8  Fassett  v.  Muloek,  5  Colo.  466  ;  Lane  v.  Dnchac,  73  Wis.  646 ;  Anderson  v. 
Baumgartner,  27  Mo.  87  ;  Boatsmen's  Sav.  Bank  v.  Crewe,  84  Mo.  477 ;  Olds  v. 
Cumming.s,  31  III.  189  ;  Towner  v.  McClelland,  110  111.  542 ;  Barrett  v.  Hinck- 
ley, 124  111.  32 ;  Hargeman  v.  Sutton,  91  Mo.  519. 


ASSIGNMENT    OF    MORTGAGE    AND    DEBT.  967 

equitable  doctrine,  and  the  mortgage  goes  with  the  notes  as- 
signed, unless  the  agreement  stipulates  to  the  contrary.  This 
rule  is  general,^ 

The  mortgagor  cannot  complain  that  the  note  and  mortgage 
have  been  separated.  No  one  but  the  assignee  of  the  note  can 
complain  of  this  separation.^  A  mortgage  debt  for  future  ad- 
vances may  be  transferred  by  assigning  the  account  for  such 
advances,  without  a  formal  assignment  of  the  mortgage.^  A 
party  with  a  power  of  attorney  to  enforce  the  payment  of  a 
mortgage  has  an  equitable  assignment  of  the  mortgage  and 
note,  if  in  his  possession,  though  delivered  without  indorse- 
ment or  assignment.^ 

The  assignment  of  a  debt  secured  by  a  deed  of  trust  is  not 
an  assignment  of  the  trust.^ 

§  981.  Assignment  of  Part  op  the  Notes. — When  the 
holder  of  the  mortgage  notes  assigns  a  portion  of  them  without 
any  agreement  as  to  the  mortgage  security,  such  assignment  car- 
ries with  it,  by  operation  of  law,  an  assignment  of  a  proportionate 
share  of  the  security.^     But  the  mortgagee  may  assign   his 

1  Keyes  v.  Wood,  21  Vt.  331 ;  Blair  v.  White,  61  Vt.  110 ;  Perkins  v.  Sterne, 
23  Tex.  561 ;  Muller  v.  Wadlington,  5  S.  Car.  342  ;  Walker  v.  Kee,  14  S.  Car. 
142  ;  Prout  v.  Hoge,  57  Ala.  28 ;  Bennett  v.  Solomon,  6  Cal.  134 ;  Partridge  v. 
Partridge,  38  Pa.  St.  78  ;  Watson  v.  Dundee,  etc.,  Co.,  12  Oreg.  474 ;  Paine  v. 
French,  4  Ohio,  318 ;  Kuhns  v.  Bankes,  15  Nebr.  92  ;  Blake  v.  Williams,  36  N. 
H.  39 ;  Ferry  v.  Meckert,  32  N.  J.  Eq.  38  ;  Bayless  v.  Glenn,  72  Ind.  5  ;  Gould 
V.  Marsh,  1  Hun  (N.  Y.),  566;  Hohnes  v.  McGinty,  44  Miss.  94  ;  Belcher  v. 
Costejlo,  122  Mass.  189 ;  Miller  v.  Cappel,  36  La.  Ann.  264 ;  Martin  v.  M6- 
Eeynolds,  6  Mich.  70;  Burdett  v.  Clay,  8  B.  Mon.  (Ky.)  287;  Walker  v. 
Schreiber,  47  Iowa,  529 ;  Perkins  v.  Matteson,  40  Kan.  165 ;  Lawrence  v. 
Knap,  1  Root  (Conn.),  248 ;  Vose  v.  Handy,  2  Me.  322;  Hyman  v.  Devereux, 
63  N.  Car.  624;  AVoodrufF  v.  King,  47  Wis.  261;  AVinstead  r.  Bingham,  4 
Woods,  C.  C.  510 ;  Roberts  v.  Mansfield,  32  Ga.  228 ;  Batesville  Institute  v. 
Kauffman,  18  Wall.  (U.  S.)  151 ;  Myers  v.  Hazzard,  4  McCrary,  C.  C.  94,  97. 
Compare  Planter's  Bank  v.  Prater,  64  Ga.  609. 

2  INIatthews  v.  Warner,  112  U.  S.  600. 

3  Moses  V.  Hatfield,  27  S.  Car.  324. 

*  Cutler  V.  Haven,  8  Pick.  (Mass.)  490. 

*  Charter  Oak  L.  Ins.  Co.  v.  Gisborne,  5  Utah,  319  ;  Bell  v.  Simpson,  75  Mo. 
485. 

6  Blair  v.  White,  61  Vt.  110 ;  Keyes  v.  AVood,  21  A^t.  331 ;  Patrick's  Appeal, 
105  Pa.  St.  356 ;  Sargent  v.  Howe,  21  111.  148 ;  Studebaker  Manuf.  Co.  v.  Mc^ 


968  RIGHTS    OF    PARTIES  BEFORE    DEFAULT. 

whole  interest  as  a  security  for  a  part  of  the  notes  transferred 
at  the  time  of  the  transaction.^  And  the  assignee  of  the  mort- 
gage and  part  of  the  notes  takes  the  mortgage  in  trust  for  the 
benefit  pro  tanto  of  the  party  liolding  tlie  other  notes.^  This 
rule  would  apply  to  detached  coupon  notes  in  the  hands  of 
different  parties.^  And  the  same  principle  is  applicable  where 
the  mortgage  secures  an  account  and  a  note.  The  assign- 
ment of  either  carries  with  it  a  ijroportionate  part  of  the 
security.* 

§  982.  Priority  of  the  Secured  Notes. — A  mortgagee 
holding  two  or  more  notes  secured  by  a  mortgage,  can  transfer 
one  or  more  and  the  mortgage,  so  as  to  give  that  note  transferred 
priority  in  payment  out  of  the  mortgaged  property.^  And  it 
is  clear  that  the  mortgagee  has  the  right  by  agreement  to  fix 
the  rights  of  the  holders  of  the  several  notes  to  the  mortgage 
security ;  and  such  agreement  may  be  implied  from  the  cir- 
cumstances of  the  transaction.^ 

An  indorsement  of  a  note,  with  an  assignment  of  the  mort- 
gage is  sufficient  to  give  to  the  assignee  priority,  in  the  absence 
of  circumstances  showing  a  contrary  intention.'^  However  it  is 
held  by  other  authority  that  the  assignment  of  one  note  with 
the  mortgage  does  not  necessarily  give  that  note  priority,  but 
operates  only  as  an  assignment  of  the  mortgage  j^ro  tanto.^  And 
again  it  is  held  that  the  assignee  of  one  note,  who  has  also  the 

Cargur,  20  Nebr.  500 ;  Harman  v.  Barhydt,  20  Nebr.  625  ;  Cooper  v.  Ulmann, 
Walk.  (Mich.)  251 ;  Donley  v.  Hays,  17  Serg.  &  R.  (Pa.)  400. 

1  Warden  v.  Adams,  15  Mass.  233 ;  Langdon  v.  Keith,  9  Vt.  299. 

^  Norton  v.  Palmer,  142  Mass.  433  ;  Belding  v.  Manly,  21  Vt.  550 ;  Moore  v. 
Ware,  38  Me.  496. 

3  See  Miller  v.  Rutland,  .etc.,  Railroad  Co.,  40  Vt.  399  ;  Champion  v.  Hart- 
ford Invest.  Co.,  45  Kan.  103. 

*  Adger  v.  Pringle,  11  S.  Car,  527  ;  Magloughlin  v.  Clark,  35  111.  App.  251. 

6  Noyes  v.  White,  9  Kan.  640 :  Goar  v.  McCanless,  60  Miss.  244 ;  McLean's 
Appeal,  103  Pa.  St.  255  ;  Anglo-Am.  Land  Co.  v.  Bush  (Iowa),  50  N.  W.  Rep. 
1063  ;  Walker  v.  Demont,  42  111.  272 ;  Bank  v.Tarleton,  23  Miss.  173. 

« Grattan  v.  Wiggins,  23  Cal.  30;  Bryant  v.  Damon,  6  Gray  (Mass.),  564; 
Langdon  v.  Keith,  9  Vt.  29;  Mechanics'  Bank  v.  Bank,  9  Wend.  (N.  Y.)  410. 

'  Foley  V.  Rose,  123  Mass.  557  ;  Solberg  v,  Wright,  33  Minn.  224. 

^Ewing  V.  Arthur,  1  Humph.  (Tenn.)  537 ;  Stevenson  v.  Black,  Saxt.  (N.  J.) 
338 ;  Page  v.  Pierce,  26  N.  H.  317. 


ASSIGNMENT   OF   MORTGAGE    AND    DEBT.  969 

assignment  of  the  mortgage,  may  stand  upon  another  principle 
of  law,  that  when  two  or  more  have  equal  claims  in  equity 
and  one  has  a  legal  title,  the  legal  title  must  prevail.' 

An  assignment  of  one  note  without  the  mortgage,  implies 
priority  of  payment  of  notes  retained  by  the  mortgagee,  which 
subsequently  assigned  would  not  take  priority  over  the  first 
note  transferred  ;  ^  but  this  rule  is  not  without  exceptions.^ 

An  assignment  of  part  of  the  amount  secured  out  of  the  first 
moneys  to  become  due  and  payable,  gives  the  assignee  priority 
of  payment  over  the  balance  secured  by  the  mortgage.* 

When  part  of  the  notes  are  assigned,  and  part  retained,  it  is 
entirely  a  matter  of  contract  between  the  assignor  and  assignee 
how  far  and  for  whose  benefit  the  mortgage  shall  be  held.^ 

§  983.  No  Intention  or  Circumstances  to  Control. — As  a 
general  rule,  an  assignment  of  one  of  several  notes  secured  by  a 
mortgage  operates  as  an  assignment  jpro  tanto  of  the  mortgage.^ 

This  is  on  the  principle  that  an  assignment  of  a  portion  of 
the  debt  is  an  assignment  of  the  mortgage  made  to  secure  it 
pro  tanto ;  ^  and  the  holders  of  the  sejDarate  notes  are  regarded 
as  separate  and  distinct  mortgagees.^ 

But  the  assignee  of  the  mortgage  may  foreclose  in  his  own 

name,  and  then  he  will  hold  the  proceeds  as  a  trustee  for  the 

persons  entitled  to  share.^ 

1  Eastman  v.  Foster,  8  Met.  (Mass.)  19. 

''  Eicbard.son  v.  McKim,  20  Kan.  346  ;  Foley  v.  Rose,  123  Mass.  557. 
'  Hendei-son  v.  Herrod,  10  Sm.  &  M.  (Miss.)  631 ;  Abney  v.  Walmsley,  33 
La.  Ann.  589  ;  Knight  v.  Ray,  75  Ala.  383. 

*  Thayer's  Appeal,  9  At.  Rep.  498. 

*  Langdon  v.  Keith,  9  Vt.  300. 

« Walker  v.  Schreiber,  47  loAA'a,  529;  Patrick's  Appeal,  103  Pa.  St.  255; 
Lynch  v.  Hancock,  14  S.  Car.  66,  84  ;  Gratton  r.  Wiggins,  23  Cal.  1<> ;  Foley  v. 
Rose,  123  Mass.  557 ;  Moore  v.  Ware,  38  Me.  496 ;  Anderson  v.  Baumgartner, 
27  310.  80 ;  Stockton  r.  Johnson,  6  B.  Mon.  (Ky.)  408  ;  Terry  v.  Woods,  6  Sm. 
&  :M.  (Miss.)  1.39 ;  Johnson  v.  BroAvn,  31  N.  H.  405  ;  Noyes  v.  White,  9  Kan. 
640  ;  Collerd  >:  Huson,  34  N.  J.  Eq.  38 ;  Swartz  v.  Leist,  13  Ohio  St.  419  ; 
Langdon  v.  Keith,  9  Vt.  299 ;  Herring  v.  Woodhull,  29  111.  92 ;  Smith  v.  Stevens, 
49  Conn.  181. 

^  Grapengether  v.  Fejervary,  9  Iowa,  163. 

*  Rankin  v.  Major,  9  Iowa,  297. 

»Solbergv.  Wright,  33  Minn.  224.    See  EngUsh  v.  Carney,  25  Mich.  178; 


970  RIGHTS    OF    PARTIES    BEFORE   DEFAULT. 

Several  notes  in  the  hands  of  different  parties  have  an  equal 
claim  to  be  paid  ratably  out  of  the  land/ 

When  a  party  assigns  a  mortgage  and  a  forged  note  to  one 
party,  and  the  real  note  to  another,  the  lien  of  the  first  assignee 
is  paramount.^ 

In  West  Virginia,  eight  notes  for  the  purchase-money  of 
land  were  secured  by  a  deed  of  trust.  By  assignment  and  for 
value  they  came  into  the  hands  of  one  person.  He  assigned 
four  of  them  to  a  sub-assignee,  who,  in  turn,  assigned  these 
four  notes  to  another  party  "  without  recourse."  It  was  held 
that  these  four  notes  so  assigned  were  entitled  to  be  first  paid 
out  of  the  proceeds  of  the  land  when  the  same  was  sold.^ 

§  984.  Remedy  when  the  Assignee  Does  Not  Have  the 
]\IoRTGAGE. — When  one  party  holds  the  note  and  another  the 
mortgage,  the  assignee  of  the  note  may  proceed  in  equity  to 
have  the  mortgage  assigned  to  him,*  or  the  holder  may  be 
charged  as  trustee  for  the  holder  of  the  note.* 

In  New  Hampshire  the  assignee  of  the  note  may  maintain 
an  action  on  the  mortgage  in  his  own  name  without  any  other 
evidence  of  the  transfer." 

It  is  the  general  rule  and  the  tendency  of  the  decisions  that, 
when  the  mortgage  has  not  been  assigned,  the  mortgagee  holds 
the  legal  title  in  trust  for  the  purchaser  of  the  debt,  and  that 
the  latter  may  obtain  a  conveyance  by  a  bill  in  equity.^ 

Bryant  v.  Damon,  6  Gray  (Mass.),  564  ;  Foley  v.  Rose,  123  Mass.  557 ;  Norton 
V.  Stone,  8  Paige  (N.  Y.),  222;  Rolston  v.  Brockway,  23  Wis.  407;  Belding  v. 
Manly,  21  Vt.'soO ;  Keyes  v.  Wood,  21  Vt.  331. 

'  Jennings  v.  Moore,  83  Mich.  231.  See,  also,  Abele  r.  McGuigan,  78  Mich. 
415 ;  First  Nat.  Bank  v.  Hoveyman,  6  Dak.  275 ;  Laplace  v.  Laplace,  43  La. 
Ann.  284. 

"^  Kernohan  v.  Durham,  48  Ohio  St.  1,  See,  also,  Mellick  v.  Mellick,  47 
N.  J.  Eq.  86. 

3  Jenkins  v.  Hawkins,  34  W.  Va.  799. 

*  Morris  v.  Bacon,  123  Mass.  58. 

^  Steward  v.  Welch  (Me.),  24  At.  Rep.  860  ;  Wolcott  v.  Winchester,  15  Gray 
(Mass.),  461 ;  Jordan  v.  Cheney,  74  Me.  359;  Crane  v.  March,  4  Pick.  (Mass.) 
131. 

®  Southerin  v.  Mendum,  5  N.  H.  420. 

'  Wolcott  V.  Winchester,  15  Gray  (Mass.),  461,  464  ;  Young  v.  Miller,  6  Gray 
(Mass.),  152 ;  Barnes  v.  Boardman,  149  Mass.  106. 


assignment  of  mortgage  and  debt.  971 

Article  6. 
Validity  in  Equity  and  at  Law. 

I  985.  Transfer  Without  Covenants  of  §  991.  Fraudulent    Representations. 

Warranty.  ^  992.  Usury. 

§  986.  Transfer  With  Warranty.  I  993.  Assignment  not  Completed. 

I  987.  Warranty  in  General.  ^  994.  Lex  Loci  Contractus — Law  of 
1 988.  Assignment    of     Mortgage    as  Place. 

Collateral  Security.  |  995.  Measure  of  Damages. 

§  989.  Mortgagee  in  Pos.«ession.  ^  996.  Pleadings, 

i  990.  Fraudulent  Mortgages.  §  997.  Burden  of  Proof. 

§  985.  Transfer  Without  Covenants  of  Warranty. — 
An  assignment  of  a  mortgage,  as  a  general  rule,  passes  nothing 
but  the  mortgagee's  interest.  And  a  deed  of  assignment  of  a 
mortgage,  without  covenants  of  warranty,  does  not  estop  the 
assignor,  nor  those  claiming  under  him,  to  set  up  the  after- 
acquired  title.^  The  title  conveyed  is  but  a  title  in  mortgage. 
The  words  of  grant  in  the  assignment  cannot  operate  by  way 
of  covenant  or  estoppel  beyond  the  description  of  the  thing 
granted  and  assigned.^  The  assignment  does  not  cover  a  title 
which  the  mortgagee  holds  absolutely.^  An  assignment  does  not 
convey  or  extinguish  the  right  of  entry.  Thus,  it  does  not  extin- 
guish the  right  of  entr}^  for  a  breach  of  a  condition  subsequent, 
as  for  the  payment  of  j^rior  mortgages  upon  the  mortgaged  es- 
tate,* though  an  absolute  sale  in  fee  would  extinguish  the  right.^ 

Where  the  assignment  indorsed  on  the  mortgage  contains  no 
warranty,  and  fraud  or  deceit  is  not  alleged,  evidence  that,  at 
the  time  of  the  execution  of  the  assignment,  the  assignor  ver- 
bally warranted  the  mortgage  to  be  a  good  lien  on  the  jDrop- 
erty,  is  inadmissible.® 

'  Weed  Sewing-Mach.  Co.  v.  Emerson,  115  Mass.  554. 

'^Blanchard  v.  Brooks,  12  Pick.  (Mass.)  66,  67;  Miller  v.  Ewing,  6  Cush. 
(IMass.)  34,-  Hoxie  v.  Finney,  16  Gray  (Mass.),  332 ;  Van  Rensselaer  v.  Kearney, 

II  How.  (U.  S.)  325,  326. 

^Durgin  v.  Bushfield,  114  Mass.  492;  Barnstable  Sav.  Bank  v.  Barrett,  122 
Mass.  172. 

*  Hancock  v.  Carlton,  6  Gray  (Mass.),  39 ;  Richardson  v.  Cambridge,  2  AUen 
(Mass.),  118. 

*Rice  V.  Boston,  etc..  Railroad  Co.,  12  Allen  (Mass.),  141 ;  Co.  Litt.  214  a. 

*Nally  V.  Long,  71  Md.  585. 


972  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

§  986.  Transfer  with  Warranty. — When  the  mortgage  con- 
tains covenants  of  warranty  and  it  is  assigned,  and  the  mort- 
gagor acquires  another  title  to  the  same  premises,  such  title 
inures  instantly  to  the  benefit  of  the  assignee  of  the  mortgage/ 
Because  this  after-acquired  title  by  the  mortgagor  inures  to  the 
benefit  of  the  mortgagee  and  his  assigns  by  virtue  of  the  cove- 
nants in  the  mortgage,  and  is  subject  to  foreclosure.^ 

Expenses  or  taxes  on  the  mortgaged  land  cannot  be  paid  by 
the  assignee  which  accrued  before  the  assignment  and  then 
added  to  the  amount  due  on  the  loan.^ 

§987.  Warranty  in  General. — A  court  of  equity  cannot 
relieve  a  person  who  purchases  a  mortgage  upon  real  estate,  to 
which  the  title  is  defective,  unless  the  seller  has  made  some 
statement  respecting  the  title  upon  which  the  purchaser  was 
justified  in  relying.^  The  purchaser  is  not  excused  from  an 
examination  of  the  title,  unless  he  is  fraudulently  induced  to 
forbear  inquiry,  which  he  would  otherwise  have  made.^ 

When  the  validity  of  the  mortgage  is  warranted,  it  is  also  a 
warranty  of  the  bond  or  note.^  And  an  unreasonable  delay  by 
the  assignee  in  the  collection  of  the  mortgage  discharges  the 
guarantor  from  the  depreciation  of  the  property  in  the  mean- 
time.^ 

Generally,  it  is  held  that  by  the  assignment  of  a  note  and 
mortgage  the  assignor  impliedly  warrants  their  validity.^  But 
there  is  no  implied  covenant  in  an  assignment  that  the 
assignor  will  not  receive  the  payment  of  the  debt.^     Neither 

1  Gardiner  v.  Gerrish,  23  Me.  46. 

"^  Pratt  V.  Pratt,  96  111.  184  ;  Bush  v.  Marshall,  6  How.  (U.  S.)  284  ;  Flynt  v. 
Hubbard,  57  ]\liss.  471 ;  Wells  v.  Somers,  4  111.  App.  297 ;  Wright  v.  Shumway, 
1  Biss.  C.  C.  23. 

3  Macomb  v.  Prentis,  78  Mich.  255. 

*  Vincent  v.  Berry,  46  Iowa,  571. 

^Gordon  v.  Parmelee,  2  Allen  (Mass.),  212 ;  Brown  v.  Castles,  11  Gush. 
(Mass.)  348. 

«Ros9  V.  Terry,  63  N.  Y.  613. 

'Griffith  V.  Robertson,  15  Hun  (N.  Y.),  344. 

8  Ross  V.  Terry,  63  N.  Y.  613.  See  Fant  v.  Fant,  17  Gratt.  (Va.)  11 ;  Littauer 
V.  Goldman,  72  N.  Y.  506. 

9  Hortsman  v.  Gerker,  49  Pa.  St.  282. 


ASSIGNMENT    OF    MORTGAGE    AND    DEBT.  973 

does  the  assignment  of  a  mortgage  carry  with  it  a  separate 
contract  of  guaranty  of  the  pa3anent  of  the  mortgage  debt, 
when  made  to  the  mortgagee,  "  his  executors  and  administra- 
tors," as  this  is  a  personal  contract.^  If  the  guaranty  be  upon 
the  mortgage,  which  is  assigned,  the  guarantor  may  plead  in 
defense  to  a  suit  by  the  assignee  upon  the  guaranty,  want  of 
consideration  for  the  guaranty.^ 

In  general,  the  assignment  of  a  mortgage  is  an  assignment 
of  all  the  securities  which  the  assignor  has  for  the  debt,  and 
not  merely  the  claim  against  the  mortgagor.^  Thus,  it  trans- 
fers any  judgments  that  may  have  been  obtained  against  in- 
dorsers  of  the  notes,  or  a  mortgage  given  as  collateral  security 
to  the  mortgage  debt  which  it  assigned.* 

There  is  no  implied  warranty  of  the  solvenc}^  of  the  mort- 
gagor, but  that  the  mortgage  debt  has  not  been  satisfied.^ 

The  debtor  is  bound  to  respect  the  rights  of  the  assignee  of 
the  debt,  and  cannot  defeat  them.  Thus,  after  he  knows  of 
the  insolvency  of  the  mortgagee  after  assignment  of  the  mort- 
gage debt,  he  cannot  purchase  desperate  claims  against  him  to 
satisfy  the  mortgage  debt,  even  if  the  mortgage  has  been  trans- 
ferred only  as  collateral  security.*' 

§  988.  Assignment  of  Mortgage  as  Collateral  Security. 
— The  mortgage  note  may  be  re-issued  to  a  third  and  innocent 
holder  for  full  value  before  maturity,  without  impairing  the 
security  of  the  mortgage,  provided  it  is  only  a  collateral  se- 
curity.^ And  the  assignment  of  a  mortgage  may  be  by  deed 
absolute  in  form  and  yet  be  only  a  9ollateral  security  for  a  loan, 
and  parol  evidence  is  admissible,  in  equity,  to  prove  that  it 
was  only  an  assignment  as  collateral  security.* 

1  Smith  V.  Starr,  4  Hun  (N.  Y.),  123. 
^Brigijs  V.  Latham,  36  Kan.  205. 
'  Phihps  V.  Bank,  18  Pa.  St.  394. 
*Phihp9  V.  Bank,  18  Pa.  St.  394. 
*  French  v.  Turner,  15  Ind.  59. 
8  Phihps  V.  Bank,  18  Pa.  St.  394. 
'  Morris  v.  Cain,  39  La.  Ann.  712. 

spond?;.  Eddy,  113  Mass.  149;  Wormuth  v.  Tracy,  15  Hun  (N.  Y.),  180; 
Briggs  V.  Rice,  130  Mass.  50. 


974  BIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

The  mortgagee  does  not  lose  his  interest  in  the  mortgage  by 
assigning  it  to  his  creditors  as  collateral  security  for  his  own 
debt,  though  he  stipulates  in  the  assignment  to  forfeit  all 
interest  in  the  mortgage  if  he  fails  to  pay  his  debt  by  a  specified 
time,  and  fails  to  pay  it.  The  agreement  for  forfeiture  amounts 
to  nothing  in  a  court  of  equity/ 

The  assignor  can  redeem  by  paying  the  amount  he  owes,  in 
whosoever  hands  it  may  be.^ 

A  second  assignee  of  a  note  secured  by  mortgage,  who  has 
taken  it  before  due  for  full  value,  may  enforce  for  the  whole 
amount,  though  his  assignor  took  it  for  a  small  part  of  the 
amount  secured.^ 

But  if  the  debt  be  a  bond  or  other  non-negotiable  instrument, 
the  assignee  would  in  such  case  acquire  only  the  right  of  the 
first  assignee.* 

Where  a  mortgage  has  been  taken  as  collateral  security,  the 
assignee  does  not  guarantee  the  sufficiency  of  it,  but  undertakes 
to  use  due  diligence  in  its  collection.^ 

An  indemnit}''  mortgage  may  be  assigned  as  collateral 
security.''  An  indorsee  of  a  mortgage  note,  who  has  lawful 
possession  of  the  mortgaged  property,  and  also  of  the  mortgage 
itself,  cannot  be  dispossessed  until  the  mortgage  debt  is  paid, 
since  he  is  the  equitable  assignee  of  the  mortgage.'^ 

The  possession  of  an  equitable  assignee,  when  peaceably 
acquired,  is  as  lawful  as  that  of  the  mortgagee  himself,  or  his 
tenant.^ 

§  989.  Mortgagee  in  Possession. — An  assignment  of  a 
mortgage  as  security  for  a  debt  by  a  mortgagee  in  possession  is 
evidence  that  the  mortgage  is  redeemable.^     And  such  an  as- 

1  Hughes?  r.  Johnson,  38  Ark.  285. 

^  Sweet  V.  Van  Wyck,  3  Barb.  Ch.  (N.  Y.)  647. 

^  Briggs  V.  Rice,  130  Mass.  50. 

*  Bush  V.  Lathrop,  22  N.  Y.  535. 

5  Hammond  v.  Lewis,  1  How.  (U.  S.)  14. 

«  Murray  v.  Porter,  26  Nebr.  288. 

^  Brown  v.  Bookstaver  (111.),  31  N.  E.  Rep.  17. 

8  Kilgour  V.  Gockley,  83  111.  109. 

9  Smart  v.  Hunt,  4  Ves.  478,  note  a ;  Hardy  v.  Reeves,  4  Ves.  466,478 ;  Borst 
V.  Boyd,  3  Sandf.  Ch.  (N.  Y.)  501. 


I 


ASSIGNMENT   OF    MORTGAGE    AND    DEBT.  975 

signment  to  a  third  person  of  the  mortgage  is  evidence  that 
the  mortgagee  in  possession  acknowledges  the  rights  of  the 
mortgagor.^  And  when  the  assignee  takes  the  mortgage,  he  is 
not  accountable  to  the  mortgagor  for  rents  and  profits  before 
the  assignment.'"^ 

§  990.  Fraudulent  Mortgages, — When  a  mortgage  and 
note  are  fraudulently  made,  the  assignee,  with  notice,  stands  in 
no  better  situation  than  the  parties  to  the  'original  transaction, 
and  the  law  will  not  aid  him  to  avail  himself  of  the  security.^ 

So  when  the  assignee  of  the  mortgage,  fraudulent  in  its  incep- 
tion, and  void  as  against  creditors,  purchases  with  knowledge  of 
the  fraud,  he  is  not  a  bona  fide  purchaser,  and  the  fact  that  he 
paid  full  consideration  for  the  assignment,  will  not  aid  him.* 
Of  course  the  burden  is  upon  the  party  asserting  fraud. ^ 

But  such  fraudulent  mortgage  becomes  valid  in  the  hands  of 
an  assignee  who  has  purchased  without  notice,  and  this  is  so 
both  as  to  the  subsequent  purchasers  and  creditors.^ 

§  991.  Fraudulent  Representations. — Representations  by 
the  vendor  of  a  mortgage  given  by  a  third  person  upon  lands 
at  a  distance,  as  to  the  responsibility  of  the  mortgagor,  and  the 
value  of  the  securities,  which  representations  are  false  in  fact, 
though  honestly  made  in  the  belief  that  they  were  true,  if  they 
are  relied  upon  and  mislead  the  purchaser,  are  tantamount,  in 
legal  effect,  to  fraud ;  ^  and  the  assignee  can  avoid  the  assign- 
ment ;  but  the  transaction  must  be  fraud  in  fact  or  in  legal 
effect.^  And  where  a  person  obtains  an  assignment  of  a  bond 
and  mortgage  from  the  owner  thereof  by  false  pretenses  and 

1  Smart  v.  Hunt,  4  Ves.  478. 

2  Hall  V.  We.stc-ott  (R.  I.),  23  At.  Rep.  25. 

3  Nellis  V.  Clark,  20  Wend.  (N.  Y.)  24;  4  Hill  (X.  Y.),  424;  Chamberlain  v. 
Morgan,  2G  Barb.  (N.  Y.)  160. 

*Danbury  v.  Robinson,  1  McCarter  (N.  J.  Eq.),  213. 

5  Farmers'  Bank  v.  Douglas,  11  Sm.  &  M.  (Miss.)  469 ;  Langdon  v.  Keith,  9 
Vt.  299. 

«Danbury  v.  Robinson,  1  McCarter  (X.  J.  Eq.),  213;  Tantum  v.  Green,  21 
N.  J.  Eq.  364. 

'  Webster  v.  Bailey,  31  Mich.  36. 

8  Peabody  v.  Fenton,  3  Barb.  Ch.  (N.  Y.)  451. 


976  EIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

gross  fraud,  and  then  transfers  the  same  to  a  third  person  for 
less  than  their  full  value,  and  under  circumstances  calculated 
to  i^ut  the  latter  upon  inquiry,  it  was  held  that  no  title  vested 
in  the  purchaser  under  the  assignment  to  him,  and  that  the 
owner  of  the  bond  and  mortgage  was  entitled  to  a  decree  de- 
claring the  assignment  fraudulent  and  void.^ 

Representations  as  to  the  value  of  property  cannot  ordinarily 
be  made  the  basis  of  the  recovery  of  damages  for  fraud  and 
deceit ;  ^  but  when  the  manager  of  an  investment  comj)any 
makes  representations  to  a  purchaser  of  notes  and  mortgage 
which  he  knows  are  untrue,  and  the  purchaser  relies  on  such 
statements,  having  faith  in  the  honesty  of  the  company,  the 
question  of  fraud  shoUld  be  left  to  the  jury  to  pass  upon.^ 

§  992.  Usury. — The  hj'^pothecation  of  an  obligation  valid 
in  its  inception  as  security  for  a  usurious  loan  will  not  render 
it  void  or  discharge  the  debtor  from  liability  thereon.  Upon 
payment  of  the  amount  of  the  loan,  the  obligation  will  be  free 
from  all  taint  of  usury.*  But  a  party  who  is  the  direct  assignee 
in  trust  of  a  mortgage  may  impeach  the  mortgage  for  usury. 
Such  assignee  stands  in  the  place  of  the  mortgagor  and  has 
his  rights.  If  the  security  is  good  in  its  inception  it  cannot  be 
impeached  on  account  of  circumstances  in  a  usurious  transfer 
between  the  original  mortgagee  and  assignee  of  the  mortgage.^ 
Neither  can  the  assignee  of  the  equity  of  redemption  allege 
usury  in  the  loan  to  the  mortgagor,  to  defeat  the  foreclosure 
by  the  mortgagee.^  And  in  general  if  the  mortgage  is  valid 
in  its  inception,  it  is  unaffected  by  the  usury  and  illegality  to 
a  contract  upon  which  it  is  assigned.^ 

§  993.  Assignment  not  Completed. — An  assignment  may 

be  revoked  before  completed  and  the  rights  of  the  mortgagee 

1  Peabody  v.  Fenton,  3  Barb.  Ch.  (N.  Y.)  451. 

'^  Bell  V.  Byerson,  11  Iowa,  233  ;  Dawson  v.  Graham,  48  Iowa,  378  ;  Hoffman 
V.  Wilhelm,  68  Iowa,  510. 

^King  r.  Sioux  City  L.  and  Invest.  Co.,  76  Iowa,  11. 
*  Warner  v.  Gouverneur,  1  Barb.  36,  40. 
^Pearpall  v.  Kingsland,  3  Edw.  Ch.  (N.  Y.)  195,  198. 
«  De  Wolf  V.  Johnson,  10  AVheat.  (U.  S.)  367. 
'Wells  V.  Chapman,  13  Barb.  (N.  Y.)  561. 


I 


ASSIGNMENT    OF    MORTGAGE    AND    DEBT.  977 

unaffected.  Thus,  a  mortgagee  who  has  assigned  the  mort- 
gage and  indorsed  the  note  may,  upon  the  indorsement  of  the 
note  back  to  him,  and  the  cancellation  of  the  assignment  before 
it  has  been  recorded,  maintain  a  writ  of  entry  to  foreclose  the 
mortgage/  Or,  after  the  cancellation  of  the  unrecorded  deed 
of  assignment,  he  could  have  made  an  assignment  to  another 
party  in  good  faith  and  for  value.^ 

§  994.  Lex  Loci  Contractus — Law  of  Place. — The  law 
of  the  place  must  govern  in  determining  the  validity  of  the 
assignment,  although  the  purchase  was  made  in  another  juris- 
diction, in  the  absence  of  proof  that  the  law  was  different  in 
such  other  jurisdiction.^ 

The  law  of  the  place  where  an  assignment  is  made  governs 
it  whether  the  instrument  transferred  be  negotiable  or  not.  A 
deed  for  the  conveyance  of  real  estate  can  only  take  effect  by 
virtue  of  the  law  of  the  State  where  the  land  is  situated.  A 
mortgage  comes  within  this  rule,  but  the  rule  does  not  embrace 
equitable  transfer  of  such  mortgage  under  an  indorsement  of  a 
negotiable  note  to  which  it  is  an  incident.* 

The  general  rule  is  that  the  assignment  of  negotiable  paper 
must  be  made  in  conformity  with  the  law  of  the  place  where 
the  assignment  is  made,  and  if  invalid  by  the  law  of  that 
place  it  will  also  be  held  to  be  invalid  in  another  State  or 
country,  notwithstanding  that  it  would  have  been  a  valid 
assignment  if  made  at  the  latter  placc.^ 

But  in  Mississippi  an  exception  to  this  rule  has  been  made, 
and  it  is  held  that  where  the  assignee  of  the  note  seeks  to 
enforce  a  mortgage  of  real  estate,  situated  in  that  State,  that 
he  has  acquired  a  right  to  do  so,  in  conformity  to  the  laws  of 
that  State,  and  is  entitled  to  his  remedy.^ 

^Howe  V.  Wilder,  11  Gray  (Mass.),  267. 

2  Trull  V.  Pkinner,  17  Pick.   (Mass.)  213;    Lawrence  v.  Stratton,  6  Cush. 
(Mass.)  lfi.3. 

^  Kennedy  v.  Chapin.  67  IMd.  454. 

*Dundas  v.  Bowler,  3  iMcLean,  C.  C.  307. 

^Mnrrell  v.  Jones,  40  Miss.  565,  583  ;  Trimbey  r.  Yignier,  1  Bing.  N.  Caa. 
151  ;  27  Eng.  C.  L.  336. 

«Murrell  v.  Jones,  40  Miss.  565,  583 ;  Bank  v.  Tarleton,  23  Miss.  173. 
62 


978  RIGHTS    OF    PARTIES    BEFORE   DEFAULT. 

When  the  law  of  the  place  of  assignment  is  different  from 
that  of  the  place  where  the  land  lies,  and  the  mortgage  is 
sought  to  be  enforced,  the  lex  rei  sitse  will  govern  unless  the 
foreign  law  is  proved.^ 

In  Michigan,  where  the  assignment  of  a  mortgage,  executed 
in  another  State,  is  acknowledged  before  an  officer,  but  contains 
no  certificate  of  a  clerk  of  a  court  of  record,  or  of  the  Secretary 
of  State,  that  the  person  taking  the  acknowledgment  was  such 
an  officer  as  therein  represented  to  be,  as  required  by  statute,' 
it  is  not  entitled  to  record  and  if  recorded  cannot  support  a 
foreclosure  by  advertisement,  since  under  the  statute  allowing 
such  mode  of  foreclosure  the  assignment  and  mortgage  must 
be  entitled  to  record  as  well  as  recorded.^ 

§  995.  Measure  of  Damages. — The  right  to  recover  the 
debt  and  to  subject  the  mortgaged  property  is  the  measure  of  the 
assignee's  redress,  unless  there  appears  something  in  the  agree- 
ment to  assign,  indicating  also  the  right  to  proceed  against  third 
persons  for  injury  to  the  mortgaged  property.* 

In  an  action  to  recover,  by  the  assignee  on  a  covenant  in  an 
assignment  of  a  mortgage  that  there  had  been  nothing  paid 
thereon,  when  the  evidence  showed  that  the  mortgage  debt  had 
been  paid  at  the  date  of  the  assignment,  the  assignee  can  only 
recover  the  value  of  the  note  and  mortgage,  and  the  burden  of 
proof  is  upon  him  to  establish  their  value.^ 

§  996.  Pleadings. — In  an  action  by  the  assignee  on  the 
note  and  mortgage  to  recover  judgment  on  the  note  and  to 
foreclose  the  mortgage,  it  is  not  necessary  to  set  up  in  the  com- 
plaint or  petition  a  copy  of  the  assignment,^  as  the  assignment 
is  not  the  foundation  of  the  action.'' 

The  assignee  of  a  satisfied  mortgage  on  real  estate  takes  it 

^  Kennedy  v.  Chapin,  67  Md.  454. 

=*  How.  Stat.,  sect.  5660. 

^Dohrn  V.  Hapkin,  88  Mich.  144. 

*  Gabbert  v.  Wallace,  66  Miss.  618, 

^  Eaton  V.  Knowles,  61  Mich.  625. 

«  Stanford  v.  Broadway  Sav.  and  L.  Assc,  122  Ind.  422. 

'Keith  V.  Champer,  69  Ind.  477. 


ASSIGNMENT    OF    MORTGAGE    AND    DEBT.  979 

subject  to  the  defense  that  it  is  satisfied,  though  the  satisfaction 
does  not  appear  of  record/ 

In  an  action  to  foreclose  a  mortgage  securing  a  non-negoti- 
able note  or  contract  for  the  payment  of  money,  an  allegation 
that  the  assignee  paid  the  mortgagee  the  whole  amount  due 
thereon,  for  and  in  consideration  of  which  the  mortgagee  then 
and  there  sold,  assigned,  and  delivered  the  said  mortgage  and 
all  his  right  and  title  and  interest  in  and  to  said  contract  of 
mortgage  and  amount  due  thereon,  sufficiently  avers  the  trans- 
fer of  the  security  to  the  assignee,  and  shows  his  ownership 
thereof  and  his  right  to  maintain  an  action.^  When  the  as- 
signee claims  to  be  the  owner  of  one  of  four  mortgage  notes, 
he  should  account  for  the  remaining  notes  ;  but  if  their  pay- 
ment is  shown  on  the  hearing,  the  defect  is  one  of  pleading 
and  may  be  disregarded.^ 

§  997.  Burden  op  Proof. — The  burden  of  proof  is  upon 
the  assignee  in  a  foreclosure  suit  to  establish  the  fact  that  he  is 
a  bona  fide  purchaser,  where  it  is  conceded  that  it  would  be 
fraudulent  for  the  assignor  to  make  any  claim  to  the  mortgage 
note  which  he  should  have  delivered  uj)  to  the  maker.*  So 
when  the  assignee  of  a  second  mortgage  is  not  made  a  party 
to  foreclosure  of  the  first  mortgage  in  order  to  sustain  his 
claim  to  the  surplus,  the  assignee  must  show  that  he  is  a  bona 
fide  assignee  for  the  amount  claimed,  and  that  he  purchased 
the  interest  in  good  faith  for  value,  and  without  any  notice  of 
the  invalidity  of  the  mortgage.^ 

The  assignee  can  recover  the  value  of  the  note  and  mortgage, 
and  the  burden  of  proof  is  upon  him  to  establish  their  value.^ 
He  must  allege  and  prove  innocence  and  good  faith  in  establish- 
ing his  rights  in  cases  of  conflicting  equities ;  in  the  absence 
of  such  pleading  and  proof,  the  mortgage  will  be  postponed.'^ 

^  Redin  v.  Branhan,  43  Minn.  283. 

*  Morris  v.  Peck,  73  Wis.  482. 
^Cooper  V.  Smith,  75  Mich.  247. 

*  Cooi^er  V.  Smith,  75  Mich.  247. 
^  Kent  V.  Melius,  69  Mich.  71. 

« Eaton  V.  Knowles,  61  Mich.  625. 

'  Seymour  v.  McKinstry,  106  N.  Y.  230. 


980  rights  of  parties  before  default. 

Article  7. 

Negotiable  and  Non-Negotiable  Instruments. 

1 998.  Equities.  ?  1002.  Contrary  Doctrine. 

§  999.  Taking  a    Mortgage    Without  1 1003.  Non-Negotiable  and  Overdue 

the  Note.  Instruments. 

1 1000.  Bona  Fide  Assignee— Consid-  ?  1004.  Bonds. 

eration.  §  1005.  Equities  as  to  Third  Parties, 

g  1001.  Receiving    Note  Without    In-  1 1006.  New  York  Rule. 
dorsement. 

§  998.  Equities. — It  is  the  general  rule  that  the  assignee  of  a 
negotiable  note  and  mortgage  before  maturity  takes  them  free 
from  equities  between  the  original  parties  to  the  transaction.^ 
But  if  the  note  be  past  due,  then  he  takes  it  with  the  equities 
that  existed.  Thus,  the  assignee  of  a  mortgage  securing 
several  notes,  one  of  which  is  overdue,  takes  the  assignment 
subject  to  the  equities  that  may  exist  between  the  mortgagee 
and  the  mortgagor  as  to  the  note  due,  as  the  notes  and  mort- 
gage are  one  transaction  between  the  same  parties.^ 

So  the  assignee  of  a  trust  deed,  who  has  purchased  the  note 
it  secures,  after  maturity,  takes  such  trust  deed  subject  to  any 
equitable  defense  available  against  his  assignor.^ 

A  transfer  of  note  and  mortgage,  made  by  a  separate  instru- 
ment such  as  a  negotiable  bond  of  a  corporation,  in  which  the 
recitals  are  that  the  note  and  mortgage  are  transferred  as 
security  for  the  bond,  and  transferable  only  in  connection  with 
it,  is,  in  Wisconsin,  equivalent  to  an  indorsement  of  the  note, 
and  the  assignee  takes  it  before  maturity  free  from  all  equities.* 

^Billgery  v.  Ferguson,  30  La.  Ann.  84;  Duncan  v.  Louisville,  13  Bush 
(Ky.),  378;  Updegraft  v.  Edwards,  45  Iowa,  513;  Taylor  v.  Page,  6  Allen 
(Mass.),  86;  Spraguer.  Graham,  29  Me.  160;  Abele  v.  McGuigan,  78  Mich. 
415 ;  Bloomer  v.  Henderson,  8  Mich.  395  ;  Helmer  v.  Krolick,  36  Mich.  371 ; 
Webb  V.  Hoselton,  4  Nebr.  308  ;  Burhans  v  Hutcheson,  25  Kan.  625  ;  Kelley 
V.  Whitney,  45  Wis.  110  ;  Paige  v.  Chapman,  58  N.  H.  333 ;  Gould  v.  Marsh, 
1  Him  (N.  Y.),  -566;  Swett  v.  Stack,  31  Fed.  Rep.  858 ;  Hayden  i).  Snow,  9 
Biss.  C.  C.  511 ;  Myers  v.  Hazzard,  4  McCrary,  C.  C.  94 ;  Carpenter  v.  Longan, 
16  Wall.  (U.  S.)  271. 

2  Abele  v.  McGuigan,  78  Mich.  415. 

3  Scott  V.  Magloughlin,  133  111.  33. 

*  Murphy  v.  Dunning,  30  Wis.  296 ;  Crosby  v.  Roub,  16  Wis.  616.  Compare 
Franklin  v.  Twogood,  18  Iowa,  515 ;  25  Iowa,  520. 


ASSIGNMENT    OF    MORTGAGE    AND    DEBT.  981 

However,  if  the  terms  of  the  assignment  are  made  subject 
to  the  rights  of  the  mortgagor,  then  the  assignee  takes  no 
greater  rights  than  the  mortgagee  had  ;  ^  and  a  parol  trust  may 
be  attached  to  a  mortgage  at  the  time  of  its  execution,  that 
the  mortgagee  shall  hold  it  in  part  for  his  own  benefit  and  in 
part  for  the  benefit  of  another.  Thus,  it  may  be  agreed  that 
when  the  mortgagee  is  paid,  the  mortgage  may  be  transferred 
to  another  creditor  to  secure  him  for  a  debt,  and  such  assignee 
may  foreclose  the  mortgage.^ 

§  999.  Taking  a  Mortgage  Without  the  Note. — Generally 
speaking,  every  assignee  of  a  mortgage,  without  the  accompa- 
nying note,  takes  it  subject  to  existing  equities,  and  no  pur- 
chaser can  safely  rely  on  inquiry  made  of  his  assignor  alone, 
but  if  inquiry  becomes  necessary,  resort  may  usually  be  had  to 
the  debtor  also.^ 

Such  assignment  is  but  a  naked  trust,  and  the  purchaser 
takes  with  existing  equities.*  So  if  a  mortgage  be  delivered  to 
an  assignee  purporting  to  secure  a  note,  but  the  note  is  not  de- 
livered, the  assignee  takes  it  subject  to  all  existing  equities.^ 

The  assignee  of  a  mortgage  takes  it  as  he  would  any  other 
chose  in  action,  subject  to  all  the  equities  which  exist  ag-ainst 
it  while  in  the  hands  of  the  mortgagee.^ 

Judge  Gofer  says  that  this  doctrine  had  its  origin  at  a  time 
when  the  practice  of  giving  mortgages  as  collateral  security  for 
negotiable  paper  was  unknown ;  that  this  was  the  rule  in  an 
action  at  law  on  the  bond  then  in  general  use.^ 

A  purchaser  of  such  non-negotiable  instrument  is  bound  to 
make  inquiries  of  the  maker,**  and  he  takes  it  with  existing 
equities.® 

1  Fisher  v.  Otis,  3  Chand.  (Wis.)  S3 ;  Bassett  v.  Daniels,  136  Mass.  547.  Com- 
pare Dearman  r.  Trimmier,  26  S.  Car.  506. 
^  Hubbell  V.  Blakeslee,  71  N.  Y.  63,  reversing  8  Hun  (N.  Y.),  603. 
^Cooper  V.  Smith,  75  Mich.  247. 

*Pope  V.  .Jacobus,  10  Iowa,  262 ;  Wilson  v.  Carpenter,  17  Wis.  512. 
*  Burbank  r.  Warwick,  52  Iowa,  493. 

^  Longan  v.  Carpenter,  1  Colo.  205  ;  Carpenter  v.  Longan,  16  Wall.  (U.  S.)  271. 
'Duncan  v.  Louisville,  13  Bush  (Ky.),  378. 
^Morgan's  Appeal,  126  Pa.  St.  500. 
3  Matthews  v.  Wallwyn,  4  Ves.  118  ;  Williams  v.  Sorrell,  4  Yes.  389 ;  Cham- 


982  RIGHTS    OF    PARTIES   BEFORE    DEFAULT. 

§  1000.  Bona  Fide  Assignee — Consideration. — On  fore- 
closure the  assignee  is  not  bound  to  show  that  he  is  an  assignee 
for  a  valuable  consideration ;  but  when  the  assignment  has 
been  made  after  the  debt  became  due,  he  is  only  entitled  to 
such  relief  as  the  mortgagee  would  have  been  entitled  to  had 
he  brought  the  action.^ 

And  the  assignee  takes  a  negotiable  note  before  maturity,  if 
in  good  faith,  free  from  all  equities.  He  is  a  bona  fide  pur- 
chaser, though  the  note  was  given  for  the  price  of  intoxicating 
liquors  sold  in  violation  of  law ; "  or  the  mortgage  was  given 
in  the  first  place  without  consideration.^ 

Such  assignee  may  enforce  his  mortgage  by  foreclosure, 
although  the  mortgage  was  fraudulent  as  to  the  mortgagor's 
creditors  when  executed  and  delivered  to  the  mortgagee,  and 
such  transfer  had  been  declared  void  by  decree.* 

A  statutory  foreclosure  by  advertisement  and  sale  is  not 
adapted  to  cases  where  there  are  conflicting  claims.  Hence, 
under  such  circumstances  the  assignee  must  go  into  chancery 
to  foreclose.^ 

And  when  a  party  purchases  the  mortgage  and  notes  for  the 
mortgagor,  he  cannot  have  them  assigned  to  him  at  a  discount 
and  then  charge  the  mortgagor  full  amount  of  the  debt.  Because 
one  who  undertakes  to  settle  a  debt  for  another  cannot  purchase 
it  on  his  own  account." 

An  assignee  may  take  a  new  note  and  then  have  the  mort- 
gage first  given,  assigned  to  him  ;  and  if  the  assignor  cove- 
nants that  the  premises  are  free  from  all  incumbrance,  but 
had  forgotten  that  a  portion  of  the  land  had  been  released, 
the  covenant  was  broken  the  instant  it  was  made,  and  the 

bers  V.  Goldwin,  9  Ves.  254 ;  Clute  v.  Robison,  2  Johns.  (N.  Y.)  595 ;  Cumber- 
land, etc..  Coal  Co.  v.  Parish,  42  Md.  598;  Coote  on  Mort.  315-320;  1  Hill,  on 
Mort.  571-582. 

1  Whitney  v.  Traynor,  74  Wis.  289. 

*  Taylor  v.  Page,  6  Allen  (Mass.),  86. 

3  Carpenter  v.  Lonpan,  16  Wall.  (U.  S.)  271 ;  Sprague  v.  Graham,  29  Me.  160; 
Pierce  v.  Faunce,  47  Me.  507  ;  Gould  v.  Marsh,  1  Hun  (N.  Y.),  566. 

^  Smart  v.  Bement,  4  Abb.  App.  Cas.  (N.  Y.)  253. 

5  Olcott  V.  Crittenden,  68  Mich.  230 ;  In  re  Gilbert,  104  N.  Y.  200. 

«Albertson  v.  Fellows,  45  N.  J.  Eq.  306;  Button  v.  Willner,  52  N.  Y.  313. 


ASSIGNMENT    OF    MORTGAGE    AND    DEBT.  983 

second  mortgagee  or  assignee  could  recover  only  nominal 
damages.^ 

An}''  defense  open  to  the  maker  in  a  suit  on  a  note  may  be 
made  use  of  in  an  action  on  a  mortgage.^ 

In  an  action  on  a  mortgage  by  an  assignee,  who  receives  it 
with  the  note  secured  by  it  for  value  before  due  as  collateral 
security,  in  good  faith  and  without  notice  of  defect  or  defense, 
the  mortgaiior  cannot  make  the  defense  of  want  of  considera- 
tion.^ 

An  agent  of  an  investment  company  to  whom  a  mortgagor 
applies  for  money  to  pay  off  first  mortgage,  may  purchase  the 
first  mortgage  in  order  to  protect  the  second  mortgagee's  inter- 
ests when  the  money  was  not  applied  to  the  payment  of  the 
mortgage.* 

An  assignee  who  takes  a  mortgage  for  the  pajanent  of  a  pre- 
existing debt  is  held  by  many  courts  not  to  be  a  bona  fide  pur- 
chaser.^ 

Where  a  mortgagor  makes  payment  negligently  to  the  mort- 
gagee after  the  assignment  of  the  note  without  the  mortgage 
and  then  sells  the  land,  the  assignee  of  the  note  is  entitled  to 
recover  the  full  amount  of  the  notes  notwithstanding  the  part 
payments.''  And  the  mortgagor  cannot  set  up  a  counter 
claim  in  forclosure  suit  by  assignee  of  a  note  of  the  mortgagee 
purchased  subsequent  to  the  assignment.^ 

The  mortgagee  cannot  impeach  the  validity  of  an  assign- 
ment.^ 

The  record  of  an  assignment  of  a  part  of  a  mortgage  is  not 
such  notice  to  the  mortgagor  as  will  render  him  liable  to  the 
assignee  for  subsequent  payments  to  the  assignor.^ 

1  People's  Sav.  Bank  v.  Hill,  81  Me.  71. 
^Northy  v.  Northy,  45  N.  H.  141. 
^  Pai.se  V.  Chapman,  58  N.  H.  333. 

*  Hollenbeck  v.  Stearns,  73  Iowa,  570. 

MVaterbury  v.  Andrews,  67  Mich.  281  ;  Glidden  v.  Hunt,  24  Pick.  (Mass.) 
221 ;  Clark  t).  Flint,  22  Pick.  (Mass.)  231 ;  Ashton's  Appeal,  73  Pa.  St.  153. 
*Brayley  v.  Ellis,  71  Iowa,  155. 
'  Blakely  v.  Twining,  69  AVis.  238. 

*  Johnson  v.  Beard  (Ala.),  9  South  Rep.  535. 
3 Foster  v.  Carson  (Pa.),  23  Atl.  Rep.  342. 


984  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

§  1001.  Receiving  Note  Without  Indorsement. — As  a 
general  rule,  if  the  note  be  assigned  without  indorsement,  then 
the  assignee  must  enforce  it  in  the  name  of  the  payee  or  as- 
signor, and  hence  the  assignee  is  not  protected  against  existing 
equities  in  favor  of  the  mortgagor.^ 

If,  however,  the  note  be  indorsed  before  maturity  but  the 
mortgage  is  not  assigned  with  it,  then  the  assignee  may  enforce 
the  mortgage,  and  the  mortgagee  will  be  considered  as  holding 
it  for  his  benefit.^  In  case  the  note  is  assigned  the  mortgagor 
cannot  set  up  a  counter  claim  against  the  mortgagee,  which  he 
received  since  the  assignment ;  ^  even  when  the  note  is  not  in- 
dorsed and  the  mortgage  is  not  formally  assigned  to  the  as- 
signee.* 

The  holder  of  an  unindorsed  note,  without  the  mortgage, 
must  postpone  his  rights  to  the  assignee  of  the  mortgage  in 
good  faith  with  duplicate  note.  The  assignee  of  the  mortgage 
is  protected  by  the  record  and  need  not  inquire  further.' 
However,  the  rule  would  be  different  if  the  note  had  been  in- 
dorsed before  maturity.® 

In  New  Jersey,  the  mortgagor  can  set  off  claims  and  make 
all  other  defenses  that  he  could  against  the  mortgagee,  when 
foreclosure  suit  is  brought  by  the  assignee.'^ 

If  the  note  is  indorsed  and  delivered  before  maturity,  and 
the  note  assigned,  the  general  rule  is  that  the  assignee  acquires 
interest  in  the  mortgage  which  he  may  enforce.^ 

§  1002.  Contrary  Doctrine. — Exceptions  exist  to  the  gen- 
eral rule.     It  is  held  by  several  courts  that  a  mortgage  of  real 

1  Blunt  V.  Norris,  123  Mass.  55. 

^  Morris  v.  Bacon,  123  Mass.  58 ;  Myers  v.  Hazzard,  4  McCrary,  C.  C.  94 ; 
Young  V.  Miller,  6  Gray  (Mass.),  152;  Green  v.  Hart,  1  Johns.  (N.  Y.)  589. 

3  Blakely  v.  Twining,  69  Wis.  238. 

*Breen  v.  Seward,  11  Gray  (Mass.),  118. 

*  Blunt  V.  Norris,  123  Mass.  55. 

« Morris  v.  Bacon,  123  Mass.  58.     See  Strong  v.  Jackson,  123  Mass.  60. 

'  Rev.  Stat.  1877,  p.  708,  sect.  31 ;  Woodruff  v.  Morristown  Inst.,  34  N.  J. 
Eq.  174,  179. 

8  Reeves  v.  Scully,  Walk.  (Mich.)  248 ;  Carpenter  v.  Longan,  16  Wall.  (U. 
S.)  271 ;  Button  v.  Ives,  5  Mich.  515 ;  Fisher  v.  Otis,  3  Chand.  (Wis.)  83 ;  Croft 
V.  Bunster,  9  Wis.  503 ;  Martineau  v.  McCollum,  4  Chand.  (Wis.)  153. 


ASSIGNMENT    OF    MORTGAGE    AND    DEBT.  985 

estate,  given  to  secure  a  negotiable  note,  is  not  for  that  reason 
invested  with  any  of  the  privileges  or  immunities  of  negotiable 
paper ;  it  is  a  chose  in  action' and  subject  to  all  the  disabilities 
incident  to  that  species  of  property,  qualified  by  the  operation 
of  the  registry  acts  so  far  as  practicable ;  that  the  mortgagor 
has  all  the  rights  of  defense  against  the  assignee  which  he  had 
against  the  mortgagee.^ 

So  as  between  the  mortgagor  and  a  subsequent  assignee,  the 
mortgage  is  taken  subject  to  the  state  of  accounts  between  the 
mortgagor  and  the  mortgagee  at  the  time  of  the  assignment.^ 

So  whether  standing  alone  or  taken  to  secure  negotiable  or 
non-negotiable  paper,  mortgages  are  only  available  for  what 
was  honestly  due  from  the  mortgagor  to  the  mortgagee.  If 
they  are  assigned  either  expressly  or  by  legal  implication,  the 
assignee  takes  only  the  interest  which  his  assignor  had  in 
the  instrument — acquires  but  an  equity  upon  the  long-estab- 
lished doctrine  in  courts  of  equity,  and  is  bound  to  submit  to 
the  assertion  of  prior  equitable  rights  of  third  parties.^  The 
mortgage  is  not  a  negotiable  instrument ;  and  unlike  the  notes 
which  it  secures,  when  assigned,  is  subject  to  all  equities  be- 
tween the  original  parties.* 

Under  this  doctrine  the  mortgage  follows  the  notes  only  in 
equity,  and  a  bona  fide  purchaser  of  the  note  before  maturity 
takes  the  mortgage  subject  to  the  equities  existing  between  the 
original  parties.^  Because  he  who  buys  that  which  is  not  as- 
signable takes  it  subject  to  all  equities  then  existing.'^ 

A  real  estate  mortgage  is  not  a  negotiable  instrument.'  And 
an  assignee  of  a  mortgage  takes  it  subject  to  equities  between 
mortgagor  and  mortgagee.^     But  the  assignee  takes  subject 

^Johnson  v.  Carpenter,  7  Minn.  176. 

^  Hostetter  v.  Alexander,  22  ]\Iinn.  559. 

^Baily  v.  Smith,  1-1  Ohio  St.  .•]96,  413. 

*Bouhgny  v.  Fortier,  17  La.  Ann.  121. 

6  Corbett  V.Woodward,  5  Saw.  C.  C.  403;  Miller  r.  Larned,  103  111.  562; 
Jenkins  v.  Bawr,  8  111.  App.  634. 

«  Medley  v.  Elliott,  62  111.  532 ;  Ellis  v.  Sisson,  96  111.  105 ;  Darst  v.  Gale,  83 
111.  136,  1.37  ;  Grapsly  r.  Reinback,  4  111.  App.  341. 

'  Mellendy  v.  Keen,  89  111.  395. 

^Mclntire  v.  Gates,  101  111.  491. 


986  RIGHTS    OF    PARTIES   BEFORE    DEFAULT. 

only  to  equities  of  mortgagor  against  mortgagee,  and  not  sub- 
ject to  equities  in  favor  of  third  persons,  of  which  he  had  no 
notice/  And  if  the  mortgagee  holding  conveyance  absolute  on 
its  face  conveys  to  purchaser  without  notice,  such  purchaser 
will  take,  discharged  of  lien.^ 

§  1003.  Non-Negotiable  and  Overdue  Instruments. — A 
non-negotiable  note  secured  by  mortgage  in  the  hands  of  an 
assignee  for  value  before  it  is  due  is  subject  to  the  equities  ex- 
isting between  the  maker  and  payee.^  So  the  same  rule  ap- 
plies to  overdue  notes.  Thus,  payment  may  be  pleaded  to  a 
suit  at  the  instance  of  the  assignee  upon  a  note  transferred 
after  due  and  secured  by  mortgage.^  And  the  assignee  of 
a  non-negotiable  note  holds  it  subject  to  all  legal  rights  of 
third  persons  acquired  against  the  maker  on  account  of  in- 
debtedness before  notice  of  the  assignment.^ 

The  purchaser  of  a  non-negotiable  instrument  is  bound  to 
make  inquiry  of  the  maker  before  purchasing,  and  is  charge- 
able with  notice  of  any  defense  by  way  of  payment  or  growing 
out  of  the  equities  of  the  parties  to  the  instrument  which  in- 
quiry would  have  brought  to  his  notice.*' 

But  the  fact  that  the  note  is  indorsed  without  recourse,  and 
that  interest  is  overdue  do  not  affect  the  rights  of  a  purchaser 
in  good  faith.'^ 

The  assignee  of  an  indemnity  mortgage  takes  it  subject  to 
all  the  equities  between  the  original  parties.^ 

The  only  defense  which  an  assignee  is  to  guard  against  in  re- 
ceiving an  overdue  note  is  that  which  has  arisen  since  the  execu- 
tion of  the  note,  and  which  is  not  collateral,  but  relates  to  the 
note  itself ;  and  that  which  is  inherent  in  the  note,  and  would 

1  Silverman  v.  Bullock,  98  111.  11. 
'^  Jenkins  r^.  Rosenberg,  105  111.  157. 

3  Reddish  v.  Ritchie,  17  Fla.  867 ;  Eversole  v.  Maull,  50  Md.  95. 
*  Howard  v.  Gresham,  27  Ga.  347. 

^Sharts  v.  Await,  73  Ind.  304;  Fish  v.  French,  15  Gray  (Mass.),  520;  Mc- 
Kenna  v.  Kirkwood,  50  Mich.  544. 
«  Morgan's  Appeal,  126  Pa.  St.  500. 
">  Kelley  v.  Whitney,  45  Wis.  110. 
^Corbett  V.  Woodward,  5  Saw.  C.  C.  403. 


ASSIGNMENT   OF   MORTGAGE    AND    DEBT.  987 

show  it  to  have  been  void  ah  initio,  such  as  fraud,  mistake,  or 
absence  of  consideration.'  The  assignee  is  not  affected  by 
equities  arising  after  assignment,  and  which  had  not  existence 
at  the  time  of  the  assignment,  and  were  simply  possibihties.^ 

§  1004.  Bonds. — In  some  States  bonds,  instead  of  negotiable 
notes,  are  given  and  secured  by  mortgage.  Tliese  bonds  are 
not  negotiable  instruments,  and,  therefore,  when  assigned,  are 
subject  to  all  the  equities  existing  between  the  original  parties.^ 
And  where  a  bond  and  mortgage  are  given,  although  the 
mortgage  may  be  assigned  so  as  to  allow  the  assignee  to  sue  in 
his  own  name,  yet  the  mortgage  is  subject  to  the  same  equities 
and  rules  that  govern  other  non-negotiable  instruments  and 
claims.*  But  the  rule  is  different  in  most  jurisdictions  when 
the  mortgage  secures  a  negotiable  note.^ 

In  such  case  the  transfer  of  the  bond  and  mortgage  does  not 
in  any  way  affect  the  mortgagor's  rights.^ 

In  Pennsylvania  the  obligor  can  defend  against  a  suit  by  the 
assignee  of  the  bond  and  mortgage  for  want  of  consideration, 
and  can  set  up  matters  affecting  the  existence  of  the  debt. 
The  assignee  is  not  affected  by  a  secret  equity,  or  by  an  agree- 
ment with  the  obligee  merely  collateral,  or  an  agreement  incon- 
sistent with  the  purport  or  legal  effect  of  the  instrument.'^ 

1  Renwick  v.  Williams,  2  Md.  356 ;  Eversole  v.  Maull,  50  Md.  95,  103. 

2  (Cornish  v.  Bryan,  2  Stockt.  (N.  J.)  146 ;  Caster  v.  Griswold,  4  Edw.  Ch. 
(N.  Y.)  374 ;  Murray  v.  Lylburn,  2  Johns.  Ch.  (N.  Y.)  442 ;  2  Leading  Cas.  in  Eq. 
pt.  2,  238 ;  Bush  v.  Cushman,  27  N.  J.  Eq.  131 ;  Colehour  v.  State  Sav.  Inst.,  90 
111.  152 ;  Elliott  v.  Deason,  64  Ga.  63. 

'  Crane  v.  March,  4  Pick.  (Mass.)  131 ;  Union  College  v.  Wheeler,  61  N.  Y.  88. 

*  Horstman  v.  Gerker,  49  Pa.  St.  282 ;  Pryor  v.  Wood,  31  Pa.  St.  142 ;  Twitchell 
V.  McMurtrie,  77  Pa.  St.  383 ;  Morgan's  Appeal,  126  Pa.  St.  500 ;  Earnest  v. 
Hoskins,  100  Pa.  St.  551 ;  Theyken  v.  Howe  Machine  Co.,  109  Pa.  St.  95. 

^Moffatt  V.  Hardin,  22  S.  Car.  9 ;  Nichols  v.  Lee,  10  Mich.  526 ;  Talwr  v.  Foy, 
56  Iowa,  539 ;  Richardson  v.  Woodruff,  20  Nebr.  132 ;  Cornish  ;•.  Bryan,  10  X.  J. 
Eq.  146;  Yredenburgh  v.  Burnet,  31  N.  J.  Eq.  229;  Goulding  v.  Bunster, 
9  Wis.  513;  Reeves  v.  Scully,  AValk.  (Mich.)  248. 

«  Briggs  V.  Langford,  107  N.  Y.  680 ;  Bush  v.  Lathrop,  22  N.  Y.  535  ;  Cum- 
berland Coal  and  Iron  Co.  v.  Parish,  42  Md.  598 ;  Davies  v.  Austen,  1  Ves.  Jr.  247 ; 
Godeffroy  v.  Caldwell,  2  Cal.  489. 

'  Davis  V.  Barr,  9  Serg.  &  R.  (Pa.)  137,  141 ;  Pryor  v.  Wood,  31  Pa.  St.  142 ; 
McMasters  v.  Wilhehn,  85  Pa.  St.  218 ;  Jeffers  v.  Gill,  91  Pa.  St.  290. 


988  RIGHTS   OP    PARTIES    BEFORE    DEFAULT. 

§  1005.  Equities  as  to  Third  Parties. — The  general  rule 
is  that  the  assignee  takes  a  mortgage  subject  to  the  equities  of 
the  mortgagor  against  the  mortgagee,  and  not  subject  to  the 
equities  in  favor  of  third  persons,  of  which  he  had  no  notice.^ 
So  an  assignee  of  a  mortgage  takes  it  subject  to  all  the  de- 
fenses which  the  mortgagor,  or  those  who  have  succeeded  to 
his  rights,  may  urge  against  it,  but  free  from  secret  equities 
created  by  the  mortgagee  in  favor  of  third  persons.^ 

Between  the  parties  the  assignee  of  equities  stands  in  the 
place  of  his  assignor,  with  no  better  rights ;  but  as  to  the 
claims  of  third  parties,  the  purchaser  of  equities  stands  un- 
affected by  frauds,  of  which  he  had  no  knowledge,  express  or 
constructive.*  The  assignee  takes  the  mortgage  free  from  latent 
equities  existing  in  favor  of  third  persons.* 

He  takes  it  subject  to  the  equities  in  favor  of  the  mortgagor, 
of  which  he  had  notice  when  he  bought  the  notes.^ 

But  when  a  curator  gives  a  mortgage  on  his  ward's  land,  to 
secure  his  individual  debt,  the  rule  that  the  assignee,  without 
notice,  of  a  negotiable  note  secured  by  a  trust  deed,  takes  the 
benefit  of  the  mortgage,  free  from  equities  between  the  origi- 
nal parties,  does  not  apply.® 

§  1006.  New  York  Rule. — In  New  York  the  equities  ex- 
isting  between   the   assignor  and  the  assignee  of  choses    in 

^Silverman  v.  Bullock,  98  111.  11;  Redfearn  v.  Ferrier,  1  Dow.  50;  Starr 
V.  Haskins,  2()  N.  J.  Eq.  415  ;  Putnam  v.  Clark,  29  N.  J.  Eq.  412 ;  De  Witt  v. 
Van  Sickle,  29  N.  J.  Eq.  209 ;  Mott  r.  Clark,  9  Pa.  St.  399 ;  Blair  v.  Mathiott, 
46  Pa.  St.  262 ;  Downey  v.  Tharp,  63  Pa.  St.  322 ;  Porter  v.  King,  1  Fed.  Rep. 
755  ;  Reineman  v.  Robb,  98  Pa.  St.  474. 

^  Vredenburgh  v.  Burnet,  31  N.  J.  Eq.  229  ;  Losey  r.  Simpson,  3  Stockt.  (N. 
J.)  246,  254;  Woodruff  v.  Depue,  1  McCart.  (N.  J.)  168,  175  ;  Starr  v.  Haskins, 
26  N.  J.  Eq.  414. 

3  Starr  r.  Hawkins,  26  N.  J.  Eq.  414;  Putnam  v.  Clark,  29  N.  J.  Eq.  412. 

*  De  Witt  V.  Van  Sickle,  29  N.  J.  Eq.  209 ;  Mott  v.  Clark,  9  Pa.  St.  399  ;  Prior  v. 
Wood,  31  Pa.  St.  142 ;  Blair  v.  Mathiott,  46  Pa.  St.  262 ;  Downey  v.  Tharp,  63 
Pa.  St.  322 ;  Reineman  v.  Robb,  98  Pa.  St.  474 ;  Porter  v.  King,  1  Fed.  Rep. 
755;  Losey  r.  Simpson,  3  Stockt.  (N.  J.)  246,  254;  Woodruffs.  Depue,  1  Mc- 
Cart. (N.i.)  168,  175  ;  Bloomer  v.  Henderson,  8  Mich.  395;  Grocers'  Bank  v. 
Neet,  29  N.  J.  Eq.  449. 

s  Mullanphy  Bank  v.  Schott,  135  111.  655. 

"Patterson 'v.  Booth,  103 Mo. 402. 


i 


ASSIGNMENT    OF   MORTGAGE    AND    DEBT.  989 

action,  not  negotiable,  attend  the  title  transferred  to  a  subse- 
quent assignee  for  value  and  without  notice ;  the  latter  takes 
the  exact  j^osition  of  his  assignor.  The  doctrine  of  latent 
equities  is  repudiated.^  The  assignee  takes  subject  to  the 
equities  between  the  original  parties,  and  he  must  abide  the 
case  of  the  person  from  whom  he  takes.^  The  assignee  of  a 
non-negotiable  instrument  takes  it,  not  only  subject  to  all 
the  equities  existing  between  the  parties  to  the  instrument,  but 
to  the  equities  which  third  persons  could  enforce  against  the 
assignor.^  The  rule  of  Bush  v.  Lathrop  ^  is  received  as  a  just 
exposition  of  the  law  as  held  in  New  York,^  and  the  assignee 
stands  in  respect  to  the  security  in  the  place  of  the  assignor.^ 

1  Bush  V.  Lathrop,  22  N.  Y.  535 ;  Briggs  v.  Langford,  107  N.  Y.  680.  Com- 
pare Moore  v.  Bank,  55  N.  Y.  41 ;  James  v.  Morey,  2  Cow.  (N.  Y.)  246. 

^  Union  College  v.  Wheeler,  61  N.  Y.  88,  104,  citing  Davies  v.  Austen,  1  Ves. 
Jr.  247. 

'  Greene  v.  Warnock,  64  N.  Y.  220,  reversing  4  Hun  (N.  Y.),  703 ;  Viele  v. 
Judson,  82  N.  Y.  32 ;  Bank  v.  Frank,  45  N.  Y.  Superior  Ct.  404. 

*22N.  Y.  535. 

*Schafer  v.  Reilly,  50  N.  Y.  61,  opinion  by  Denio,  J. 

6Brigg3  V.  Langford,  107  N.  Y.  680. 


CHAPTER  XXIV. 

transfer  of  the  mortgaged  property. 

Article  1. 

Purchase   Without  Assuming  Payment  of  Mortgage. 

§  1007.  Liability  of  Vendee.  I  1010.  Collateral  Security. 

I  1008.  Without  Covenants  of  War-     I  1011.  Two  or  More  Purchasers. 

ranty.  ^  1012.  Taking  by  Paramount  Title. 

^  1009.  Grantee's    Right   of    Assign- 
ment of  Mortgage. 

§  1007.  Liability  of  Vendee. — The  vendee  may  take  the 
land  with  no  personal  liability,  subject  only  to  the  mortgage.^ 
The  covenants  of  the  grantor  must  show  the  condition  of  the 
transfer  as  to  the  assumption  of  payment  of  the  premises 
mortgaged.^ 

The  vendee  of  land,  subject  to  a  mortgage,  is  entitled,  on 
paying  the  mortgage  note,  to  possession  of  the  note.^ 

The  purchaser  of  such  mortgaged  land  must,  at  his  peril, 
ascertain  who  then  owns  the  notes  accompanying  the  mortgage, 
and  whether  the  same  have  been  actually  paid.*  And  it  is  pre- 
sumed, in  the  absence  of  a  contract,  that  the  amount  paid  by 
the  vendee  is  the  price  of  the  property,  less  the  amount  of  the 
mortgage  debt,  and  that  the  vendee  is  to  pay  the  amount  of 
the  debt ;  ^  and  he  holds  for  the  purpose  of  the  mortgage  sub- 
ject to  so  much  of  the  price  as  he  paid,  unless  his  right  to  the 
land  antedates  the  mortgage.^     And  when  there  is  no  agree- 

iStrohauer  v.  Voltz,  42  Mich.  444  ;  Woodbury  v.  Swan,  58  N.  H.  380;  Mc- 
Conihe  v.  Fales,  107  N.  Y.  404. 

''  Garnsey  v.  Rogers,  47  N.  Y.  233 ;  Ritter  v.  Phillips,  53  N.  Y.  586. 

^  Stiger  V.  Bent,  111  111.  328. 

*Leet;.  Clark,  89  Mo.  553. 

5  Gayle  v.  Wilson,  30  Gratt.  (Va.)  166 ;  Guernsey  v.  Kendall,  55  Vt.  201 ; 
Scheippelmann  v.  Feurth,  87  Mo.  351 ;  Dickason  v.  Williams,  129  Mass.  182 ; 
G^rdine  v.  Menage,  41  Minn.  417. 

«  Gordon  r.  Collett,  102  N.  Car.  532. 

990 


TRANSFER    OF    THE    MORTGAGED    PROPERTY.  991 

ment  or  understanding  that  the  vendee  is  to  pay  the  mortgage 
as  a  part  of  the  consideration,  lie  is  not  liable  to  the  mortgagor, 
who  has  been  compelled  to  pay  the  mortgage  debt/  And  if  he 
negotiates  an  extension  of  the  time  with  the  holder  of  the  note, 
but  expressly  stipulates  that  he  is  not  thereby  to  become  per- 
sonally responsible  for  the  debt,  he  does  not  become  responsible 
for  the  debt,  though  the  property  so  depreciates  in  value  as  to 
become  insufficient  security  for  the  debt.^ 

A  vendee  of  a  parcel  of  land,  subject  with  others  to  a  mort- 
gage, succeeds  to  the  rights  only  of  the  parcel  purchased,  and 
cannot  redeem  unalienated  parcels  from  the  mortgagee  at  a 
foreclosure.^  So  the  vendee  who  assumes  the  mortgage  stands 
in  the  position  of  the  mortgagor  in  possession,  and  on  fore- 
closure sale,  the  crops  planted  by  him  while  in  possession  pass 
to  the  purchaser  as  accessories  to  the  land.*  A  purchaser  in 
good  faith  will  be  protected.^  In  Louisiana  a  purchaser  of 
property,  subject  to  a  mortgage  containing  the  j)act  non  alien- 
ando,  stands  with  regard  to  the  mortgagee,  in  so  far  as  relates 
to  the  mortgage,  in  the  position  of  the  mortgagor,  and  can 
make  no  objection  to  a  seizure  and  sale,  on  the  ground  of  non- 
acceptance  of  the  mortgage,  which  the  mortgagor  could  not 
make.^ 

Where  a  conveyance  of  the  entire  estate  is  made,  subject  to 
a  mortgage,  in  the  absence  of  specifications  therein  or  of  proof 
aliunde  to  the  contrary,  the  grantee  takes  simply  the  equity  of 
redemption.^  And  where  the  incumbrance  is  not  made  a  part 
of  the  consideration,  and  not  deducted  from  it,  and  where  it  is 
not  assumed  by  the  grantee,  the  recital  in  a  deed  that  the  con- 

1  Comstock  ^^  Hitt,  37  111.  542;  Fowler  v.  Fay,  62  111.  375;  Middaugh  v. 
Bachelder,  33  Fed.  Rep.  706. 
"^  Duncan  v.  Finn,  79  Iowa,  658. 
■''Pine  Bluff,  etc.,  Kailroad  Co.  v.  James,  -54  Ark.  <S1. 

*  Hayden  r.  Burkemper,  101  Mo.  044,  distinguishing  Jenkins  v.  McCoy,  50 
Mo.  348. 

*  Golding  V.  Golding,  43  La.  Ann.  555.     See,  also,  Duncan  v.  Finn,  79  Iowa, 
658 ;  Holland  v.  Bank,  16  R.  I.  734. 

8  Citizens'  Bank  v.  Webre,  10  South,  Rep.  728. 

nVinans  v.  Wilkie,  41  Mich.  264;  Fiske  v.  Tolman,  124  Mass.  254;  Wood- 
bury V.  Swan,  58  X.  H.  382. 


992  EIGHTS   OF    PARTIES    BEFORE   DEFAULT. 

veyance  is  subject  to  an  incumbrance  does  not  estop  the  grantee 
from  showing  that  what  purports  to  be  an  incumbrance  is  not 
one  in  fact,  because  of  its  invalidity  or  because  it  has  been 
satisfied,^ 

§  1008.  Without  Covenants  op  Warranty. — When  the 
land  is  sold  subject  to  the  mortgage,  it  is  charged  with  such 
debt/  and  the  purchaser  may  surrender  the  property  in  satis- 
faction of  the  debt.^ 

When  the  amount  of  the  mortgage  debt  has  been  deducted 
from  the  jjurchase  price,  the  purchaser  is  estopped  to  deny  the 
validity  of  the  mortgage,  because  he,  in  effect,  undertakes  to 
pay  the  amount  of  the  purchase-money  represented  by  the 
mortgage.* 

So  a  purchaser  at  an  execution  sale  of  the  equity  of  redemp- 
tion, takes  the  land  subject  to  the  mortgage,  and  is  in  no  better 
situation  than  if  he  had  bought  the  premises  of  the  mortgagor 
subject  to  the  mortgage.^ 

If  the  mortgagor  conveys  the  premises  to  the  mortgagee,  and 
the  mortgage  is  included  as  part  of  the  consideration,  and  so 
stated  in  the  deed,  this  is  a  full  satisfaction  of  the  debt,  though 
the  property  is  not  sufficient  to  pay  the  debt ;  ^  and  if  the 

1  Brooks  V.  Owen  (Mo.),  19  S.  W.  Rep.  723;  Purdy  v.  Coar,  109  N.  Y.  448; 
Russell  V.  Kinney,  1  Sandf.  Ch.  (N.  Y.)  34;  Hartleys.  Tatham,  10  Basw.  (N. 
Y.)  273 ;  Briggs  v.  Seymour,  17  Wis.  255 ;  Weed  Sewing-Machine  Co.  v.  Emerson, 
115  Mass.  554  ;  Thompson  v.  Morgan,  6  Minn.  292  ;  Williams  v.  Thurlow,  31 
Me.  392  ;  Baldwin  v.  Tuttle,  23  Iowa,  66 ;  Wood  v.  Broadley,  76  Mo.  23  ;  Cum- 
mins V.  Wire,  6  N.  J.  Eq.  73  ;  Judson  v.  Dada,  79  N.  Y.  373  ;  Parker  v.  Jenks, 
36  N.  J.  Eq.  398 ;  Flanders  v.  Doyle,  16  111.  App.  508 ;  Bishop  v.  Felch,  7 
Mich.  371 ;  Martineau  v.  McCollum,  4  Chand.  (Wis.)  153. 

"^  Chadwick  v.  Island  Beach  Co.,  43  N.  J.  Eq.  616,  and  note ;  Sweetzer  v. 
Jones,  35  Vt.  317 ;  Berry  v.  Whitney,  40  Mich.  65 ;  Fuller  v.  Hunt,  48  Iowa, 
163 ;  Cobb  v.  Dyer,  69  Me.  494. 

^Tichenor  v.  bodd,  3  Green  (N.  J.),  Ch.  454  ;  Shepherd  v.  May,  115  U.  S. 
505 ;  Johnson  v.  Monell,  13  Iowa,  300. 

*  Hancock  v.  Fleming,  103  Ind.  533 ;  Washington,  etc.,  Railroad  Co.  v.  Caz- 
enove,  83  Va.  744,  749 ;  Fuller  v.  Hunt,  48  Iowa,  163  ;  Lee  v.  Stiger,  30  N.  J. 
Eq.  610 ;  Pinnell  v.  Boyd,  33  N.  J.  Eq.  190. 

*  Bunch  V.  Grave,  111  Ind.  351 ;  Delaware  &  Hudson  Canal  Co.  r.  Bonnell, 
46  Conn.  9 ;  Russell  v.  Dudley,  3  Met.  (Mass.)  147  ;  Lovelace  v.  Webb,  62  Ala. 
271. 

«Dickason  v.  WiUiams,  129  Mass.  182. 


TRANSFER    OF    THE   MORTGAGED    PROPERTY.  993 

mortgagor  sells  a  portion  of  the  premises  subject  to  the  mort- 
gage, this  will  not  make  the  mortgage  a  specific  lien  upon  the 
portion  sold/  Sale  of  mortgaged  property  operates  to  give  the 
mortgage  priority  as  against  the  purchaser.^ 

And  a  purchaser  of  land  who  has  given  a  bond  and  mort- 
gage thereon  to  secure  the  purchase-money  cannot  resist  fore- 
closure of  the  mortgage  on  the  mere  ground  of  a  defect  in  the 
title,  there  being  no  allegation  of  fraud  in  the  sale,  nor  evic- 
tion.^ In  such  case  his  remedy  for  relief,  if  any  he  has,  is  the 
covenant  contained  in  his  deed,  and  if  there  are  no  such  cove- 
nants, he  is  remediless.*  The  vendor,  by  his  covenants,  if 
there  are  such,  agrees  upon  them,  and  not  otherwise  to  be  re- 
sponsible for  defects  of  title.  If  there  are  no  covenants,  he 
assumes  no  responsibility,  and  the  other  party  takes  the  risk. 
The  vendee  agrees  to  pay  according  to  his  contract,  and  secures 
payment  by  giving  a  lien  upon  the  property.^ 

§  1009.  Grantee's  Right  of  Assignment  of  Mortgage. — 
The  rule  which  is  most  generally  recognized  is  that  the  mort- 
gagee cannot  be  required  to  assign  the  mortgage  upon  receiving 
the  amount  due,  unless  the  person  making  the  payment  is 
entitled  to  such  assignment  for  some  equitable  reason,  but  can 
only  be  required  to  release  or  discharge  the  debt  and  mortgage ; 
or,  if  the  person  making  the  payment  prefers,  to  surrender  them 
to  him  uncancelled.  This  is  because  the  mortgagee,  like  any 
other  grantor,  is  not  under  any  obligation  to  sell  and  transfer 
his  claim  to  another ;  but  is  only  under  obligations  to  accept 
payment  thereof  when  due,  and  because  he  is  entitled  under 
the  mortgage,  if  the  debt  is  not  paid  as  stipulated,  to  sell  the 
estate  for  its  payment  or  to  foreclose  in  some  other  mode  as 
provided  by  law.* 

1  Slater  v.  Breeae,  36  Mich.  77. 

''Bundy  r-.  Iron  Co.,  88  Ohio  St.  300. 

'  Abbott  V.  Allen,  2  Johns.  Ch.  (N.  Y.)  520  ;  York  v.  Allen,  30  N.  Y.  104 ; 
McConihe  v.  Fales,  107  N.  Y.  404. 

*  Banks  v.  AValker,  2  Sand.  Ch.  (N.  Y.)  344 ;  Parkinson  v.  Sherman,  74  N.  Y. 
88. 

5  Peters  r.  Bowman,  98  U.  S.  56. 

«Chedelr.  Millard,  13  R.  I.  461;  Butler  r.  Taylor,  5  Gray  (Mass.),  455; 
63 


994  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

If  the  purchaser  takes  the  premises  and  the  mortgage  debt 
is  deducted  from  the  purchase  price,  he  cannot  pay  the  debt 
and  have  the  mortgage  assigned  to  him,  and  then  set  it  off 
against  an  unpaid  balance  due  the  mortgagor ; '  but  if  the 
mortgage  does  not  come  in  as  a  part  of  the  purchase-money, 
the  purcliaser  can  then  pay  the  mortgage  debt  and  then  set  it  off 
against  a  debt  that  he  still  owes  to  his  vendor,  the  mortgagor.^ 

A  grantee  by  accepting  a  deed  containing  a  covenant  that 
all  the  incumbrances  on  the  estate  shall  be  removed  within  a 
certain  time,  except  a  mortgage  for  a  certain  sum,  in  effect, 
agrees  to  hold  his  estate  subject  to  the  mortgage  for  that  sum 
to  be  charged  upon  it.^ 

The  general  rule  is  that  where  an  equity  of  redemption  is 
sold  under  execution,  the  purchaser  takes  the  land  charged 
with  the  payment  of  the  prior  incumbrances.  The  amount 
paid  will  be  presumed  to  be  the  price  or  value  of  the  property 
less  the  incumbrances.  In  such  case,  where  the  purchaser 
obtains  title  to  the  land,  and  subsequently  pays  off  the  pre- 
existing incumbrances,  of  which  he  had  notice,  he  will  not  be 
permitted  to  keep  them  alive  by  having  them  assigned  to  him- 
self. Having  obtained  the  primary  fund,  out  of  which  the 
incumbrances  are  to  be  paid,  he  does  nothing  more  than  to 
discharge  his  own  equitable  obligation  when  he  pa^^s  them  off.* 

§  1010.  Collateral  Security. — The  purchaser  is  not  en- 
titled to  the  benefit  of  a  collateral  security,  which  the  vendor 
places  with  the  mortgagee,  subsequently  to  the  execution  of 

Lamf^on  v.  Drake,  105  Mass.  564  ;  Lamb  v.  Montague,  112  Mass.  352 ;  Hamilton 
V.  Dobbs,  19  N.  J.  Eq.  227 ;  Bigelow  v.  Cassedy,  26  N.  J.  Eq.  557  ;  Gatewood  v. 
Gatewood,  75  Va.  407 ;  Chase  v.  Williams,  74  Mo.  429 ;  Ellsworth  v.  Lock- 
wood,  42  N.  Y.  89  ;  Holland  v.  Bank,  16  R.  I.  734. 

1  Bunch  V.  Grave,  111  Ind.  351. 

^  Wolbert  v.  Lucas,  10  Pa.  St.  73  ;  Wadsworth  v.  Lyon,  93  N.  Y.  201 ;  Ben- 
nett V.  Bates,  94  N.  Y.  354. 

3  Brown  v.  Bank,  148  Mass.  300. 

*  Atherton  v.  Toney,  43  Ind.  211 ;  Hancock  v.  Fleming,  103  Ind.  533  ;  Robins 
V.  Swain,  68  111.  197;  Weiner?'.  Heintz,  17  111.  259;  Mines  v.  Moore,  41  111. 
273;  .Johnson  v.  Zink,  51  N.  Y.  .333;  Russell  r.  Allen,  10  Paige  (N.  Y.),  249; 
Cleveland  v.  Southard,  25  Wis.  479  ;  Bunch  v.  Grave,  111  Ind.  351 ;  Ferry  v. 
Krueger,  41  N.  J.  Eq.  432 ;  43  N.  J.  Eq.  295 ;  2  Washb.  on  Real  Prop.  567. 


TRANSFER    OP    THE    MORTGAGED    PROPERTY.  995 

the  mortgage,'  because  the  purchaser  acquires  no  equita1)le 
interest  in  other  security  held  b}^  the  mortgagee.^ 

Wiiere  one  holds  an  indemnity  mortgage  against  a  judgment, 
he  will  not  be  entitled  to  an  allowance  for  it  on  foreclosure  of 
a  second  mortgage,  when  the  mortgagor  testifies  that  he  has 
paid  the  judgment,  and  there  is  no  evidence  to  the  contrary.^ 
A  subsequent  purchaser  of  mortgaged  premises  does  not  stand 
as  a  mere  surety,  although  the  mortgagee  cannot  knowingly 
discharge  other  lands  from  the  mortgage  without,  to  some 
extent,  risking  his  own  priority  so  far  as  the  subsequent  pur- 
chaser is  damnified  by  losing  the  benefit  of  sale  and  inverse 
order/  But  the  purchaser  cannot  have  the  mortgaged  debt 
charged  upon  the  mortgagor  personally  in  exoneration  of  the 
land/ 

In  New  Jersey  a  conveyance  by  the  mortgagee  to  a  third 
person  of  the  premises,  the  mortgagee  himself  retaining  the 
debt,  is  a  nullity/ 

§  1011.  Two  OR  More  Purchasers. — Different  equities  of 
redemption  in  different  parcels  of  land  under  mortgages  to 
different  persons  cannot  be  sold  together  on  an  execution 
against  the  mortgagor.^ 

But  when  a  mortgagor  retains  the  equity  of  redemption  in 
all  the  parcels  of  land  included  in  an  existing  mortgage,  or 
when  by  one  conveyance,  he  has  conveyed  this  equity  to 
another  person  who  remains  the  assignee  of  the  whole  interest 
of  the  mortgagor  in  all  the  parcels  subject  to  the  mortgage 
lien,  this  equity  may  be  levied  upon  and  sold  as  one  single  and 
entire  res,  and  separate  sales  of  the  right  of  redemption  of 
each  parcel  are  void.^ 

1  Brewer  v.  Staples,  3  Sand.  Ch.  (X.  Y.)  579. 
"  Stevens  v.  Church,  41  Conn.  369. 
3  Shipley  v.  Fox,  69  Md.  572. 
*  Case  V.  O'Brien,  66  Mich.  289. 

5  Cherry  v.  Monro,  2  Barb.  Ch.  (X.  Y )  618  ;  Mathews  v.  Aikin,  1  N.  Y.  505. 
«  Devlin  v.  CoUier,  53  N.  J.  L.  422. 
'  McCone  v.  Courser,  64  N.  H.  506. 

^Webster  v.  Foster,  15  Gray  (Mass.),  31 ;  Cochran  v.  Goodell,  131  Mass.  464; 
Plimpton  V.  Goodell,  143  Mass.  365,  367. 


996  RIGHTS    OF    PARTIES    BEFORE    DEFAULT, 

When,  however,  the  mortgagor  has  conveyed  his  equity  in 
some  of  the  parcels,  but  retains  it  in  others,  all  of  which  are 
included  in  one  mortgage,  the  levy  of  an  execution  issued  upon 
the  judgment  against  him  must  be  upon  only  his  right  to  re- 
deem the  parcels  of  land  on  which  he  retains  the  equity,  if  his 
conveyances  are  recognized  as  valid  by  the  judgment  creditor. 
If  the  mortgagor  has  conveyed  his  equity  in  all  the  different 
parcels  to  different  grantees  by  several  conveyances,  some  or 
all  of  which  are,  or  are  claimed  to  be,  voidable  by  his  cred- 
itors, the  levy  of  an  execution  against  him  may  be  made  by  a 
sale  separate  of  the  equities  in  the  different  parcels  which  have 
been  conveyed  to  the  different  grantees.^ 

So,  if  a  mortgagor,  by  one  deed,  mortgages  two  j^arcels  of 
land,  and  subsequently  conveys  his  equity  of  redemption  in 
each  parcel  to  a  different  grantee,  his  interest  in  each  parcel 
may  be  levied  upon  and  sold  separately  on  an  execution 
against  him." 

§  1012.  Taking  by  Paramount  Title. — If  a  purchaser 
from  the  mortgagor  subsequent  to  the  execution  of  the  mort- 
gage buys  in  a  paramount  title,  outstanding  in  a  third  person, 
the  purchase  does  not  inure  to  the  benefit  of  the  mortgagee, 
nor  operate  as  a  confirmation  of  his  title.^ 

Though  an  after-acquired  title  by  the  mortgagor  will  inure 
to  the  mortgagee,  yet  the  mortgagee  may  be  estopped  to  assert 
such  title  against  an  innocent  purchaser  of  the  property  mort- 
gaged. Thus,  a  party  purchased  a  tract  of  land,  excepting  out 
of  it  a  described  lot.  He  then  mortgaged  the  whole  tract,  not 
making  an  exception  of  the  lot,  and  afterward  became  the 
owner  of  the  lot  thus  excepted  at  the  first  purchase.  A  judg- 
ment was  subsequently  entered  against  him,  under  which  the 
lot  was  sold.  After  this  sale  the  whole  tract  was  sold  under 
the  mortgage.  It  was  held  that  the  purchaser  under  the  judg- 
ment acquired  the  title  of  the  lot,  on  the  principle  that  the 

1  Mansfield  v.  Dyer,  133  Mass.  374. 

2  North  V.  Dearborn,  146  Mass.  17.  See,  also,  Libby  v.  Tufts,  121  N.  Y.  172 ; 
De  Haven  v.  Musselman,  123  Ind.  62  ;  Deavitt  v.  Judevine,  60  Yt.  695. 

2  Knox  V.  Easton,  38  Ala.  345. 


TKAXSFER    OF    THE    MORTGAGED    PROPERTY.  997 

mortgagee  had  been  negligent,  and  therefore  an  innocent  pur- 
chaser should  not  suffer  for  his  neo-ligence/ 


Article  2. 
Assumption  of  Payment  by   Vendee. 

I  1013.  Effect      of      Assuming     Pay-  I  1016.  Extending  Time  of  Payment 
ment.  Without  Mortgagor's  Con- 

?  1014.  The    Purchaser  Becomes    the  sent. 

Principal.  §  1017.  Collateral  Obligation. 

I  1015.  Material     Alteration    of     the  I  1018.  Part  Purchase  of  the  Prem- 
Mortgage  Contract.  ises. 

§  1013.  Effect  of  Assuming  Payment. — One  who  assumes 
the  pa^^ment  of  a  mortgage  by  agreement  when  he  purchases, 
takes  upon  himself  the  burden  of  the  debt  or  claim  secured  by 
the  mortgage,  and  as  between  him  and  his  grantor,  he  becomes 
the  principal  and  the  latter  merely  a  surety  for  the  payment 
of  the  debt.^  But  the  mere  statement  in  a  deed  that  the 
premises  conveyed  were  subject  to  a  mortgage,  does  not  con- 
stitute an  agreement  by  the  grantee  to  assume  and  pay  the 
mortgage  debt,  and  then  no  personal  obligation  on  the  grantee 
to  pay  the  mortgage  debt  is  created.^ 

An  innocent  purchaser  for  value  may  rely  upon  recitals  in 
a  deed  from  the  mortgagor  to  a  subsequent  grantee  by  which 
the  latter  agrees  to  assume  the  debt.* 

By  assuming  the  payment  of  the  mortgage  debt,  the  vendee 
makes  it  his  own  debt,  and  he  cannot  take  an  assignment  of 
it  and  make  it  an  independent  debt.^  So  if  a  senior  mortgagee 
becomes  the  purchaser  and  assumes  the  second  mortgage,  his 

1  Calder  v.  Chapman,  52  Pa.  St.  359. 

^  Rice  V.  Sanders,  152  Mass.  108 ;  George  v.  Andrews,  60  Md.  26 ;  45  Am. 
Rep.  706. 

*  Chilton  V.  Brooks,  72  Md.  554.  See,  also,  Thomson  v.  Bettens,  94 
Cal.  82. 

*Hayden  v.  Snow,  9  Biss.  C.  C.  511 ;  Coolidge  v.  Smith,  129  Mass.  554  ;  Muh- 
lig  V.  Fiske,  131  Mass.  110. 

*Gayle  v.  Wilson,  30  Gratt.  (Va.)  166;  Lilly  v.  Pahner,  51  111.  331 ;  Russell 
V.  Pistor,  7  N.  Y.  171. 


9D8  EIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

own  mortgage  is  merged  and  discharged,  and  the  junior  mort- 
gage takes  precedence.^ 

It  is  said  in  many  cases  that  primarily  there  is  a  charge 
upon  the  land,^  but  it  would  be  more  accurate  to  say  that  it  is 
made  primarily  a  charge  upon  the  purchase-money  reserved 
by  the  grantee  to  pay  it.^ 

The  relation  of  the  parties,  and  the  nature  of  the  contract, 
are  the  same  as  if  the  entire  consideration  had  been  paid  to 
the  grantor,  and  he  had  taken  a  part  of  the  money  sufficient 
to  pay  the  mortgage,  and  had  intrusted  it  to  the  grantee  upon 
his  promise  to  carry  it  to  the  mortgagee,  and  pay  it  over  in 
satisfaction  of  the  mortgage.  Judge  Knowlton  says :  "  Per- 
formance of  the  promise  would  cancel  the  mortgage,  and  leave 
the  estate  discharged  from  the  lien.  If,  as  a  part  of  the  con- 
tract, another  portion  of  the  consideration  had  been  paid,  by 
giving  a  second  mortgage  on  the  property,  the  discharge  of  the 
first  mortgage  by  payment  of  the  money  as  agreed  might  be  a 
very  important  part  of  the  arrangement,  without  which  the 
second  mortgage  would  be  valueless.  In  assuming  the  mort- 
gage the  grantee  not  only  undertakes  to  relieve  the  mortgagor 
from  personal  liability  for  the  debt,  but  from  all  liability 
under  the  mortgage."  Such  an  assumption  of  payment  is  an 
ordinary  payment,  which  works  a  complete  discharge  of  the 
mortgage.* 

When  the  land  has  thus  become  the  primary  fund  for  the 
payment  of  the  debt,  subsequent  purchasers  are  chargeable 
with  notice  of  this  equitable  right  to  resort  to  the  land,  equally 
as  if  their  own  deeds  in  terms  stipulated  that  they  were  to 
take  the  premises  subject  to  the  payment  of  the  mortgage.* 

§  1014.  The  Purchaser  Becomes  the  Principal. — As 
between  the  grantor  and  grantee  who  assumes  the  mortgage, 

1  Fowler  v.  Fay,  62  111.  375.    See,  also,  Converse  v.  Cook,  8  Vt.  164 ;  McCabe 
V.  Swap,  14  Allen  (Mass.),  188. 
''Weber  v.  Zeimet,  30  Wis.  283  ;  Sidwell  v.  Wheaton,  114  111.  267. 
3  Thayer  v.  Torrey,  37  N.  J.  L.  339. 
*  Rice  V.  Sanders,  152  Mass.  108. 
5  Freeman  v.  Auld,  44  N.  Y.  50;  Calvo  v.  Davies,  8  Hun  (N.  Y.),  222. 


TRANSFER  OF  THE  MORTGAGED  PROPERTY.       999 

the  grantee  becomes  the  principal  and  the  grantor  surety,  a 
surety  for  the  payment  of  the  mortgage  debt/ 

But  in  order  to  create  the  relation  of  principal  and  surety, 
as  between  the  grantee  in  the  conveyance  and  the  grantor,  in 
respect  to  a  subsisting  mortgage  on  the  premises  granted,  it  is 
necessary,  says  Chief  Justice  Alvey,  that  there  should  be  such 
terms  employed,  either  in  the  deed  or  in  some  collateral  instru- 
ment, as  will  plainly  show  that  the  grantee  assumed  or  agreed 
to  pay  the  mortgage  debt.^  To  raise  such  a  liability  on  the 
part  of  the  grantee  of  the  mortgagor  there  must  be  words  in 
the  deed  of  conveyance  from  which,  by  fair  import,  an  agree- 
ment to  pay  the  debt  can  be  inferred.^ 

An  agreement  merely  to  take  land,  subject  to  a  specified  in- 
cumbrance, is  not  an  agreement  to  assume  and  pay  the  incum- 
brance. The  grantee  of  an  equity  of  redemption,  without 
words  in  the  grant  importing  in  some  form  that  he  assumes 
the  payment,  does  not  bind  himself  personally  to  pay  the 
debt.  There  must  be  words  importing  that  he  will  pay  the 
debt  to  make  him  personally  liable.* 

When  the  grantee  does  not  agree  to  assume  the  mortgage 
debt  the  relation  of  principal  and  surety  as  between  the  grantor 
and  grantee  does  not  arise.^ 

If  the  grantee  assumes  the  mortgage  and  then  his  grantee 

1  Union  Mut.  L.  Ins.  Co.  v.  Hanford,  143  U.  S.  187;  Rice  v.  Sanders, 
152  Mass.  108;  Willard  v.  Worsham,  76  Va.  392;  Ellis  v.  Johnson,  96  Ind. 
377;  Chilton  v.  Brooks,  72  Md.  554;  George  v.  Andrews,  60  Md.  28;  45 
Am.  Rep.  706;  Avers  v.  Dixon,  78  N.  Y.  318;  Boardraan  ?'.  Larrabee,  51 
Conn.  39 ;  Pahneter  v.  Carey,  63  Wis.  426 ;  Flagg  v.  Geltniacher,  98  111.  293 ; 
Willson  V.  Burton,  52  Vt.  394 ;  Crenshaw  v.  Thackston,  14  S.  Car.  437 ;  Bel- 
mont V.  Coman,  22  N.  Y.  438 ;  Marsh  v.  Pike,  10  Paige  (N.  Y.),  595,  596 ;  Calvo 
V.  Davies,  73  N.  Y.  211. 

^  Chilton  V.  Brooks,  72  Md.  554  ;  Corbett  v.  Waterman,  11  Iowa,  86 ;  James 
V.  Day,  37  Iowa,  164. 

3  Shepherd  v.  May,  115  U.  S.  505,  510 ;  Thompson  v.  Bertram,  14  Iowa,  476  ; 
Hebert  v.  Doussan,  8  La.  Ann.  267 ;  Waters  v.  Hubbard,  44  Conn.  340. 

*  Elliott  V.  Sackett,  108  U.  S.  132  ;  Fiske  v.  Tolman,  124  Mass.  254  ;  Hoy  v. 
Bramhall,  19  N.  J.  Eq.  74  ;  Chilton  v.  Brooks,  72  Md.  554  ;  Connecticut  Mut. 
L.  Ins.  Co.  V.  Tyler,  8  Biss.  C.  C.  369. 

s  Chilton  V.  Brooks,  72  Md.  554. 


1000  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

assumes  the  debt  but  fails  to  pay  it,  the  first  grantee  stands  as 
surety  for  the  second  and  must  pay  the  debt.^ 

§  1015.  Material  Alteration  of  the  Mortgage  Con- 
tract.— It  is  the  general  rule  after  the  grantee  has  assumed 
the  mortgage  debt,  that  the  mortgagee  cannot  release  the  grantee 
without  releasing  the  mortgagor,  who  has  become  surety.^ 

But  if  the  relation  of  principal  and  surety  does  not  exist, 
the  grantor  will  not  be  discharged,  nor  his  liability  on  the  note 
affected,  by  such  material  alteration  of  the  mortgage  con- 
tract.^ 

§  1016.  Extending  Time  of  Payment  Without  Mort- 
gagor's Consent. — It  is  very  true  that  where  a  grantee  cove- 
nants, or,  by  apt  terms,  assumes  to  pay  a  mortgage  debt 
charged  on  the  granted  premises,  for  the  payment  of  which 
the  grantor  is  bound,  the  relation  of  principal  arises ;  and  an 
extension  of  time  of  payment  of  the  mortgage  debt,  by  valid 
agreement,  by  the  mortgagee,  without  the  consent  of  the  mort- 
gagor or  grantor,  will  release  the  grantor  from  personal  lia- 
bility.' 

The  mortgagor  is  released  when  he  notifies  the  mortgagee  to 
foreclose  at  maturity,  as  the  property  may  depreciate,  and  the 
mortgagee  refuses  to  comply  with  this  request ;  ^  otherwise,  if 
not  requested  to  foreclose  at  maturity  of  debt.^ 

But  when  the  grantee  does  not  agree  to  assume  the  mort- 
gage debt,  no  personal  obligation  on  the  grantee  to  pay  the 
debt  is  created,  and  the  relation  of  principal  and  surety  does 
not  arise,  and  the  grantor  is  not  discharged,  nor  his  liability  on 

1  Stover  V.  Tompkins  (Nebr.),  51. N.  W.  Eep.  1040. 

"^  Paine  v.  Jones,  76  N.  Y.  274 ;  George  r.  Andrews,  60  Md.  26 ;  Paine  v. 
Jones,  14  Hun  (N.  Y.),  577 ;  Spencer  v.  Spencer,  95  N.  Y.  353 ;  Fish  v.  Hay- 
ward,  28  Hun  (N.  Y.),  456. 

3  Shepherd  v.  May,  115  U.  S.  514. 

^  Union  INIut.  L.  Ins.  Co.  v.  Hanford,  143  U.  S.  187 ;  George  v.  Andrews, 
60  Md.  26 ;  Calvo  v.  Davies,  73  N.  Y.  211 ;  Shepherd  v.  May,  115  U.  S.  505, 
514 ;  Metz  v.  Todd,  36  Mich.  473. 

^  Remsen  v.  Beekman,  25  N.  Y.  552. 

«Hurd  V.  Callahan,  9  Abb.  N.  C.  (N.  Y.)  374.  See,  also.  Case  v.  O'Brien,  66 
Mich.  289. 


TRANSFER    OF    THE    MORTGAGED    PROPERTY.  1001 

tho  mortgage  note  affected  by  any  indulgence  as  to  the  time  of 
payment,  given  by  the  assignee  of  the  mortgage  to  the  grantee 
in  the  deed/  And  when  the  purchaser  has  assumed  no 
personal  liability,  he  is  not  the  surety  of  the  grantor,  and  an 
extension  of  time  of  payment  made  between  the  mortgagor 
and  mortgagee  does  not  release  or  discharge  the  lien  of  the 
mortgage  in  favor  of  the  purchaser.^  But  an  invalid  or  un- 
authorized agreement  to  assume  payment  does  not,  without  the 
mortgagee's  assent,  put  the  grantee  and  the  mortgagor  in  the 
relation  of  principal  and  surety  toward  the  mortgagee,  so  that 
the  latter  by  givdng  time  to  the  grantee,  will  discharge  the 
mortgagor.^ 

§  1017.  Collateral  Obligation. — However,  some  courts 
hold  a  modified  doctrine  and  declare  that  the  mortgagee  may 
treat  both  the  mortgagor  and  his  grantee  under  such  promise 
of  assumption  as  principal  and  debtor,  and  may  have  a  per- 
sonal decree  against  either  or  both.'' 

Under  this  doctrine,  after  the  mortgage  note  becomes  due,  if 
time  is  given  the  purchaser  for  payment,  it  does  not  discharge 
the  original  debtor  on  the  ground  that  he  has  become  surety.' 
The  assumption  of  the  debt  as  between  the  mortgagor  and 
purchaser,  makes  the  purchaser  liable,*^  but  it  does  not  follow 
that  the  original  debtor  was  thereby  discharged,  or  that  the 
right  of  the  holder  of  the  note  to  proceed  against  the  mort- 
gagor was  in  any  manner  affected.^ 

§  1018.  Part  Purchase  of  the  Premises. — Where  the  sub- 
ject-matter of  the  contract  or  the  consideration  is  entire,  there 

1  Chilton  V.  Brooks,  72  Md.  554. 

2  Maher  v.  Lanfrom,  86  111.  513. 

^Shepherd  v.  May,  115  U.  S.  505,  511 ;  Keller  v.  Ashford,  133  U.  S.  610,  625. 

*  Crawford  v.  Edwards,  33  Mich.  354 ;  Corbett  v.  Waterman,  11  Iowa,  86 ; 
Thompson  v.  Bertram,  14  Iowa,  476 ;  Curtis  v.  Tyler,  9  Paige  (N.  Y.),  435 ;  lial- 
sey  V.  Reed,  9  Paige  (N.  Y.),  451.  See,  also,  Marsh  v.  Pike,  10  Paige  (N.  Y.), 
595;  Burr  v.  Beers,  24  N.  Y.  178;  Converse  v.  Cook,  8  Vt.  164;  Hoff's 
Appeal,  24  Pa.  St.  200 ;  Huyler  v.  Atwood,  26  N.  J.  Eq.  504  ;  Connecticut  Mut. 
Ins.  Co.  V.  Mayer,  8  Mo.  App.  18. 

^  Boardman  v.  Larrabee,  51  Conn.  39  :  Waters  v.  Hubbard,  44  Conn.  340. 

« Birke  v.  Abbott,  103  Ind.  1. 

'  Kelso  V.  Fleming,  104  Ind.  180 ;  Davis  v.  Hardy,  76  Ind.  272. 


1002  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

can  be  no  partial  rescission.  These  being  entire  the  rescission 
must  be  complete.  Where,  however,  a  contract  is  divisible, 
one  part  having  no  necessary  relation  to  the  other  which  rests 
upon  a  consideration  peculiar  to  itself  and  independent  of  the 
other,  the  injured  party  may  retain  the  subject  of  one  imvt, 
and  having  tendered  the  consideration  or  benefit  received,  may 
treat  another  part  as  rescinded  at  law,  or  he  may  maintain  a 
suit  in  equity  to  rescind  one  part  upon  equitable  terms,  while 
adhering  to  another  independent  part.  In  such  case  each 
distinct  stipulation  relating  to  separate  subject-matters  will  be 
treated  as  a  separate  contract.^  So  where  two  persons  unite  in 
purchasing  real  estate,  execute  their  joint  mortgage  for  the  un- 
paid purchase-money,  and  after  partition  between  themselves, 
one  sells  the  part  taken  by  him  to  a  third  person,  the  other 
purchaser  having  paid  his  equitable  share  of  the  debt,  is 
primarily  liable  as  principal  debtor,  and  the  land  received  by 
him  must  be  first  looked  to  before  that  held  by  the  other.^ 
Hence,  a  purchaser  of  a  portion  of  the  mortgaged  premises  who 
assumes  the  payment  of  a  proportionate  part  of  the  debt,  is 
bound  to  pay  in  exoneration  of  the  other  parties.^  He  is 
bound  to  pay  the  amount  agreed  upon.^  If  he  buys  a  part  of 
the  mortgaged  premises,  and  then  pays  off  the  whole  mortgage, 
he  is  entitled  to  subrogation.^  But  if  he  had  agreed  to  assume 
and  pay  the  whole  debt,  then  he  will  be  liable  for  the  whole 
debt,^  and  cannot  keep  the  mortgage  alive  by  taking  an  as- 
signment.^ 

1  Goodspeed  v.  Fuller,  46  Me.  141  ;  Rand  v.  Webber,  64  Me.  191 ;  Miner  v. 
Bradley,  22  Pick.  (Mass.)  457 ;  Morse  v.  Brackett,  98  Mass.  205 ;  Bartlett  v. 
Drake,  100  Mass.  174 ;  Johnson  v.  Johnson,  3  Bos.  &  P.  162 ;  Perkins  v.  Hart, 
11  Wheat.  (U.  S.)  237;  Merrill  v.  Ins.  Co.,  73  N.  Y.  452;  29  Am.  Rep.  184. 

2  Higham  v.  Harris,  108  Ind.  246 ;  Willard  v.  Worsham,  76  Va.  392. 

3  Ayers  v.  Dixon,  78  N,  Y.  318 ;  Bowne  v.  Lynde,  91  N.  Y.  92 ;  Wright  v. 
Briggs,  99  Ind.  563. 

*  Edwards  v.  Thostenson,  64  Iowa,  680. 
5  Salem  v.  Edgerly,  33  N.  H.  46. 

^  Rugg  V.  Brainerd,  57  Vt.  364 ;  Johnson  v.  Walter,  60  Iowa,  315 ;  Welch  v. 
Beers,  8  Allen  (Mass.),  151. 
'  Johnson  v.  Walter,  60  Iowa,  315. 


transfer  op  the  mortgaged  property.  1003 

Article  3. 
Ti^ansfer  of  the  Debt. 

§  1019.  Effect  of  Assumption.  §  1024.  Collateral     Written    Agree- 
§  1020.  Agreement  Necessary  to  Trans-  ment. 

I'er  the  Debt.  1 1025.  Acceptance  of  the  Deed. 

1 1021.  Implied  Promise.  ^  1026.  Assumption  by  Married  Wo- 
§  1022.  Statutory  Provisions.  man. 

§  1023.  Verbal  Agreement. 

§  1019.  Effect  of  Assumption. — The  effect  of  the  assump- 
tion of  payment  of  the  mortgage  debt  makes  the  vendee  Hable 
for  all  incidents  of  the  mortgage  debt,  such  as  the  debt  itself 
and  attorney's  fees  in  case  of  foreclosure.^  This  agreement  of 
assumption  of  payment  may  be  made  by  a  contemporaneous 
writing,  which  shall  give  the  conditions  of  the  contract.^ 

The  purchaser  of  land,  accepting  a  deed,  expressly  convey- 
ing it,  subject  to  a  mortgage,  and  excepting  it  from  the  cove- 
nants, is  not  personally  liable  to  pay  it,  "unless  he  covenants  to 
do  so.  The  land  is  primarily  liable,  and  the  grantor  is  liable 
for  the  deficiency,  if  there  be  any,^ 

In  case  the  deed  does  not  clearly  express  the  contract,  and 
it  cannot  be  ascertained  from  its  recitals  whether  the  grantee 
is  personally  liable  for  the  debt,  parol  evidence  will  be  admitted 
to  construe  the  instrument.* 

§  1020.  Agreement  Necessary  to  Transfer  the  Debt. — 
To  render  the  grantee  personally  liable  for  the  debt,  the  deed 
must  contain  terms-  that  will  clearly  import  that  the  grantee 
assumed  the  payment  of  the  debt.^ 

1  Stockton  V.  Gould  (Pa.),  24  At.  Rep.  160 ;  Johnson  v.  Harder,  4-5  Iowa,  677. 

2  Pike  V.  Seiter,  15  Hun  (N.  Y.),  402;  Gaffney  v.  Hicks,  124  IMass.  301. 
sjohnsoni'.  Zink,  51  N.  Y.  .333;   Gayle  v.  Wilson,  30  Gratt.  (Ya.)   106; 

Comstock  V.  Hitt,  37  111.  542 ;  Tanguay  v.  Felthousen,  45  Wis.  30. 

*  Winans  v.  Wilkie,  41  Mich.  264. 

5  Shepherd  v.  May,  115  U.  S.  505,  510;  Watei-s  v.  Hubbard,  44  Conn.  .340; 
Rapp  V.  Stover,  104  111.  618 ;  Weed  SeAving-Machine  Co.  v.  Emerson,  115 
Mass,  554 ;  Bumgardner  v.  Allen,  6  Munf.  (Ya.)  439  ;  Woodbury  v.  Swan,  58 
N.  H.  380  ;  Dean  v.  Walker,  107  111.  540 ;  47  Am.  Rep.  467 ;  Walker  v.  Gold- 
smith, 7  Oreg.  161 ;  Moore's  Appeal,  88  Pa.  St.  450 ;  Lewis  v.  Day,  53  Iowa, 
575 ;  Gage  v.  Jenkinson,  58  Mich.  169 ;  Ritchie  v.  McDuffie,  62  Iowa,  46 ;  Hall 


1004  RIGHTS    OP    PARTIES    BEFORE    DEFAULT. 

The  intention  must  clearly  appear  that  the  vendee  assumes 
the  payment  of  the  mortgage  debt.' 

When  the  mortgage  is  assumed  as  part  of  the  consideration 
the  purchaser  becomes  liable.  Because  accepting  the  estate 
conveyed,  he  must,  as  a  matter  of  law,  be  presumed  to  have 
agreed  to  pay  the  indebtedness  secured  upon  it ;  for  it  is  not 
simply  buying  the  estate  subject  to  the  mortgage,  but  he  im- 
pliedly assumes  to  pay  the  mortgage  as  part  of  the  considera- 
tion.^ 

When  the  purchaser  of  land  incumbered  by  a  mortgage 
agrees  to  pay  a  particular  sum  as  purchase-money,  and  the 
amount  of  the  mortgage  debt  is  deducted  from  the  purchase- 
money  or  consideration,  and  the  land  conveyed  subject  to  the 
mortgage,  then  the  vendee  is  bound  to  j^ay  the  debt  whether 
he  agreed  to  do  so  by  express  words  or  not.  This  obligation 
results  necessarily  from  the  very  nature  of  the  transaction , 

Whenever  the  mortgage  debt  forms  a  part  of  the  considera- 
tion and  is  deducted  from  the  purchase-money,  he  is  bound  to 
the  extent  of  the  property  to  indemnify  the  grantor,*  but  is  not 
personally  liable  for  the  mortgage  debt.* 

After  assumption  of  the  mortgage  debt,  if  the  mortgagor  pays 

V.  Morgan,  79  Mo.  47  ;  Patton  v.  Adkins,  42  Ark.  197 ;  Campbell  v.  Patterson, 
58  Ind.  66 ;  Belmont  v.  Coman,  22  IST.  Y.  438 ;  Tanguay  v.  Felthousen,  45 
Wis.  30. 

1  Wright  V.  Briggs,  99  Ind.  563 ;  Stebbins  v.  Hall,  29  Barb.  (N.  Y. )  524 ;  Bel- 
mont V.  Coman,  22  N.  Y.  438. 

2  Pike  r.  Bro\vn,  7  Cuph.  (Mass.)  133 ;  Funas  v.  Durgin,  119  Mass.  500 ; 
Crawford  v.  Edwards,  33  Mich.  354 ;  Collins  v.  Rowe,  1  Abb.  N.  C.  (N.  Y.)  97  ; 
Thorp  r.  Keokuk,  etc.,  Co.,  47  Barb.  (N.  Y.)  439  ;  Urquhart  v.  Brayton,  12  R. 
I.  169  ;  Braman  v.  Dowse,  12  Cush.  (Mass.)  227  ;  Heid  v.  Vreeland,  30  N.  J. 
Eq.  591 ;  Thayer  v.  Torrey,  37  N.  J.  L.  339 ;  Kennedy  v.  Brown,  61  Ala. 
296 ;  Tichenor  v.  Dodd,  3  Green  Ch.  (N.  J.)  454  ;  Smith  v.  Truslow,  84  N.  Y. 
660. 

3  Heid  V.  Vreeland,  30  N.  J.  Eq.  591. 

*  Lawrence  v.  Towle,  59  N.  H.  28 ;  Equitable  L.  Asso.  v.  Bostwick ,  100  N. 
Y.  628 ;  Twitchell  v.  Mears,  8  Biss.  C.  C.  211 ;  Comstock  v.  Hitt,  37  111.  542 ; 
Townsend  r.  Ward,  27  Conn.  610 ;  Iowa  Loan  and  Trust  Co.  •;;.  Mowery,  67 
Iowa,  113  ;  Moore's  Appeal,  88  Pa.  St.  450  ;  Crowell  v.  Hospital,  27  N.  J.  Eq. 
650  ;  Flagg  v.  Thurber,  14  Barb.  (N.  Y.)  196  ;  Thompson  r.  Thompson,  4  Ohio 
St.  333 ;  Schlatre  r.  Greaud,  19  La.  Ann.  125. 

5  Waring  v.  Ward,  7  Ves.  332 ;  Lawrence  i>.  Towle,  59  N.  H.  28. 


TRANSFER    OF    THE    MORTGAGED    PROPERTY.  1005 

the  amount,  the  purchaser  must  return  the  property  or  refund 
the  money  so  paid/ 

§  1021.  Implied  Promise. — A  promise  to  pay  the  mortgage 
debt  by  the  vendee  may  be  implied.  Thus,  a  stipulation  that 
the  conveyance  is  made  "subject  to  the  payment"  of  an  out- 
standing mortgage,  or  words  equivalent,  which  clearly  imply 
an  obligation  intentionally  created  by  the  grantor  and  assumed 
by  the  grantee,  will  constitute  an  assumption  of  payment.^ 
But  an  assumption  of  payment  cannot  be  implied  from  the 
stipulation  that  the  conveyance  is  subject  to  the  mortgage,  the 
amount  of  which  "  forms  part  of  the  consideration,  and  is 
deducted  therefrom."  ^ 

However,  the  word  "  assumes  "  means  the  same  as  "  assumes  to 
pay."*  "  Subject,  however,  to  a  mortgage  .  .  .  of  $7,000,  which 
is  part  of  the  above-named  consideration,"  is  not  sufficient  to 
imply  assumption  of  payment ;  ^  and  "  the  above  described 
property  is  alone  to  be  holden  for  the  payment  of  both  of  the 
above  debts,"  does  not  imply  a  promise  to  pay  the  mortgage 
debt.« 

"  Subject,  nevertheless,  to  a  certain  mortgage  which  the  party 
hereto  of  the  first  part  assumes  and  agrees  to  pay  as  part  of  the 
consideration  hereinbefore  expressed,"  is  a  promise  to  assume 
payment,  and  the  word  "  first "  will  be  construed  to  read  and 
mean  "  second."  ^ 

The  burden  of  proof  is  upon  the  purchaser  who  has  as- 
sumed a  mortgage  and  claims  to  have  performed  his  part  of 
the  contract,  to  show  that  he  has  thus  discharged  his  obliga- 
tion.* 

'  Thichenor  v.  Dodd,  3  Green  Ch.  (N.  J.)  454 ;  Mount  r.  Van  Ness,  33  N.  J. 
Eq.  262,  265. 

"^  Stebbins  v.  Hall,  29  Barb.  (N.  Y.)  524  ;  Carley  v.  Fox,  38  Mich.  387. 
'  Equitable  Life  Asso.  v.  Bostwick,  100  N.  Y.  628. 

*  Schley  v.  Fryer,  100  N.  Y.  71 ;  Vreeland  v.  Van  Blarcom,  35  N.  J.  Eq.  530. 
See,  also,  Moore's  Appeal,  88  Pa.  St.  450  ;  Taylor  v.  Mayer,  93  Pa.  St.  42. 

*  Fiske  V.  Tolman,  124  Mass.  254. 

«  Hubbard  i>.  Ensign,  46  Conn.  576. 

'  Fairchild  v.  Lynch,  42  N.  Y.  Superior  Ct.  265. 

^  Jewett  V.  Draper,  6  Allen  (Mass.),  434. 


1006  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

§  1022.  Statutory  Provisions. — In  Pennsylvania  it  is  pro- 
vided by  statute  that  a  grantee  of  real  estate  which  is  subject 
to  ground-rent,  or  bound  by  mortgage  or  other  incumbrance, 
shall  not  be  personally  liable  for  the  payment  of  such  ground- 
rent,  mortgage,  or  other  incumbrance  unless  he  shall  expressly 
assume  a  personal  liability  therefor,  or  there  shall  he  express 
words  in  the  deed  of  conveyance  stating  that  the  grant  is  made 
on  condition  of  the  grantee  assuming  such  personal  liability  ; 
provided,  that  the  use  of  the  words  "  under  and  subject  to  the 
payment  of  such  ground-rent,  mortgage,  or  other  incum- 
brance "  shall  not  alone  be  so  construed  as  to  make  such 
graTitee  personally  liable  as  aforesaid.  The  right  to  enforce 
such  personal  liability  shall  not  inure  to  any  person  other 
than  the  person  with  whom  such  an  agreement  is  made,  nor 
shall  such  personal  liability  continue  after  the  said  grantee 
has  bona  fide  parted  with  the  incumbered  propert}^,  unless  he 
shall  have  expressly  assumed  such  continuing  liability.^ 

§  1023.  Verbal  Agreement. — The  assumption  of  a  mort- 
gage may  be  made  by  verbal  agreement,  and  in  a  case  against 
the  grantee,  the  grantor  is  not  estopped  from  proving  the  in- 
cumbrance and  the  agreement  to  discharge  it,  as  the  agreement 
was  considered  to  be  collateral.^  So  when  a  party  buys  a  por- 
tion of  a  lot  and  agrees  to  assume  the  incumbrance  on  the  lot, 
a  purchaser  of  the  remainder  who  has  to  pay  the  incum- 
brance to  protect  himself,  can  hold  the  first  purchaser  liable.^ 
His  oral  assumption  was  sufficient  to  make  him  liable.^ 

But  in  South  Carolina  this  rule  is  not  accepted.  It  is  held 
that  a  parol  agreement  cannot  be  shown  when  a  deed  is  abso- 
lute without  any  condition.  These  words  "  except  as  regards 
the  two  notes  given  for  the  purchase-money,"  did  not  raise  any 

1  Purdon's  Ann.  Dig.,  1877,  p.  2160,  sects.  5,  6. 

2  Bolles  V.  Beach,  2  Zab.  (N.  J.)  080 ;  Wilson  r.  King,  23  N.  J.  Eq.  150 ;  Mer- 
riman  v.  Moore,  90  Pa.  St.  78 ;  Lamb  v.  Tucker,  42  Iowa,  118 ;  Putney  v.  Farn- 
ham,  27  Wis.  187. 

3  Wright  V.  Briggs,  99  Ind.  563. 

*  Pom.  Eq.  Jour.,  sect.  1206,  note  2;  Bowen  ?>.  Kurtz,  37  Iowa,  239.  See, 
also,  Drury  v.  Tremont  Imp.  Co.,  13  Allen  (Mass.),  168. 


TRANSFER    OF    THE    MORTGAGED    PROPERTY.  1007 

ambiguity,  and  parol  evidence  was  inadmissible  to  show  any 
condition.^ 

But  the  general  rule  is  that  such  an  agreement  may  be 
shown,  and  is  not  merged  in  the  deed,  nor  is  it  affected  by  the 
statute  of  frauds.^ 

§  1024.  Collateral  Written  Agreement. — A  written 
agreement  between  the  grantor  and  grantee  outside  of  the 
conveyance,  by  which  for  value  received,  the  latter  promises 
to  pay  the  note  and  mortgage,  or  a  certain  amount  thereof,  is 
competent  evidence  against  the  grantee.^  And  the  liability  of 
the  grantee  is  not  affected  because  the  deed  is  made  to  his 
wife  by  his  request.'* 

The  effect  of  an  absolute  assumption  of  a  mortgage  in  a 
deed  may  be  modified  by  a  contemporaneous  agreement  of  the 
parties.^ 

§  1025.  Acceptance  op  the  Deed. — The  grantee  in  a  deed 
by  accepting  it  becomes  liable  on  the  covenants  therein  pur- 
porting to  be  made  by  him,  just  as  if  he  had  signed  and  sealed 
the  instrument.^  And  an  express  acceptance  is  not  required, 
as  an  acceptance  may  be  implied  from  the  circumstances."  And 
such  an  acceptance  is  a  sufficient  consideration  for  the  promise 
to  assume  payment  of  the  mortgage.*     An  acceptance  by  an 

1  Boozer  v.  Teague,  27  S.  Oar.  348 ;  MowTy  v.  Stogmer,  3  S.  Car.  251. 

^  Remington  v.  Palmer,  62  N.  Y.  3i  ;  Murdoek  v.  Gilchrist,  52  N.  Y.  242 ; 
Canfield  v.  Shear,  49  Mich.  313 ;  Taintor  v.  Hemmingway,  18  Hun  (N.Y.),458 ; 
Barker  v.  Bradley,  42  N.  Y.  31 6. 

*  Schmucker  v.  Sibert,  18  Kan.  104.  See,  also,  Colgin  v.  Henley,  6  Leigh 
(Va.),  85. 

*  Pike  V.  Seiter,  15  Hun  (N.  Y.),  402. 
^Gaffney  r.  Hicks,  124  Mass.  301. 

®  Sparkman  ;■.  Gove,  44  N.  J.  L.  252  ;  Furnas  r.  Durgin,  119  Mass.  500 ;  Finley 
V.  Simpson,  2  Zab.  (N.  J.)  311  ;  Spaulding  r.  Hallenbeck,  35  N.  Y.  20(3 ;  Halsey 
V.  Reed,  9  Paige  (N.  Y.),  44();  Thompson  v.  Dearborn,  107  111.  87  ;  Urquhart  v. 
Brayton,  12  R.  I.  169  ;  Bishop  v.  Douglass,  25  AVis.  696 ;  Klein  r.  Isaacs,  8  Mo. 
App.  568 ;  linger  v.  Smith,  44  Mich.  22 ;  Dickason  v.  Williams,  129  Mass.  182  ; 
State  V.  Davis,  96  Ind.  539.  Compare  Plinsdale  v.  Humphrey,  15  Conn.  432; 
Burnett  v.  Lynch,  5  Barn.  &  Cress.  589 ;  Maule  v.  Weaver,  7  Pa.  St.  329. 

'  Bundy  r.  Iron  Co.,  38  Ohio  St.  300. 

«Bay  r.  Williams,  112  111.  91  ;  Atlantic  Dock  Co.  v.  I^eavitt,  54  N.  Y.  35; 
Locke  V.  Homer,  131  Mass.  93,  102 ;  Bowen  v.  Beck,  94  N.  Y.  86. 


1008  EIGHTS    OF    PARTIES    BEFORE   DEFAULT. 

agent  is  sufficient.^  But  there  must  be  an  acceptance  concurred 
in  by  the  purchaser  to  make  him  Uable  ;  without  acceptance 
he  is  not  hable.^  If  a  deed  is  made  to  a  person  without  his 
consent  or  knowledge,  and  is  repudiated  by  him,  it  is  not  an 
acceptance  and  does  not  bind  him.^  The  recording  of  a  deed 
which  stipulates  that  the  grantee  shall  assume  the  payment  of 
a  mortgage  is  not  prima  facie  evidence  of  its  delivery  and 
acceptance.* 

§  1026.  Assumption  by  Married  Woman. — In  those  States 
where  a  married  woman  can  deal  with  her  property  as  if  sole, 
she  can  assume  the  payment  of  a  mortgage,  and  it  will  be  a 
valid  contract.  And  it  is  generally  held  under  the  various 
married  woman's  acts,  that  the  fact  that  the  purchaser  is  a 
married  woman,  does  not  relieve  her  of  her  covenants.^ 

But  she  is  not  liable  on  such  covenants  in  her  husband's 
deed.^  And  circumstances  may  show  that  she  has  accepted 
such  a  deed  with  covenants  of  assumption.^ 

1  Fairchild  v.  Lynch,  42  N.  Y.  Superior  Ct.  265 ;  Schley  v.  Fryer,  100  N.  Y.  71. 

^  Culver  V.  Badger,  29  N.  J.  Eq.  74  ;  Cordts  v.  Hargrave,  29  N.  J.  Eq.  446. 

^  Parker  r.  Jenks,  36  N.  J.  Eq.  398 ;  Albany  City  Saving  Inst.  v.  Burdick, 
87  N.  Y.  40 ;  Stevens  Institute  r.  Sheridan,  30  N.  J.  Eq.  23. 

*  Thompson  v.  Dearborn,  107  111.  87. 

» Frecking  v.  Rolland,  53  N.  Y.  422,  425 ;  Ballin  v.  Dillaye,  37  N.  Y.  35 ; 
Maxon  v.  Scott,  55  N.  Y.  347 ;  A^'rooman  v.  Turner,  69  N.  Y.  280 ;  Cashman  v. 
Henry,  75  N.  Y.  103 ;  Huyler  v.  Atwood,  26  N.  J.  Eq.  604. 

6  Kitchell  V.  Mudgett,  37  Mich.  81. 

'  Coolidge  V.  Smith,  129  Mass.  554. 


transfer  of  the  mortgaged  property.         1009 

Article  4. 

Right  of  Mortgagee   to  Bring  Action  Against   Vendee. 

\  1027.  Right  of  Mortgagee.  I  1034.  Conflict  of  Laws. 

§  1028.  Doctrine  Held  in  Many  States.  §  1035.  Cannot  Maintain  an  Action 

§  1029.  The  Promise  Must  Be   ]\Iade  in  Mortgagor's  Name. 

Upon  a  Valid  Consideration.  §  1036.  Absolute  Conveyance. 

§  1030.  The  Mortgagee  Must  Have  an  §  1037.  Covenants     in     Mortgagor's 

Interest  in  the  Land  or  Some  Deed — Second  Mortgage. 

Relation  to  It.  §  1038.  General  Covenants  in  Grant- 
§  1031.  Actions  at  Law — Assumpsit.  or's  Deed. 

§  1032.  Statutory  Provisions.  §  1039.  Release  by  Mortgagor, 

i  1033.  The  Equitable  Doctrine.  g  1040.  Release  by  Vendee. 

§  1027.  Right  of  Mortgagee. — In  equity,  as  at  law,  the 
contract  of  the  purchaser  to  pay  the  mortgage  being  made 
with  the  mortgagor  and  for  his  benefit  only,  creates  no  direct 
obligation  of  the  purchaser  to  the  mortgagee.* 

The  promise  of  the  purchaser  is  to  the  mortgagor  and  not 
to  the  mortgagee,  and  hence  there  is  no  privity  of  contract 
between  the  vendee  and  mortgagee.  The  only  object  of  the 
promise  to  pay  the  mortgage  is  to  benefit  the  mortgagor,  and 
not  to  benefit  the  mortgagee  or  other  incumbrancers  ;  and  they 
do  not  know  or  assent  to  the  promise  at  the  time  it  is  made, 
nor  afterward  do  or  omit  any  act  on  the  faith  of  it.  It  is  clear, 
therefore,  that  the  mortgagor  alone  can  maintain  an  action  at 
law  upon  that  promise.^ 

Where  a  debt  already  exists  from  one  person  to  another,  a 
promise  by  a  third  person  to  pay  such  debt  being  primarily  for 
the  benefit  of  the  original  debtor,  and  to  relieve  him  from  lia- 
bility to  pay  it,  there  being  no  novation,  he  has  the  right 
of  action  against  the  promisor  for  his  own  indemnity ; 
and  if  the  original  creditor  can  also  sue,  the  promisor  would 
be  liable  to  two  separate  actions,  and,  therefore,  the  rule  is 
that   the  original    creditor  cannot  sue.     His  case  is  not  an 

^  Parsons  v.  Freeman,  2  P.  AVms.  664,  note  ;  Ambler,  115 ;  Oxford  v.  Rod- 
ney, 14  Ves.  417,  424 ;  In  re  Empress  Engineering  Co.,  16  Ch.  Div.  125 ; 
Gandy  v.  Gandy,  30  Ch.  Div.  57,  67. 

« Keller  v.  Ashford,  133  U.  S.  610,  622. 
64 


ll 


1010  RIGHTS    OF    PARTIES    BEFORE    DEFAULT 

exception  from  the  general  rule  that  privity  of   contract  is 
required.^ 

But  the  mortgagee  has  no  greater  right  than  the  mortgagor 
has  against  the  grantee,  and,  therefore,  cannot  object  to  the 
striking  out  by  a  court  of  equity  or  to  the  release  by  the  mort- 
gagor of  an  agreement  to  assume  payment,  when  inserted  in 
the  deed  by  mistake.^ 

§  1028.  Doctrine  Held  in  Many  States. — It  is  held  in 
many  State  courts,  in  accordance  with  the  suggestion  of  Lord 
Hardwicke,^  that  in  a  court  of  equity  the  mortgagee  may  avail 
himself  of  tlie  right  of  the  mortgagor  against  the  purchaser. 

This  result  has  been  obtained  by  a  development  and  appli- 
cation of  the  ancient  doctrine  in  equity  that  a  creditor  shall 
have  the  benefit  of  any  obligation  or  security  given  by  the 
principal  to  the  surety  for  the  payment  of  the  debt.* 

Justice  Gray  says :  ^  "In  short,  if  one  person  agrees  with 
another  to  be  primarily  liable  for  a  debt  due  from  that  other 
to  a  third  person,  so  that  as  between  the  parties  to  the  agree- 
ment the  first  is  the  principal  and  the  second  the  surety,  the 
creditor  of  such  surety  is  entitled,  in  equity,  to  be  substituted 
in  his  place  for  the  purpose  of  compelling  such  principal  to 
pay  the  debt. 

"  It  is  in  accordance  with  the  doctrine,  thus  understood,  that 
the  Court  of  Chancery  of  New  York,  the  Court  of  Chancery 
and  the  Court  of  Errors  of  New  Jersey,  and  the  Supreme  Court 
of  Michigan  have  held  a  mortgagee  to  be  entitled  to  avail 
himself  of  an  agreement  in  a  deed  of  conveyance  from  the  mort- 
gagor by  which  the  grantee  promises  to  pay  the  mortgage."  ^ 

1  National  Bank  r.  Grand  Lodge,  98  U.  S.  123,  124  ;  Cragin  v.  Lovell,  109  TJ. 
S.  194. 

2  Elliott  V.  Sackett,  108  U.  S.  102 ;  Drury  v.  Hayden,  111  U.  S.  223. 
^  Parsons  v.  Freeman,  Ambler,  115,  116. 

*Maure  v.  Harrison,  1  Eq.  Cas.  Ab.  93,  pi.  5  ;  Wright  v.  Morley,  11  Ves.  12, 
22;  Phillips  v.  Thompson,  2  Johns.  Ch.  (N.  Y.)  418;  Curtis  v.  Tyler,  9  Paige 
(N.  Y.),  432,  435  ;  New  Bedford  v.  Fairhaven,  9  Allen  (Mass.),  175 ;  Hampton 
V.  Phipps,  108  V.  S.  260,  263. 

6  Keller  v.  Ashford,  133  U.  S.  610,  623. 

« Citing  Halsey  v.  Reed,  9  Paige  (N.  Y.),  446,  452;  King  v.  Whitely,  10 


TRANSFER    OF    THE    MORTGAGED    PROPERTY.  1011 

The  grounds  and  limits  of  this  doctrine  have  been  well  stated 
by  Justice  Depue  :  *  *'  In  equity,  a  creditor  may  have  the  bene- 
fit of  all  the  collateral  obligations  for  the  payment  of  the  debt, 
which  a  person  standing  in  the  situation  of  a  surety  for  others 
holds  for  his  indemnity.  It  is  in  the  application  of  this  prin- 
ciple that  decrees  for  deficiency  in  foreclosure  suits  have  been 
made  against  subsequent  purchasers,  who  have  assumed  the 
payment  of  the  mortgage  debt,  and  thereby  become  i)rincipal 
and  debtors  as  between  themselves  and  their  grantors."  But 
such  a  mortgagee  has  no  greater  right  than  the  mortgagor  has 
against  the  grantee.^ 

Although  the  mortgagor  may  properly  be  made  a  party  to 
an  action  of  the  mortgagee  against  the  grantee,  yet  if  no  objec- 
tion is  made  on  that  ground  at  the  hearing,  and  the  omission 
to  make  him  a  party  cannot  prejudice  any  interest  of  his,  or 

Paige  (N.  Y.),  465 ;  BIyer  v.  Monholland,  2  Sand.  Ch.  (N.  Y.)  478 ;  Klapworth 
V.  Dressier,  2  Beas.  (N.  J.)  62 ;  78  Am.  Dec.  69 ;  Hoy  v.  Bramhall,  19  N.  J.  Eq. 
74,  563 ;  Crowell  v.  Currier,  27  N.  J.  Eq.  152 ;  27  N.  J.  Eq.  650 ;  Arnaiid  v. 
Grigg,  29  N.  J.  Eq.  482 ;  Youngs  v.  Trustees,  31  N.  J.  Eq.  290 ;  Crawford  v. 
Edwards,  33  Mich.  354,  360 ;  Miller  v.  Thompson,  34  Mich.  10 ;  Pligman  v. 
Stewart,  38  Mich.  513,  523 ;  Hicks  v.  McGarry,  38  Mich.  667  ;  Booth  v.  Con- 
necticut Ins.  Co.,  43  Mich.  299.  See,  also,  Pardee  v.  Treat,  82  N.  Y.  385,  387 ; 
Coffin  V.  Adams,  131  Mass.  133,  137  ;  Biddel  v.  Brizzolara,  64  Cal.  354  ;  George 
V.  Andrews,  60  Md.  26 ;  Osborne  r.  Cabell,  77  Va.  462.  Besides  these  cases  see, 
also.  Trotter  v.  Hughes,  12  N.  Y.  74 ;  72  Am.  Dec.  137 ;  Spaulding  v.  Hallenbeck, 
35  N.  Y.  204 ;  Belmont  v.  Coman,  22  N.  Y.  438 ;  78  Am.  Dec.  213 ;  Locke  v. 
Homer,  131  Mass.  93 ;  Pike  v.  Brown,  7  Cush.  (Mass.)  133 ;  Urquhart  r.  Bray- 
ton,  12  R.  I.  169 ;  Huyler  v.  Atwood,  26  N.  J.  Eq.  504 ;  Bishop  v.  Donglas.s,  25 
Wis.  696;  Ricard  •?;.  Sanderson,  41  N.  Y.  179;  Garnsey  r.  Rogers,  47  N.  Y. 
233  ;  Lawrence  v.  Fox,  20  N.  Y.  268 ;  Burr  r.  Beers,  24  N.  Y.  178 ;  80  Am  Dec. 
327;  Thorp  7J.  Keokuk  Coal  Co.,  48  N.  Y.  253;  Atlantic  Dock  Co.  r.  Leavitt, 
54  N.  Y.  35;  Vrooman  v.  Turner,  69  N.  Y.  280  ;  Hoff's  Appeal,  24  Pa.  St.  200; 
Moore's  Appeal,  88  Pa.  St.  450 ;  Merriman  r.  Moore,  90  Pa.  St.  78 ;  Townsend 
V.  Long,  77  Pa.  St.  143 ;  Justice  v.  Tallman,  86  Pa.  St.  147  ;  Strohauer  >:  Voltz, 
42 Mich.  444;  Norwood?'.  De  Hart,  30  N.  J.  Eq.  412;  Thompson  v.  Bertram, 
14  Iowa,  476;  Corbett  v.  Waterman,  11  Iowa,  86  ;  Lamb  v.  Tucker,  42  Iowa, 
118 ;  Bowen  v.  Kurtz,  37  Iowa,  239 ;  Schmucker  v.  Sibert,  18  Kan.  104  ; 
Rogers  i).  Herron,  92  111.  583 ;  (iautzert  v.  Hoge,  73  111.  30;  Miller  ;•.  Bil- 
lingsly,  41  Ind.  489 ;  Fitzgerald  v.  Barker,  70  Mo.  685 ;  26  Am.  Rep.  660,  and 
note  where  some  of  these  cases  are  discussed. 

1  Crowell  V.  Hospital,  27  N.  J.  Fx].  650. 

^  ElUott  V.  Sackett,  108  U.  S.  132 ;  Drury  v.  Hayden,  111  U,  S.  223. 


1012  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

any  right  of  either  party  to  the  suit,  it  affords  no  ground  for 
refusing  relief/ 

§  1029.  The  Promise  Must  Be  Made  Upon  a  Valid  Con- 
sideration.— The  mortgagee  may  adopt  the  act  of  the  grantor 
for  his  own  benefit.  It  is  sufficient  if  tlie  promise  to  assume 
payment  be  made  upon  a  valid  consideration  passing  to  the 
grantee  ;  the  mortgagee  adopting  the  act  of  the  mortgagor 
brings  himself  into  privity  with  the  promisor,  and  therefore 
may  enforce  the  promise  as  if  made  directly  to  him.^  In  order 
to  avail  himself  of  this  promise  the  grantor  must  himself  be 
personally  liable  for  the  payment  of  the  mortgage  debt.^ 

Plowever,  Illinois  and  Pennsylvania  courts  hold  a  different 
doctrine.  In  these  States  it  is  held  that  the  purchaser  is  liable 
upon  his  assumption  to  pay  the  mortgage,  although  the  agree- 
ment to  assume  be  in  a  deed  from  the  grantor  who  was  not 
personally  liable  to  pay  the  mortgage.  Because  a  vendor  may 
direct  how  the  purchase-money  shall  be  paid,  and  if  the  vendee 
agrees  to  pay  it  according  to  such  directions,  he  cannot  set  up 
as  a  defense  that  his  vendor  was  under  no  duty  to  apply  it  in 
such  manner.* 

§  1030.  The  Mortgagee  Must  Have  an  Interest  in  the 
Land  or  Some  Relation  to  It. — Under  this  doctrine  it  is 
essential  that  the  party  holding  the  mortgage  shall  have  some 
relation  to  or  interest  in  the  lands  at  the  time  the  purchaser 

^Whiting  V.  Bank,  13  Pet.  (U.  S.)  6  ;  Miller  v.  Thompson,  34  Mich.  10;  Me- 
chanics' Bank  v.  Seton,  1  Pet.  (U.  S.)  299. 

*  Ayres  v.  Randall,  108  Ind.  595 ;  Follansbee  v.  Johnson,  28  Minn.  311 ;  Bay 
V.  Williams,  112  111.  91 ;  Thompson  v.  Dearborn,  107  111.  87 ;  Dean  v.  Walker, 
107  111.  540 ;  47  Am.  Rep.  467  ;  Daub  v.  Englebach,  109  111.  267 ;  Carnahan  v. 
Tousey,  93  Ind.  561 ;  Ross  v.  Kennison,  38  Iowa,  396 ;  Todd  v.  Weber,  95  N. 
Y.  181 ;  Lamb  v.  Tucker,  42  Iowa,  118  ;  Center  v.  McQuesten,  24  Kan,  480  ; 
Heim  v.  Vogel,  69  Mo.  529  ;  Cooper  r.  Foss,  15  Nebr.  515 ;  Bassett  v.  Hughes, 
43  Wis.  319 ;  McDowell  v.  Laev,  35  Wis.  171 ;  Fitzgerald  v.  Barker,  13  Mo. 
App.  192  ;  70  Mo.  685. 

^Crowell  V.  Hospital,  27  N.  J.  Eq.  050 ;  Vrooman  v.  Turner,  69  N.  Y.  280  ; 
Keller  v.  Ash  ford,  183  U.  S.  610,  625. 

*  INIerriman  v.  Moore,  90  Pa.  St.  78,  81 ;  Dean  v.  Walker,  107  111.  541 ;  47 
Am.  Rep.  467. 


TRANSFER    OF    THE    MORTGAGED    PROPERTY.  1013 

assumes  the  payment  of  the  mortgage.  After  this  purchase 
and  agreement  to  assume  payment,  if  a  party  acquires  an 
interest  in  the  premises,  he  cannot  have  it  inure  to  his 
benefit.^ 

It  is  generally  stated,  to  entitle  a  third  person  to  claim  a 
benefit  of  the  agreement  of  the  parties,  there  must  be  either  a 
new  consideration  or  some  prior  right  or  claim  against  one  of 
the  contracting  parties,  by  which  he  has  a  legal  interest  in  the 
performance  of  the  agreement.^ 

A  subsec|uent  assignee  of  the  mortgage  has  the  same  right 
of  action  against  the  purchaser  that  the  mortgagee  has.^  If  a 
second  or  third  or  other  succeeding  vendee  agrees  only  to  save 
his  grantor  harmless,  the  mortgagee  has  no  right  of  action 
against  such  vendee.* 

§  1031,  Actions  at  Law — Assumpsit. — In  many  of  the 
States  the  mortgagee  can  maintain  a  suit  at  law  to  recover 
from  the  purchaser,  and  need  not  resort  to  equity.  Thus,  when 
the  payment  of  an  outstanding  incumbrance,  created  by  the 
grantor  of  the  equity  of  redemption,  constitutes  a  part  of  the 
purchase-money,  the  law  implies  an  undertaking  by  the  pur- 
chaser to  pay  the  debt,  and  the  mortgagee  may  recover  in  as- 
sumpsit.^ Taking  the  deed  subject  to  an  outstanding  mortgage 
creates  no  personal  liability  of  the  grantee  to  pay  off  the  mort- 
gage, unless  he  has  especially  agreed  to  do  so,  or  the  amount 
of  the  mortgage  has  been  deducted  from  the  purchase  price. 
When  the  payment  of  an  outstanding  mortgage  is  part  of  the 
purchase  price  of  the  land,  the  law  will  imply  an  agreement 
to  pay  the  debt." 

As  Chancellor  Kent  said :  "The  leaving  of  so  much  money  in 
the  hands  of  the  purchaser  for  the  use  of  the  mortgagee  would 

1  Miller  v.  Winchell,  70  N.  Y.  437. 

^  Vrooman  v.  Turner,  69  N.  Y.  280 ;  Cashman  v.  Henry,  75  N.  Y.  103 ;  55 
How.  Pr.  (N.  Y.)  234. 

'Smith  V.  Ostermeyer,  68  Ind.  432;  Fitzgerald  r.  Barker,  85  Mo.  13;  Hay- 
den  V.  Snow,  9  Bipp.  C.  C.  511. 

*  First  Nat.  Bank  r.  Pchussler  (Ky.),  2  S.  W.  Rep.  145. 

^Tvvitchell  v.  Mears,  8  Biss.  C.  C.  211;  6  Reporter,  40. 

^  Comstock  V.  Hitt,  37  111.  542. 


1014  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

seem  to  be  sufficient  ground  for  a  suit  at  law  by  the  mort- 
gagee." ^ 

Or,  as  Justice  Maxwell  says,  that  the  mortgagee,  after  the 
debt  becomes  due,  may  bring  an  action  against  the  purchaser 
and  recover  the  amount  due  thereon  ;  that  this  right  is  based 
on  the  fact  that  a  contract  has  been  made  between  the  original 
debtor  and  a  third  party,  whereby  such  third  party,  for  a  suffi- 
cient consideration,  takes  the  property  mortgaged  and  assumes 
the  burden  thereon.  This  contract  the  mortgagee  may  avail 
himself  of,  and  bring  an  action  directly  against  the  purchaser 
thus  assuming  the  debt.^ 

It  is  held  that  the  legal  effect  of  the  transaction  is  to  leave 
the  portion  of  the  purchase-money  represented  by  the  incum- 
brance in  the  hands  of  the  purchaser  for  the  purpose  of  paying 
the  incumbrance ;  the  promise  being  made  for  the  benefit  of 
the  holder  of  the  incumbrance,  he  may  maintain  an  action  at 
law  to  enforce  it.^ 

This  is  in  accord  with  the  weight  of  authority.  Many  of 
the  most  recent  cases  support  the  right  of  the  mortgagee  to 
maintain  the  action  at  law.* 

^Cumberland  v.  Codrington,  3  Johns.  Ch.  (N.  Y.)  229,  and  cases  cited. 

2  Keedle  v.  Flack,  27  Nebr.  836 ;  Shamp  v.  Meyer,  20  Nebr.  223 ;  Bond  v. 
Dolby,  17  Nebr.  491 ;  Morgan  v.  Mining  Co.,  37  Cal.  5.34 ;  Helmes  v.  Kearns, 
40  Ind.  124 ;  Johnson  v.  Knapp,  36  Iowa,  616 ;  Anthony  v.  Herman,  14  Kan. 
494 ;  McDowell  v.  Laev,  35  AVis.  171 ;  Sanders  v.  Clason,  13  Minn.  379 ;  Bay  v. 
Williams,  112  111.  91 ;  Follansbee  v.  Johnson,  28  Minn.  311 ;  Thompson  v. 
Thompson,  4  Ohio  St.  333 ;  Lawrence  v.  Fox,  20  N.  Y.  268 ;  Farley  v.  Cleve- 
land, 4  Cow.  (N.  Y.)  432 ;  9  Cow.  (N.  Y.)  639 ;  Merriman  v.  Moore,  90  Pa. 
St.  80 ;  Putney  v.  Farnham,  27  Wis.  187. 

3  Burr  V.  Beers,  24  N.  Y.  178 ;  Garnsey  v.  Rogers,  47  N.  Y.  234 ;  Thompson 
V.  Thompson,  4  Ohio  St.  333  ;  Parkinson  r.  Sherman,  74  N.  Y.  88. 

*  Joslin  V.  New  Jersey  Car  Spring  Co.,  36  N.  J.  L.  141 ;  Bassett  v.  Hughes, 
43  Wis.  319 ;  Lamb  v.  Tucker,  42  Iowa,  118 ;  Putney  v.  Farnham,  27  Wis 
187;  Bay  v.  Williams,  112  111.  91;  Bohanan  v.  Pope,  42  Me.  93 
Vrooman  v.  Turner,  8  Hun  (N.  Y.),  78 ;  Brown  v.  Ins.  Co.,  5  R.  I.  394 
Motley  r.  Ins.  Co.,  29  Me.  337 ;  Carnegie  v.  Morrison,  2  Met.  (Mass.)  381 
Brewer  v.  Dyer,  7  Cush.  (Mass.)  337 ;  Follansbee  v.  Johnson,  28  Minn.  311 
Morgan  r.  Overman  Silver  Min.  Co.,  37  Cal.  534 ;  Snell  r.  Ives,  85  111.  279 
Helmes  r.  Kearns,  40  Ind.  124 ;  Johnson  v.  Knapp,  36  Iowa,  616 ;  Anthony 
V.  Herman,  14  Kan.  494 ;  Hind  v.  Holdship,  2  Watts  (Pa.),  104  ;  McDowell  v. 
Laev,  35  Wis.  171 ;  Townsend  v.  Long,  77  Pa.  St.  143 ;  Campbell  v.  Smith, 


I 


TRANSFER    OF    THE    MORTGAGED    PROPERTY.  1015 

Judge  Potter  says  :  "It  is,  so  far  as  the  vendee  is  concerned, 
the  same  as  if  the  holder  of  the  mortgage  had  discharged  it  at 
the  time  of  sale,  and  he  had  himself  given  a  new  note  or  bond 
and  mortgage  for  the  same  sum  to  the  holder  of  the  old 
one 


5>   1 


§  1032.  Statutory  Provisions. — In  Connecticut  it  is  pro- 
vided that  whenever  any  real  estate  incumbered  by  mortgage 
or  lien  shall  be  conveyed,  subject  to  such  mortgage  or  lien,  and 
in  such  conveyance  there  shall  be  a  provision  that  the  grantee 
shall  assume  and  pay  such  incumbrance,  the  holder  of  such 
mortgage  or  lien,  may,  upon  the  non-payment  of  the  same, 
maintain  an  action  in  his  own  name  upon  such  promise  with- 
out obtaining  an  assignment  thereof  from  the  grantor  of  said 
premises.^ 

§  1033.  The  Equitable  Doctrine. — In  New  York  the  mort- 
gagee is  entitled  to  maintain  a  suit,  either  in  equity  or  at  law, 
against  the  grantee  of  the  mortgagor  to  enforce  the  payment 
of  the  assumed  debt.^ 

It  is  held  in  some  States  that  an  agreement  of  the  grantee, 
in  a  deed  signed  and  sealed  by  the  grantor  only,  is  in  the  na- 
ture of  a  covenant  under  seal,  and  consequently  a  specialty  ;  * 
and  in  others  that  such  an  agreement  is  in  the  nature  of  an 
assumpsit  or  implied  contract,  arising  from  the  acceptance  of 
the  deed,  and  consequently  a  simple  contract.* 

71  N.  Y.  26 ;  Keedle  v.  Flack,  27  Nebr.  836 ;  Justice  v.  Tallman,  86  Pa.  St. 
147. 

1  Barrows  v.  Nat.  Rubber  Co.,  12  R.  I.  173.  See,  also,  Pardee  v.  Treat,  82 
N.  Y.  385 ;  Hand  v.  Kennedy,  83  N.  Y.  149 ;  Bowen  v.  Beck,  94  N.  Y.  86 ; 
Patten  v.  Adkins,  42  Ark.  197. 

"^  Acts  1881,  ch.  97. 

^Halsey  v.  Reed,  9  Paige  (N.  Y.),  446  ;  King  r.  Whitely,  10  Paise  (N.  Y.), 
465;  Blyer  r.  Monholland,  2  Sandf.  Ch.  (N.  Y.)  478;  Trotter  r.  Hughes,  12 
N.  Y.  74 ;  Burr  v.  Beers,  24  N.  Y.  178 ;  Campbell  v.  Smith,  71  N.  Y.  26 ;  Par- 
dee V.  Treat,  82  N.  Y.  385  ;  Hand  v.  Kennedy,  83  N.  Y.  149  ;  Bowen  v.  Beck, 
94  N.  Y.  86. 

*Finley  v.  Simpson,  2  Zab.  (N.  J.)  311 ;  Crowell  v.  Hospital,  27  N.  J.  Eq.  650, 
652  ;  Atlantic  Dock  Co.  v.  Leavitt,  54  N.  Y.  35 ;  Bowen  v.  Beck,  94  N.  Y.  86. 

^  Locke  V.  Homer,  131  Mass.  93, 102 ;  Foster  v.  At  water,  42  Conn.  244 ;  John- 
son V.  Muzzy,  45  Vt.  419  ;  Maule  v.  Weaver,  7  Pa.  St.  329  ;  Hocking  County 


1016  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

But  in  some  States  whether  the  agreement  of  the  grantee  is 
or  is  not  considered  under  seal,  it  is  an  agreement  made  with 
the  grantor  only,  and  creates  no  direct  obligation  to  the  mort- 
gagee upon  which  the  latter  can  sue  at  law.  If  the  agree- 
ment of  the  grantee  is  considered  as  under  seal,  by  reason 
of  the  deed  being  sealed  by  the  grantor,  it  falls  within  the 
settled  rule  of  the  common  law  that  no  one  can  maintain 
an  action  at  law  on  a  contract  under  seal  to  which  he  is  not 
a  party.^ 

If  the  agreement  of  the  grantee  is  considered  as  in  the 
nature  of  assumpsit,  implied  from  his  acceptance  of  the  deed, 
still,  being  made  with  the  grantor  only  and  for  his  benefit, 
upon  a  consideration  moving  from  him  alone,  there  being  no 
privity  of  contract  between  the  grantee  and  the  mortgagee, 
and  the  latter  not  having  known  of  or  assented  to  the  agree- 
ment at  the  time  it  was  made,  nor  having  since  done  or 
omitted  any  act  on  the  faith  of  it,  it  follows  that,  by  the  law  as 
declared  by  the  United  States  Supreme  Court,  the  mortgagee 
cannot  maintain  an  action  at  law  against  the  grantee.^  The 
payments  made  by  the  grantee,  and  accepted  by  the  mortgagee, 
on  account  of  the  mortgage  debt  are  made  pursuant  to  the 
grantee's  contract  with  the  mortgagor,  and  do  not  create,  or 
warrant  to  be  inferred,  a  new  contract  between  the  grantee  and 
the  mortgagee.  Such  agreement  can,  therefore,  be  enforced  in 
equity  only,  by  the  mortgagee.^  And  where  the  jurisdiction 
of  equity  is  distinct  from  the  jurisdiction  of  law,  equitable 
relief  cannot  be  granted  in  an  action  of  law.'' 

Trustees  v.  Spencer,  7  Ohio,  pt.  2,  149;  Society  v.  Haines,  47  Ohio  St. 
423. 

1  Hendrick  v.  Lindsay,  93  U.  S.  143, 149 ;  Southampton  v.  Brown,  0  Barn.  & 
Cress.  718 ;  Chesterfield  v.  Hawkins,  3  Hurl.  &  C.  G77  ;  Northampton  v.  Elwell, 
4  Gray  (Mass.),  81 ;  Crowell  v.  Hospital,  27  N.  J.  Eq.  650,  653. 

*  Keller  v.  Ashford,  133  U.  S.  610,  620,  622 ;  National  Bank  v.  Grand  Lodge, 
98  U.  S.  123.     See,  also,  Cragin  v.  Lovell,  109  U.  S.  194. 

nVillard  v.  Wood,  135  U.  S.  309,  affirming  4  Mackey  (Dist.  Col.)  538. 

*Fenn  r.  Holme,  21  How.  (U.  S.)  481 ;  Willard  v.  Wood,  135  U.  S.  309,  314. 
See,  also,  Mellen  ?'.  Whipple,  1  Gray  (Mass.),  317;  Crowell  v.  Currier,  27  N.J. 
Eq.  152;  Cro\vell  v.  Hospital,  27  N.  J.  Eq.  650  j  Unger  v.  Smith,  44  Mich.  22; 
Stuart  V.  Worden,  42  Mich.  154. 


! 


TRANSFER    OF    THE    MORTGAGED    PROPERTY  1017 

§  1034.  Conflict  of  Laws — Lex  Fori. — The  right  to  en- 
force such  an  agreement  against  the  purchaser  of  the  mort- 
gagor, the  form  of  the  mortgagee's  remedy,  whether  it  must  be 
in  covenant  or  assumpsit,  at  law  or  in  equity,  is  governed  by 
the  lex  fori,  the  law  of  the  place  where  the  action  is  brought.^ 
Thus,  in  the  District  of  Columbia,  a  mortgagee  can  enforce  an 
agreement  of  the  grantee  of  the  mortgagor,  contained  in  a 
deed  to  him,  to  pay  the  mortgage  debt,  by  bill  in  equity  only, 
although  by  the  law  of  the  place  where  the  land  is.  New  York, 
and  where  the  mortgage  and  the  subsequent  deed  were  made, 
he  might  sue  the  grantee  at  law.^ 

§  1035.  Cannot  Maintain  an  Action  in  Mortgagor's 
Name. — The  only  cases  in  which  a  third  person  has  the  ex- 
clusive right  to  control  an  action  at  law  are  where  he  has 
acquired  the  whole  interest  of  the  nominal  plaintiff  either  by 
voluntary  act,^  or  by  operation  of  law.* 

Under  this  principle  a  mortgagee  has  no  right  without  or 
against  the  consent  of  the  mortgagor  to  bring  and  control  an 
action  at  law  in  the  name  of  the  grantor  or  mortgagor.^  A 
court  of  law  cannot,  where  both  the  mortgagor  and  the  mort- 
gagee are  both  interested  in  a  case  of  action,  upon  summary 
motion,  and  without  regular  issue,  determine  the  equities 
between  them,  and  take  the  control  of  a  case  out  of  the  hands 
of  the  plaintiff  of  record.® 

As  between  the  mortgagor  or  a  stranger  and  the  mortgagee, 
the  sale  of  the  mortgaged  premises  covers  the  growing  crops, 
and  the  mortgagee  cannot  recover  them.^ 

1  Dixon  V.  Ramsay,  3  Cranch  (U.  S.),  319,  324;  United  States  Bank  r.  Don- 
nally,  8  Pet.  (U.  S.)"361 ;  Wilcox  v.  Hunt,  13  Pet.  (U.  S.)  378 ;  Leroy  v.  Beard, 
8  How.  (IT.  S.)  451 ;  Pritcliard  v.  Norton,  106  U.  S.  124, 130,  133. 

*Willard  v.  Wood,  135  U.  S.  309,  313,  affirming  4  Mackey  (Dist.  Col.), 
538. 

^Foss  V.  Bank,  111  Mass.  285. 

*Hart  V.  Railroad  Co.,  13  Met.  (Mass.)  99. 

s  Coffin  r.  Adams,  131  Mass.  133. 

^Corbett  ?■.  Waterman,  11  Iowa,  89;  In  re  Empress  Engineering  Co.,  16 
Ch.  Div.  125, 129. 

^Wallace  v.  Cherry,  32  Mo.  App.  436. 


1018  RIGHTS    OF    PARTIES   BEFORE   DEFAULT. 

§  lOoG.  Absolute  Conveyance. — "Where  the  grantee  in  an 
absolute  conveyance  of  land  assumes  and  agrees  to  pay  a  mort- 
gage thereon  given  by  his  grantor,  an  absolute  and  irrevocable 
obligation  is  thereby  created  in  favor  of  the  mortgagee  which 
cannot  be  released  or  affected  by  any  act  or  agreement  of  the 
mortgagor,  to  which  the  grantee  does  not  assent/ 

The  grantee  is  also  liable  to  the  mortgagee  to  the  extent  of  the 
purchase-money  yet  unpaid  when  he  receives  actual  notice  of 
the  mortgage,  though  the  unpaid  purchase-mone}^  was  by 
agreement  with  the  grantor  to  be  discharged  by  the  payment 
of  certain  debts  owing  to  third  parties  by  the  latter.^ 

The  release  of  the  grantee  by  the  grantor,  in  accordance 
with  or  to  the  extent  of  the  equities  between  them,  would  bind 
the  mortgagee.^  However,  when  the  mortgagee  has  adoj^ted 
such  agreement  of  assumption,  his  rights  cannot  be  displaced.* 

§  1037.  Covenants  in  Mortgagor's  Deed — Second  Mort- 
gage.— Under  a  bond  to  save  the  grantee  of  land  subject  to  a 
mortgage  harmless  from  a  second  mortgage,  and  to  cause  it  to 
be  assigned  to  him  within  six  months,  a  failure  to  cause  such 
an  assignment  to  be  made  within  six  months  will  entitle  the 
grantee,  even  after  foreclosure  of  the  first  mortgage,  to  main- 
tain an  action,  and  if  the  estate  is  not  worth  more  than  the 
sum  of  the  two  mortgages,  to  recover  the  difference  between  its 
value  and  the  amount  due  on  the  first  mortgage.^  And  when 
the  grantee  agrees  to  pay  two  mortgages  on  the  land,  he  under- 
takes not  only  to  relieve  the  grantor  from  personal  liability 
under  the  mortgage,  but  to  discharge  the  lien  of  the  mortgages, 
and  the  grantor  is  interested  in  having  the  lien  of  the  first 
mortgage  discharged,  for  the  improvement  of  the  security  of 
the  second.*^ 

^  Douglass  V.  Wells,  18  Hun  (N.  Y.),  88,  overruling  Stephens  v.  Casbacker, 
8  Hun  (N.  Y.),  116.    See,  also,  Bay  v.  Williams,  112  111.  91 ;  54  Am.  Eep.  209. 
'^  Watkins  v.  Vrooman,  51  Hun  (N.  Y.),  175. 
3  Judson  V.  Dada,  79  N.  Y.  373. 

*  Bassett  v.  Hughes,  43  Wis.  319 ;  Hayden  v.  Drury,  3  Fed.  Eep.  782,  789 ; 
Bassett  v.  Bradley,  48  Conn.  224. 

*  Coombs  V.  Jenkins,  10  Gray  (Mass.),  153. 
sEice  V.  Sanders,  152  Mass.  io8. 


TRANSFER    OF    THE    MORTGAGED    PROPERTY.  1019 

§  1038.  General  Covenants  in  Grantor's  Deed. — The 
general  covenants  in  a  grantor's  deed  bind  him  to  pay  off  the 
mortgage,  unless  the  mortgage  is  excepted.^ 

If  the  consideration  is  simply  the  value  of  the  equit}^  of  re- 
demption, yet  if  it  was  a  part  of  the  real  consideration  that  the 
grantee  should  assume  and  pay  the  debt  secured  by  the  mort- 
gage, it  will  be  his  duty,  as  between  him  and  his  grantor,  to 
do  so.^ 

One  who  has  sold  mortgaged  land  with  warranty,  and  has 
covenanted  to  pay  oflP  the  mortgage,  cannot  make  title  to  him- 
self as  against  his  grantee  by  allowing  foreclosure  and  redeem- 
ing the  land.^  The  covenantee  on  breach  of  such  covenant, 
can  recover  the  full  amount  of  the  mortgage  and  interest,  even 
though  he  shows  no  special  damages  to  himself  from  the  breach 
of  the  covenant.^ 

And  a  covenant  in  a  deed  by  which  the  grantee  assumes  and 
agrees  to  pay  a  mortgage  upon  the  premises  conveyed,  after  it 
has  come  to  the  knowledge  of  the  owner  of  the  mortgage  who 
has  assented  to  and  adopted  it  as  a  security  for  his  own  benefit, 
is  not  revocable.^ 

When  the  mortgagee  seeks  to  recover  for  a  deficiency  against 
an  intermediate  grantee  who  assumed  the  mortgage,it  shows  that 
the  mortgagee  has  adopted  and  relies  on  the  covenants  of  such 
assumption."  And  tlie  grantee  cannot  after  such  adoption  re- 
pudiate his  promise  on  the  ground  that,  by  reason  of  mistake 
in  the  description,  the  mortgage  does  not  cover  the  land.^ 

^Drury  v.  Treniont  Improvement  Co.,  13  Allen  (Mass.),  168. 

^  Drury  v.  Tremont  Improvement  Co.,  13  Allen  (Mass.),  168. 

3  Huxley  v.  Rice,  40  Mich.  73. 

''Lethbridge  v.  Mytton,  2  Barn.  &  Ad.  772;  Loosemore  v.  Radford,  0  Mees. 
&  W.  657  ;  Hodjjson  v.  Wood,  2  Hurl.  &  C.  649  ;  Carr  v.  Roberts,  5  Barn.  & 
Ad.  78 ;  Post  v.  Jackson,  17  Johns.  (N.  Y.)  238  ;  Mann  v.  Eckford,  15  Wend. 
(N.  Y.)  502 ;  Wicker  r.  Iloppock,  6  Wall.  (U.  8.)  99 ;  Church  r.  Higgins,  48 
N.  Y.  532 ;  Furnas  v.  Durgin,  119  Mass.  500 ;  Hall  v.  Nash,  10  Mich.  303 ; 
Booth  V.  Starr,  1  Conn.  249 ;  Lathrop  r.  Atwood,  21  Conn.  123 ;  Hogan  r.  Cal- 
vert, 21  Ala.  199 ;  Wilcox  v.  Musche,  39  Mich.  101. 

s  Gifford  V.  Michael,  117  N.  Y.  257  ;  Watkins  v.  Reynolds,  123  N.  Y.  211. 

«New  York  Life  Ins.  Co.  v.  Aitkins,  125  N.  Y.  660,  reversing  58  K  Y. 
Superior  Ct.  586. 

^  Kellums  v.  Hawkins,  36  111.  App.  161. 


1020  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

§  1039.  Release  by  Mortgagor. — By  agreement  the  mort- 
gage may  be  released  by  the  mortgagor.  Thus,  an  agreement 
that  the  mortgagor  may  sell  the  property  and  credit  the  pro- 
ceeds to  the  mortgagee  gives  him  a  right  to  sell  and  transfer ; 
but  it  gives  him  no  right  to  convey  the  land  in  exchange  for 
a  conveyance  to  him  of  other  land.^  So  where  an  agreement 
was  made  between  the  mortgagor  and  the  mortgagee,  for  a 
good  consideration,  releasing  the  mortgagor  from  personal 
liability  of  the  debt,  a  grantee  of  the  mortgagor  who  purchases 
subject  to  the  mortgage  cannot  complain  of  such  release  ;  nor 
can  the  payment  in  consideration  of  the  release  be  regarded  as 
a  satisfaction  as  to  him.^ 

§  1040.  Release  by  Vendee. — When  the  immediate 
grantee  of  land  subject  to  a  mortgage  assumes  and  agrees 
to  pay  it,  having  released  the  grantor's  executor  from  lia- 
bility therefor,  yet  the  mortgagee  can  recover  judgment  against 
the  latter.  And  where  mortgaged  property  is  sold  to  one  who 
assumes  the  mortgage  after  the  adoption  by  the  grantee  of  the 
covenants  of  such  assumption,  the  grantee  cannot  be  released 
from  this  obligation  of  his  grantor  and  previous  covenan- 
tor.^ 

Article  5, 
Right  of  Mortgagor  or  Grantor  to  Enforce  the  Contract. 

I  1041.  Action  By  Grantor.  ^  1044.  Enforcing     Promise     Before 

§  1042.  In  Case  of  Death  of  Grantor.  Payment  of  the  Debt. 

§  1043.  Action  at  Law. 

§  1041.  Action  by  Grantor. — When  the  purchaser  has 
accepted  the  benefit  of  a  conveyance,  he  cannot  repudiate  the 
burden  imposed  upon  him  by  the  express  agreement  therein, 

nVoodward  ?■.  Jewell,  140  U.  S.  247,  reversing  25  Fed.  Rep.  689. 

^  Osborn  v.  Williams,  82  Iowa,  456.  See,  also,  Chilton  v.  Brooks,  72  Md. 
554;  Blake  v.  Moore,  57  Hun  (N.  Y.),  591. 

3  New  York  Life  Ins.  Co.  v.  Aitkin,  125  N.  Y.  660,  reversing  58  N.  Y.  Supe- 
rior Ct.  586. 


TRANSFER    OF    THE    MORTGAGED    PROPERTY.  1021 

and  he  is  liable  to  his  grantor  for  any  breach  of  that  agree- 
ment/ 

The  assumption  of  the  mortgage  is  a  contract  by  the  grantee, 
not  merely  to  indemnify  the  grantor,  but  to  pay  the  debt  off, 
if  it  be  the  debt  of  the  grantor.^ 

If  the  purchaser  fails  to  fulfill  his  contract  with  the  grantor, 
the  mortgagor  may  take  an  assignment  of  the  mortgage  and 
enforce  it,^  recovering  the  amount  paid  by  him.* 

And  when  the  mortgagor  pays  the  debt,  he  thereby  becomes 
the  equitable  assignee  of  the  mortgage,  and  is  subrogated  to 
the  benefit  of  the  security.^ 

The  purchaser  is  personall}^  liable,  both  to  the  grantor  and 
the  mortgagee,  when  he  assumes  the  mortgage  debt.^ 

§  1042.  In  Case  op  Death  of  Grantor. — The  grantee  is 
bound  by  his  covenant  to  assume  the  mortgage  debt ;  if  the 
grantor  die  before  the  breach  of  the  covenant  to  assume,  the 
land  descends  to  the  grantor's  heirs,  who  are  the  parties  to 
bring  the  suit  for  such  breach.  Hence  the  administrator  or 
executor  cannot  maintain  the  action.  The  heirs  of  the  grantor 
are  the  parties  injured  by  the  failure  of  the  grantee  to  pay  off 
the  mortgage  according  to  agreement.'' 

§  1043.  Action  at  Law. — The  grantor  may  proceed  against 
the  grantee,  after  paying  the  debt,  at  law  to  recover  the  amount, 
which  he  has  paid,  from  the  grantee.^  And  evidence  is  admis- 
sible that,  at  the  time  the  mortgage  was  executed,  the  grantor 
held  the  premises  in  trust  for  the  grantee  and  others,  and  that 

1  Blyer  v.  Monholland,  2  Sandf.  Ch.  (N.  Y.)  478 ;  Coolidge  v.  Smith,  129 
Mass.  554;  Locke  v.  Homer,  131  Mass.  93 ;  Muhlig  v.  Fiske,  131  Mass.  110. 

^Furnas  v.  Durgin,  119  Mass.  500. 

=*  Sparkman  v.  Gove,  44  N.  J.  L.  252 ;  Crowell  v.  Hospital,  27  N.  J.  Eq.  650, 
655;  Braman  r.  Dowse,  12  Cush.  (Mass.)  227;  Strohauer  v.  Voltz,  42  Mich. 
444  ;  Jewett  7'.  Draper,  a  Allen  (Mass.),  434  ;  BoUes  v.  Beach,  22  N.  J.  L.  680. 

*  Mills  V.  Watson,  1  Sweeny  (N.  Y.),  374. 

5  Risk  V.  Hoflnian,  69  Ind.  137  ;  Ayers  v.  Dixon,  78  N.  Y.  318;  Kinnear  v. 
Lowell,  34  Me.  299  ;  Baker  r.  Terrell,  8  Minn.  195. 

6  Jones  V.  Parks,  78  Ind.  537. 

^  Ayers  v.  Dixon,  78  N.  Y.  318. 
8  Wood  V.  Smith,  51  Iowa,  156. 


1022  RIGHTS   OF   PARTIES    BEFORE    DEFAULT. 

the  mortgage  was  given  to  take  up  the  grantee's  share  of  the 
prior  mortgage.^  The  grantor,  upon  breach  of  the  contract, 
may  proceed  against  the  grantee  upon  his  covenant,  before 
paying  the  debt ; "  or  he  may  proceed  in  equity  to  compel  the 
grantee  to  fulfill  his  contract.^ 

§  1044.  Enforcing  Promise  Before  Payment  op  the 
Debt. — The  promise  to  pay  a  debt  due  from  the  promisee,  even 
where  it  has  not  been  paid  by  him,  is  one  upon  which  an  ac- 
tion may  be  maintained  and  damages  recovered  ;  this  is  held 
by  many  authorities ;  *  and  in  such  case  it  is  not  necessary 
that  the  promisee  should  show  that  he  had  sustained  damages 
before  he  can  recover  on  such  promise.^ 

In  common  understanding  and  legal  effect,  to  "  assume  " 
a  debt  is  an  undertaking  to  pay  it  as  the  proper  debt  of  the 
party  who  enters  into  the  undertaking.^ 

When  the  grantee  promises  to  pay  a  certain  debt  due  from 
the  grantor  to  a  third  person,  the  effect  of  this  promise  is  not 
restricted,  either  as  to  the  form  of  pleading,  the  rules  of  evi- 
dence, or  the  measure  of  damages,  by  the  fact  that  the  grantee, 
by  his  agreement,  further  promises  to  indemnify  the  grantor 
and  save  him  harmless.'^ 

Therefore,  a  promise  to  pay  a  debt  due  from  the  promisee 

^Lappen  v.  Gill,  129  Mass.  349. 

^  Bowen  v.  Kurtz,  37  Iowa,  239 ;  Eubens  v.  Prindle,  44  Barb.  (N.  Y.)  336. 

■■'Cuhberly  v.  Yager,  42  N.  J.  Eq.  289  ;  Marshall  v.  Davies,  78  N.  Y.  414; 
Marsh  v.  Pike,  10  Paige  (N.  Y.),  595 ;  Fenton  v.  Lord,  128  Mass.  466. 

*  Holmes  v.  Rhodes,  1  Bos.  &  P.  638 ;  Cutler  v.  Southern,  1  Sand.  116,  note  ; 
Toussaint  v.  Martinnant,  2  Term  R.  100 ;  Loosemore  v.  Eadford,  9  Mees.  &  W. 
657 ;  Little  v.  Little,  13  Pick.  (Mass.)  426. 

5  Snyder  v.  Summers,  1  Lea  (Tenn.),  534,  540  ;  Brewer  v.  Worthington,  10 
Allen  (Mass.),  329 ;  Furnas  v.  Durgin,  119  Mass.  500. 

"  Locke  V.  Homer,  131  Mass.  91 ;  Stout  v.  Folger,  34  Iowa,  71 ;  Braman  v. 
Dowse,  12  Cush.  (INIass.)  227. 

'  Gage  V.  Lewis,  68  111.  604 ;  Thomas  v.  Allen,  1  Hill  (X.  Y.),  145  ;  Belloni  v. 
Freeborn,  63  N.  Y.  383 ;  Stout  v.  Folger,  34  Iowa,  71 ;  Hodgson  v.  Bell,  7  Term 
Rep.  93  ;  Carr  v.  Roberts,  2  Nev.  &  M.  42 ;  5  Barn.  &  Ad.  78 ;  Hodgson  v. 
Wood,  2  Hurl.  &  C.  649  ;  Penny  v.  Foy,  8  Barn.  &  C.  11 ;  Lathrop  v.  Atwood, 
21  Conn.  117  ;  Smith  v.  Pond,  11  Gray  (Mass.),  234;  Farnsworth  i'.  Boardman, 
131  Mass.  115 ;  Reed  v.  Paul,  131  Mass.  129 ;  Wicker  i'.  Hoppock,  6  Wall. 
(U.  S.)  94.    Compare  Burbank  v.  Gould,  15  Me.  118. 


TRANSFER    OP    THE    MORTGAGED    PROPERTY.  1023 

even  where  it  has  not  been  paid  by  him,  is  one  on  which  an 
action  may  be  maintained,  and  damages  recovered  to  the 
amount  of  such  debt.'  . 

But  in  equity,  when  the  grantor  enforces  this  agreement  by 
ths  grantee,  to  assume  and  pay  the  debt,  the  grantor  must  first 
pay  the  debt,  or  if  a  decree  is  made  without  such  payment,  it 
will  be  for  so  much  as  is  necessary  to  pay  the  debt  of  the 
mortgagee,  and  paid  directly  to  him.^ 

The  grantee  must  pay  the  debt  when  due.*  If  he  pays  after 
due,  and  before  final  judgment,  the  grantor  can  recover  only 
nominal  damages.* 

Article  6. 

Defense  of  Purchaser. 

§  1045.  Right  to  Refuse  Payment.  ^  1049.  Purchaser  at  Execution  Sale. 

^  1046.  Mistake  in  the  Agreement  to  ^  1050.  Void  Promise  to  Pay  a  Mort- 

Assume.  gage. 

^  1047.  Power    Conferred    by    Mort-  §  1051.  No   Agreement    to    Pay    the 

gagor.  Debt. 

^  1048.  Cannot  Set  Up  Usury.  .  §  1052.  Measure  of  Damages. 

§  1045.  Right  to  Refuse  Payment. — When  real  property 
has  been  conveyed  subject  to  a  mortgage,  with  conditions  in 
the  deed  requiring  the  grantee  to  assume  the  payment  of  such 
mortgage,  it  is  held  that  such  grantee  by  the  acceptance  of  the 
deed  impliedly  covenants  to  pay  the  mortgage  debt,  and  thus 
becomes  personally  liable  to  the  mortgagee  for  such  payment. 

In  such  case  the  grantee  is  precluded  from  disputing  the 
validity  of  the  mortgage,  not  on  account  of  any  recognition  of 
its  validity  or  because  he  is  estopped  in  any  way  from  so  doing, 
but  simply  because,  so  far  as  the  interest  of  the  mortgagee  in 
the  land  is  concerned,  the  right  thereto  has  l)een  withheld 
from  him  by  his  grantor  ;  ^  the  grantee  having  undertaken  to 

^Furnas  r.  Durgin,  119  Mass.  500;  Locke  v.  Homer,  131  Mass.  93;  41  Am. 
Rep.  199,  and  note. 

""Waters  v.  Bossel,  58  Miss.  602.     Compare  Furnas  r.  Durgin,  119  ]\Iass.  500. 

'Furnas  v.  Durgin,  119  Mass.  500. 

*  Hood  V.  Adams,  124  Mass.  481 ;  Muhhg  v.  Fieke,  131  Mass.  110. 

^  Green  v.  Kemp,  13  Mass.  515;  Shufelt  v.  Shufelt,  9  Paige  (N.  Y.),  145; 
Bennett  v.  Bates,  94  N.  Y.  354. 


1024  EIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

pay  the  debt,  which  was  deducted,  and  has  so  agreed,  is  pre- 
cluded from  assaiUng  the  validity  of  the  mortgage/  Such 
grantee  is  estopped  to  question  the  validity  of  the  mortgage 
for  any  cause.^ 

It  is  not  a  matter  that  concerns  the  purchaser  whether  the 
mortgage  is  void,  the  debt  fictitious  or  not.  To  permit  the  vendee 
to  hold  the  land  and  repudiate  the  mortgage  would  be  to  give 
him  the  land  without  exacting  the  purchase  price.  If  nothing 
is  really  due  upon  the  mortgage,  that  fact  will  inure  to  the 
benefit  of  the  mortgagor's  creditors.^ 

In  no  way  can  the  grantee  contest  the  validity  of  the  mort- 
gage.* 

But  there  is  authority  to  the  contrary,  which  holds  that  a 
purchaser  who  had  assumed  a  mortgage  for  a  certain  sum  was 
not  estopped  to  show  that  the  incumbrance  had  no  existence 
in  fact,  the  mortgage  having  been  fully  executed  except  the 
signing  of  the  maker,^ 

§  1046.  Mistake  in  the  Agreement  to  Assume. — If  a 
grantee  is  made  to  assume  a  mortgage  by  a  mistake,  and  the 
grantee  is  ignorant  of  this  fact,  he  may  have  the  deed  reformed 
according  to  contract.^ 

But  if  he  has  made  payments  upon  the  mortgage  without 
complaining  of  the  assumption  clause,  he  cannot  thereafter  de- 

^  Crawford  v.  Edwards,  33  Mich.  354 ;  Bond  v.  Dolby,  17  Nebr.  491 ;  Clapp 
V.  Halliday,  48  Ark.  258 ;  Flanders  v.  Doyle,  16  111.  App.  508 ;  Dean  v.  Walker, 
107  111.  540 ;  47  Am.  Rep.  467 ;  Hancock  v.  Fleming,  103  Ind.  533 ;  Forgy  r. 
Merryman,  14  Nebr.  513 ;  Pidgeon  v.  Trustees,  44  111.  501 ;  Miller  v.  Thomp- 
son, 34  Mich.  10. 

■'  Millington  v.  Hill,  47  Ark.  301. 

^  Freeman  v.  Auld,  44  N.  Y.  50 ;  Cramer  v.  Lepper,  26  Ohio  St.  59 ;  Hough  v. 
Horsey,  36  Md.  181 ;  Pickett  r.  Bank,  32  Ark.  346. 

*  Kennedy  v.  Brown,  61  Ala.  296 ;  Green  v.  Houston,  22  Kan.  35 ;  Fitzgerald 
V.  Barker,  85  Mo.  13 ;  Sidwell  v.  Wheaton,  114  111.  267 ;  Scarry  v.  Eldridge, 
63  Ind.  44 ;  Ritter  v.  Phillips,  53  N.  Y.  586 ;  Ferris  v.  Crawford,  2  Denio  (N.  Y.), 
595;  Klein  v.  Isaacs,  8  Mo.  App.  568;  Figart  v.  Halderman,  75  Ind.  564; 
Pidgeon  r.  Trustees,  44  111.  501 ;  Greither  v.  Alexander,  15  Iowa,  470 ;  Cox  v. 
Hoxie,  115  Mass.  120. 

s  Goodman  v.  Randall,  44  Conn.  321. 

6  O'Neill  V.  Clark,  33  N.  J.  Eq.  444  ;  Bull  v.  Titsworth,  29  N.  J.  Eq.  73. 


TEANSFER    OF    THE    MORTGAGED    PROPERTY.  1025 

fend  upon  the  ground  that  this  clause  was  fraudulently  in- 
serted.' 

But  when  the  mortgage  is  to  be  reformed,  the  burden 
of  proof  is  upon  the  grantee  to  show  that  a  mistake  was 
made.^  He  may  be  released  by  agreement  of  the  parties 
interested.^ 

If  the  purchaser  has  assumed  the  mortgage  and  entered  into 
possession,  and  alleges  no  eviction  and  makes  no  offer  to  sur- 
render, he  cannot  set  up  an  invalid  title.*  If  he  obtains  pos- 
session of  the  land  by  virtue  of  the  deed,  which  contains  a 
mistake  in  the  description  of  the  land,  which  can  be  corrected, 
then  he  cannot  avoid  his  liability.^ 

If  the  contract  of  assumption  is  invalidated  by  a  mistake  of 
fact,  the  vendee  can  set  that  up  and  avoid  his  liability ;  "^  he 
can  also  set  up  fraud  of  his  grantor  who  had  no  title.''' 

§  1047.  Power  Conferred  by  Mortgagor. — It  seems  that 
where  a  conveyance  of  land  is  made  subject  to  the  payment  of 
a  mortgage  thereon,  but  without  any  express  covenant  on  the 
part  of  the  grantee  to  pay  it,  the  disability  thus  imposed  upon 
him,  which  prevents  him  from  disputing  the  validity  of  the 
mortgage,  may  be  removed  by  the  grantor  by  conferring  upon 
the  former  the  right  to  question  the  mortgage  which  the  origi- 
nal conveyance  withheld.* 

It  is  unquestionable  that  the  owner  of  real  property,  appar- 
ently incumbered  by  an  invalid  mortgage,  may  convey  it  in 
such  a  manner  as  to  enable  his  grantee  to  avail  himself  of  such 
defenses  to  the  enforcement  of  the  mortgage  as  exist  in  favor 
of  the  owner.  By  receiving  the  absolute  title  and  interest,  the 
grantee  becomes  the  privy  in  estate  with  the  grantor,  and 
takes  the  property,  subject  to  the  same  conditions,  and  en- 

^  Miller  v.  Thompson,  34  Mich.  10  ;  Smith  v.  Graham,  34  Mich.  302. 
»Moran  v.  Pellifant,  28  111.  App.  278. 
3  O'Neill  V.  Clark,  33  N.J.  Eq.  444. 

*  Parkinson  v.  Sherman,  74  N.  Y.  88. 

*  Crawford  v.  Edwards,  33  Mich.  354  ;  Comstock  v.  Smith,  26  Mich.  306. 
«  Crowe  I'.  Lewin,  95  N.  Y.  423. 

'  Benedict  v.  Hunt,  32  Iowa,  27. 
8  Bennett  v.  Bates,  94  N.  Y.  354. 
65 


1026  EIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

titled  to  the  same  rights  as  pertain  to  it  in  the  hands  of  his 
grantor.' 

Hence,  when  a  grantor  conveys  a  Hmited  right  in  his  prop- 
erty while  possessing  the  power  of  conveying  a  greater  interest, 
he  can  subsequently  convey  the  remaining  interest,  discharged 
of  the  obligation  to  pay  invalid  incumbrances.^ 

§  1048.  Cannot  Set  Up  Usury. — Where  a  purchaser  has 
assumed  the  mortgage,  he  cannot  resist  the  mortgage  debt,  be- 
cause it  is  usurious.^  But  the  mortgagor  may  confer  upon 
him  the  right  to  defend  the  mortgage  on  the  ground  of  usury.* 

If  the  purchaser  is  not  liable  to  the  payment  of  the  debt, 
nor  agreed  that  it  should  be  paid  out  of  the  land,  then  he 
may  set  up  usury  in  the  mortgage.^  And  the  same  rule 
applies  to  an  assignee  of  the  mortgagor  for  the  payment  of  his 
debts.^ 

The  mortgagee  may  make  the  purchaser  a  party  to  a  fore- 
closure proceeding,  or  he  may  be  sued  on  his  personal  liability 
without  foreclosure.^ 

§  1049.  Purchaser  at  Execution  Sale. — When  the  mort- 
gage debt  is  deducted  from  the  consideration,  the  purchaser's 
title  is  subordinate  to  the  mortgage,  and  he  is  estopped  from 
denying  its  validity  ;  a  purchaser  at  an  execution  sale  of  land 

iPost  V.  Dart,  8  Paige  (N.  Y.),  640;  Cole  v.  Savapje,  10  Paige  (N.  Y.),  583; 
Dix  V.  Van  Wyck,  2  Hill  (N.  Y.),  522  ;  Merchants'  Bank  v.  Warehouse  Co.,  49 
N.  Y.  635 ;  Mason  v.  Lord,  40  N.  Y.  476. 

2  Cope  V.  Wheeler,  41  N.  Y.  311 ;  Berdan  v.  Sedgwick,  44  N.  Y.  626. 

3  Millington  v.  Hill,  47  Ark.  301 ;  Looniis  v.  Eaton,  32  Conn.  550 ;  De  Wolf  v. 
Johnson,  10  Wheat.  (U.  S.)  367,  392 ;  Jones  v.  Ins.  Co.,  40  Ohio  St.  583 ;  Bas- 
kina  v.  Calhoun,  45  Ala.  582 ;  Cleaver  v.  Burcky,  17  111.  App.  92 ;  Frost  v. 
Shaw,  10  Iowa,  491 ;  Bearce  v.  Barstow,  9  Mass.  45 ;  Mahoney  v.  Mackubin, 
54  Md.  268 ;  Spaulding  v.  Davis,  51  Vt.  77 ;  Hartley  v.  Harrison,  24  N.  Y. 
170  ;  Cope  v.  Wheeler,  41  N.  Y.  303  ;  Berdan  v.  Sedgwick,  44  N.  Y.  626 ;  Stu- 
dabaker  v.  Marquardt,  55  Ind.  .341. 

*  Mason  v.  Lord,  40  N.  Y.  470 ;  Newnaan  v.  Kershaw,  10  Wis.  333 ;  Luding- 
ton  V.  Harris,  21  Wis.  239. 

5  Maher  v.  Lanfrom,  86  111.  513  ;  Smith  v.  Cross,  16  Hun  (N.  Y.),  487 ;  Stevens 
V.  Sheridan,  30  N.  J.  Eq.  23. 

«Pearsall  v.  Kingsland,  3  Edw.  (X.  Y.)  195. 

'  Cleveland  v.  Southard,  25  Wis.  479. 


TRANSFER    OF    THE    MORTGAGED    PROPERTY.  1027 

against  the  vendee  merely  succeeds  to  his  rights,  and  is  bound 
by  the  estoppel/ 

A  purchaser  of  land  upon  an  execution  "  subject  to  whatever 
sum  might  be  due  upon  the  property  by  virtue  of  a  certain 
mortgage,"  cannot  dispute  the  validity  of  the  mortgage.^ 

When  there  are  several  mortgages  on  the  purchase,  the  ven- 
dee on  execution  sale  can  defend  against  any  that  are  fraudu- 
lent and  void,  or  fully  paid,  and  redeem  from  the  valid  mort- 
gages.^ 

When  only  incumbered  land  can  be  sold  on  execution  ac- 
cording to  statute,  an  execution  in  other  cases  being  levied 
upon  the  land,  a  vendee  of  an.  equity  of  redemption  on  execu- 
tion is  estopped  to  deny  the  existence  and  validity  of  the 
mortgage,  because  he  purchased  only  an  equity  of  redemption, 
and  if  there  be  no  such  mortgage,  there  can  be  no  such  equity.* 

§  1050.  Void  Promise  to  Pay  a  Mortgage. — If  fraud 
enters  into  the  agreement  between  the  grantor  and  grantee,  or 
want  of  consideration,  or  failure  of  consideration,  then  the 
mortgagee  cannot  enforce  the  promise  ;  or  if  the  grantee  has 
been  evicted  by  title  paramount,  the  mortgagee  has  no  remedy 
against  the  vendee.^ 

§  1051.  No  Agreement  to  Pay'  the  Debt. — When  the 
grantee  has  not  agreed  to  pay  the  mortgage  debt,  he  is  not  af- 
fected by  any  agreement  to  do  so  made  by  his  grantor.*'  And 
when  he  holds  the  equity  of  redemption  by  covenants  of  war- 
ranty, he  may  prove  payment  by  the  mortgagor.'^  And  a  war- 
ranty that  the  property  is  free,  except  a  mortgage,  does  not 
estop  the  vendee  from  disputing  the  validity  of  the  mortgage, 
because  he  is  not  charged  with  the  payment  of  the  debt.^     So, 

1  Kennedy  v.  Brown,  61  Ala.  29G ;  Bunkley  v.  Lynch,  47  Ala.  211 ;  Corn- 
stock  ('.  Smith,  20  Mich.  306 ;  Freeman  v.  Auld,  44  N.  Y.  50. 

2  Conklin  v.  Secor  Sewing-Machine  Co.,  55  How.  Pr.  (N.  Y.)  269. 
^Stebbins  v.  Miller,  12  Allen  (Mass.),  591. 

*Stebbins  v.  Miller,  12  Allen  (Mass.),  ^^l- 

5  Dunning  v.  Lcavitt,  85  N.  Y.  30  ;  39  Am.  Rep.  617. 

«Torrey  v.  Bank,  9  Paige  (N.  Y.),  649. 

nVilliams  v.  Thurlow,  31  Me.  392. 

*Weed  Sewing-Machine  Co.  v.  Emerson,  115  Mass.  554. 


i 


1028  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

when  the  grantor  conceals  the  incumbrance,  and  the  grantee 
buys  without  actual  notice,  he  should  be  permitted  to  set  up 
any  defense  there  may  be  to  the  validity  of  the  mortgage,  and 
he  may  interpose  the  defense  of  usur3\  Having  purchased  the 
land  without  any  deduction  from  the  purchase-money  on  ac- 
count of  the  incumbrance  upon  it,  the  vendee  can  interpose 
the  same  defense  that  the  mortgagor  could.* 

If  he  has  never  become  indebted  to  the  mortgagee  by  as- 
suming the  mortgage,  he  is  not  liable  for  the  mortgage  debt.^ 
A  purchaser  with  notice  of  the  mortgagor's  rights  must  be 
subject  to  them,^  and  a  judgment  may  be  rendered  against  the 
purchaser,  who  has  assumed,  and  his  grantor  jointly,  for  a 
deficiency.''  And  where  several  lots  are  subject  to  the  same 
mortgage,  the  owner  of  one  of  them,  in  a  suit  to  determine 
the  amount  necessary  to  redeem  from  foreclosure,  can  compel 
contribution  from  the  other  lot-owners  of  their  proportionate 
share  of  the  amount  necessary  for  such  redemption.^ 

§  1052.  Measure  of  Damages. — The  measure  of  damages 
in  an  action  by  the  grantor  against  the  grantee  upon  his 
promise  to  pay  the  mortgage  debt,  is  the  whole  amount  of  the 
debt  which  has  not  been  paid.'' 

If  the  grantor  has  paid  the  debt  before  bringing  the  action, 
the  measure  of  damages  is  the  amount  he  paid  in  satisfaction 
of  the  debt.^ 

The  grantor  is  entitled  to  the  amount  of  the  debt.  His 
damages  are  the  value  of  the  security  which  should  have  been 
paid,  but  not  exceeding  the  amount  of  the  debt  secured.^ 

1  Maher  v.  Lanfrom,  86  111.  513 ;  Flanders  v.  Doyle,  16  111.  App.  508. 

2  Brown  r.  Stillman,  43  Minn.  126 ;  Searing  v.  Benton,  41  Kan.  800 ;  Nelson 
V.  Rogers  (Minn.),  49  N.  W.  Rep.  526. 

3  Marston  v.  Williams,  45  Minn.  110.  See,  also,  Keedle  v.  Flack,  27  Nebr. 
836. 

*  Rockwell  V.  Blair  Sav.  Bank,  31  Nebr.  128,  following  Cooper  v.  Foss,  15 
Nebr.  515. 

5  Coffin  V.  Parker,  127  N.  Y.  117. 

6  In  re  Negus,  7  Wend.  (N.  Y.)  499;  Lathop  v.  Atwood,  21  Conn.  117;  Red- 
field  V.  Haight,  27  Conn.  31 ;  ,Gage  v.  Lewis,  68  111.  604. 

'Town  ?;.  Wood,  37  111.  512. 

^Lethbridge  v.  Mytton  2  Barn.  &  Adol.  772;  Brown  v.  Howard,  2  Brod.  & 


TRANSFER    OF    THE    MORTGAGED    PROPERTY.  1029 

If  the  grantee  pay  the  debt  according  to  agreement,  then 
there  is  no  breach.  If  he  makes  payment  before  final  judg- 
ment against  him,  after  due,  only  nominal  damages  can  be 
recovered.^  If  he  pays  before  final  judgment  after  suit  against 
him,  only  nominal  damages  should  be  allowed  to  the  grantor.^ 

Of  course  the  amount  equals  the  debt  secured  and  any 
interest  remaining  due,  which  is  the  measure  of  damages 
which  the  grantor  can  claim  when  the  debt  is  unpaid  accord- 
ing to  stipulation.^ 

B.  73  ;  Howell  v.  Young,  5  Barn.  &  C.  259 ;  Loosemore  v.  Radford,  9  Mees.  & 
W.  657 ;  Post  v.  Jackson,  17  Johns.  (N.  Y.)  2.39 ;  Crofoot  v.  Moore,  4  Vt.  204 ; 
Wilson  V.  Stilwell,  9  Ohio  St.  467  ;  Stout  v.  Folger,  34  Iowa,  71 ;  Ham  v.  Hill, 
29  Mo.  275 ;  Rice  v.  Sanders,  152  Mass.  108. 

1  Locke  V.  Homer,  131  Mass.  93 ;  Muhlig  v.  Fiske,  131  Mass.  110 ;  Hood  v. 
Adams,  124  Mass.  481. 

^  Furnas  v.  Durgin,  119  Mass.  500 ;  Elmer  v.  Welch,  47  Conn.  56 ;  Hall  v. 
Way,  47  Conn.  467,  473. 

5  Gage  V.  Lewis,  68  111.  604 ;  Post  v.  Jackson,  17  Johns.  (N.  Y.)  239  ;  Crofoot  v. 
Moore,  4  Vt.  204 ;  Wilson  v.  Stilwell,  9  Ohio  St.  467  ;  Ham  v.  Hill,  29  Mo.  275 ; 
In  re  Negus,  7  Wend.  (N.  Y.)  499 ;  Redfield  v.  Haight,  27  Conn.  31 ;  Stout  v. 
Folger,  34  Iowa,  71. 


CHAPTER  XXV. 

MERGER. 

Article  1. 

At   Law  and  In  Equity. 

g  1053.  Principles  that  Govern.  ^  105-4.  Intent  of  Parties  Governs  in 

Equity. 

§  1053.  Principles  that  Govern. — Merger  is  not  favored 
in  equity,  and  is  never  allowed  unless  for  special  reasons  and 
to  promote  the  intention  of  the  party.  The  intention  is  con- 
sidered in  merger  at  law ;  but  it  is  not  the  governing  principle 
of  the  rule,  as  it  is  in  equity  ;  and  the  rule  sometimes  takes 
place  without  regard  to  intention.^ 

At  law  the  doctrine  of  merger  will  operate,  even  though  one 
of  thfe  estates  is  held  in  trust  and  the  other  beneficially  by  the 
same  person ;  or  both  estates  be  held  by  the  same  person  on 
the  same  or  different  trusts.  But  the  court  of  equity  will  in- 
terpose and  support  the  interest  of  the  cestui  que  trust,  and  not 
allow  trusts  to  merge  in  the  legal  estate  if  the  justice  of  the 
case  requires  it.  The  rule  in  law  is  inflexible  ;  but  in  equity 
it  depends  upon  circumstances  and  is  governed  by  the  inten- 
tion, either  expressed  or  implied,  if  it  be  a  fair  and  just  inten- 
tion, whether  the  equitable  estate  shall  merge  or  be  kept  in 
existence.^ 

In  England,  under  the  operation  of  a  statute,^  no  merger  takes 
place  by  operation  of  law  only,  of  any  estate  the  beneficial  in- 
terest in  which  would  not  be  deemed  to  be  merged  in  equity. 

Where  the  legal  and  the  equitable  interests  descend  through 

1  Co.  Litt.  54,  6  ;  3  Preston  on  Conv.  43-49. 

2  Gardner  v.  Astor,  3  Johns.  Ch.  (N.  Y.)  53 ;  Starr  v.  Ellis,  6  Johns.  Ch.  (N. 
Y.)  393  ;  Gibson  v.  Crehore,  3  Pick.  (Mass.)  475 ;  Campbell  v.  Carter,  14  111. 
286 ;  Knowles  v.  Lawton,  18  Ga.  476 ;  Eeed  v.  Latson,  15  Barb.  (N.  Y.)  9 ; 
Forbes  v.  Moffatt,  18  Ves.  384. 

'  Sup.  Ct.  of  Judicature,  Act  of  1874,  ch.  83,  sect.  2 ;  Act  of  1873,  ch.  66, 
BBCt.  25. 

1030 


MERGER.  1031 

different  channels,  and  unite  in  the  same  person,  and  were 
equal  and  co- extensive,  it  has  been  held  that  the  equitable  es- 
tate merges  in  the  legal,  in  equity,  as  well  as  at  law.^ 

At  law  the  rule  is  that  a  merger  always  takes  place,  when 
the  greater  estate  and  the  less  coincide  and  meet  in  one  and 
the  same  person,  in  one  and  the  same  right,  without  any  inter- 
mediate estate.^ 

§  1054.  Intent  of  Parties  Governs  in  Equity. — A  court 
of  equity  will  consider  a  conveyance  in  fee  simple  of  the  mort- 
gaged premises  from  the  mortgagor  to  the  mortgagee  to  be  or 
not  to  be  a  merger,  according  to  the  intent  and  interest  of  the 
parties  and  the  demands  of  substantial  justice  and  equity.^ 

And  this  intention  is  a  question  of  fact,  and  is  to  be  deter- 
mined as  other  issues  are  ;  a  party's  intention  is  generally  de- 
termined by  his  interest,  considered  with  the  surrounding  cir- 
cumstances.'* And  tliis  rule  is  not  affected  by  the  fact  that  the 
mortgage  includes  other  estates,  of  which  the  mortgagee  is  not 
the  owner  of  the  equity  of  redemption.^ 

^  Donisthorpe  v.  Porter,  2  Eden,  162  ;  Goodright  v.  Wells,  Doug.  771 ;  Wade 
V.  Paget,  1  Bro.  C.  C.  363 ;  Selby  v.  Alston,  3  Ves.  339. 

^  Flanigan  v.  Sable,  44  Minn.  417. 

^Flanigan  v.  Sable,  44  Minn.  417;  Edgerton  v.  Young,  43  111.  464;  Lyon  v. 
Mcllvaine,  24  Iowa,  9  ;  Stanton  v.  Thompson,  49  N.  H.  272 ;  Mallory  v.  Hitch- 
cock, 29  Conn.  127.  See  Walker  v.  Baxter,  26  Vt.  710,  where  it  is  held  that 
the  doctrine  of  the  text  is  the  rule  at  law  as  well  as  in  equity. 

*Dircks  r.  Logsdon,  59  Md.  173  ;  Little  v.  Bowen,  76  Va.  724  ;  Watson  v.  Dun- 
dee, etc.,  Co.,  12  Oreg.  474 ;  Insurance  Co.  v.  Murphy,  111  U.  S.  738,  744 ; 
Loverin  v.  Humboldt  Safe  Co.,  113  Pa.  St.  6;  Gresham  r.  Ware,  79  Ala.  192; 
Silliman  v.  Gammage,  55  Tex.  365 ;  Duffy  v.  McGuiness,  13  R.  I.  595 ;  Bacon 
V.  Goodnow,  59  N.  H.  415 ;  Duncan  v.  Smith,  31  N.  J.  L.  325 ;  Thebaud  r.  Hol- 
lister,  37  N.  J.  Eq.  402 ;  Fasaett  v.  Mulock,  5  Col.  466 ;  Scrivner  v.  Diotz,  84  Cal. 
295;  Carpentier  r.  Brenham,  40  Cal.  221;  Smith  v.  Roberts,  91  N.  Y.  470; 
James  v.  Johnson,  6  Johns.  Ch.  (N.  Y.)  417  ;  Given  v.  IMarr,  27  Me.  212 ;  Hart 
r.  Chase,  46  Conn.  207 ;  Richardson  v.  Hockenhull,  85  111.  124 ;  Davis  v.  Pierce, 
10  Minn.  376 ;  Ann  Arbor  Sav.  Bank  v.  Webb,  56  ]\Iich.  377  ;  Spurgin  r.  Adam- 
son,  62  Iowa,  661 ;  Carter  v.  Taylor,  3  Head  (Tenn.),  30 ;  Grellet  r.  Ileilshorn, 
4  Nev.  526;  Loud  v.  Lane,  8  Met.  (Mass.)  517;  Grover  ?•.  Thatcher,  4  Gray 
(Mass.),  526;  Wilson  v.  Murphy,  1  Phila.  (Pa.)  203;  Carpenter  v.  Gleason,  58 
Vt.  244 ;  Belknap  v.  Dennison,  61  Yt.  520.  Compare  Agnew  v.  Railroad  Co., 
24  S.  Car.  18 ;  58  Am.  Rep.  237. 

*  Knowles  v.  Carpenter,  8  R.  I.  548. 


1032 


EIGHTS    OF    PARTIES    BEFORE    DEFAULT. 


When  the  legal  and  the  equitable  estate  both  become  vested 
in  the  same  person,  there  will  be  no  merger  of  the  two  estates 
in  any  case  if  it  be  for  the  interest  of  the  owner  to  keep  them 
distinct/  And,  on  the  other  hand,  equity  will  not  prevent  a 
merger  where,  to  prevent  it,  would  work  injustice.^ 


Article  2. 
Whe7i  It  Takes  Effect. 


I  1055.  Merger— General  Rule.  I  1065. 

?  1056.  Intervening    Equities    or   In-  ^  1066. 

cumbrances.  I  1067. 
I  1057.  Judgments. 

\  1058.  Mortgagee  Taking  the  Equity  ^  1068. 

of  Redemption.  §  1069. 

§  1059.  Evidence  of  Intention.  |  1070. 

I  1060.  In  Aid  of  Fraud  or  Wrong.  §  1071. 

§  10()1.  Assignment  of  the  Mortgage.  I  1072. 

?  1062.  Dower  Rights.  I  1073. 
I  1063.  Assignment  to  Wife. 

§  106-4.  Feme   Sole  Mortgagee  —  Mar-  ?  1074. 

riage  with  Mortgagor. 


Heirs  Taking  Assignment. 

Estoppel. 

Express  Intention  Will  Con- 
trol. 

Deed  of  Quit  Claim. 

Rents  and  Profits. 

Bequest  to  Mortgagor. 

Assuming  to  Pay  Mortgage. 

Right  of  Dower. 

Assigning  Mortgage  as  Col- 
lateral Security, 

The  Record  Does  Not  Show 
Merger. 


§  1055.  Merger — General  Rule. — It  is  generally  held  that 
when  the  legal  title  becomes  united  with  the  equitable  title, 
so  that  the  owner  has  the  whole  title,  the  mortgage  is  merged 
by  the  unity  of  possession.  Thus,  where  the  mortgagee,  not 
having  assigned  his  mortgage,  takes  a  release  of  the  equity  of 
redemption,  the  whole  estate  is  vested  in  him,  and  the  mort- 
gage is  extinguished  unless  the  express  or  implied  intent  of 
the  parties,  or  intent  in  the  mortgagee,  intervenes  to  prevent 
merger.^  But  where  the  mortgagee  refuses  to  accept  a  deed  of 
conveyance  of  the  mortgaged  premises,  executed  to  him  by 
the  mortgagor,  and  retains  the  mortgage,  there  is  no  merger 
or  extinguishment  of  the  mortgage.* 

Merger  is  always  a  question  of  intention,  when  the  question 

1  Mallory  v.  Hitchcock,  29  Conn.  127 ;  Polk  v.  Reynolds,  31  Md.  106 ;  Spen- 
cer V.  Ayrault,  10  N.  Y.  202;  Snyder  v.  Snyder,  6  Mich.  470. 
''Boos  r.  Morgan  (Ind.),  30  N.  E.  Rep.  141. 
^  Wilhehni  v.  Leonard,  13  Iowa,  330. 
*  Brendenberg  v.  Landrum,  32  S.  Car.  215. 


MERGER.  1033 

is  as  to  whether  the  mortgage  hen  is  merged  in  the  fee. 
Equity  will  keep  the  legal  title  and  the  mortgagee's  interest 
separate,  although  held  by  the  same  person,  whenever  neces- 
sary for  the  full  protection  of  his  just  rights.'  A  merger  may 
readily  be  prevented,  in  taking  a  new  security,  by  reciting  in 
the  latter  that  there  is  no  merger,  only  additional  security.^ 

§  IO06.  Intervening  Equities  or  Incumbrances. — If  there 
be  an  intervening  mortgage,  attachment,  or  other  lien,  the 
acquirement  of  title  by  a  prior  mortgagee  will  not  operate  as  a 
merger  ;  and  this  i"ule  will  apply  with  still  greater  force  where 
the  prior  mortgage  was  held  by  the  mortgagee  in  trust  for  one 
person,  and  the  title  acquired  by  him  in  trust  for  another.^ 

If  there  is  an  outstanding  intervening  title,  the  foundation 
for  the  merger  does  not  exist,  and,  as  a  matter  of  law,  it  is  so 
declared.*  Of  course,  the  incumbrance  must  be  one  which 
the  owner  has  not  assumed,  and  one  against  which  he  is  not 
estopped  from  defending  ;  such  an  intervening  equity  will  pre- 
vent a  merger.^  So,  where  a  mortgagee  purchases  at  a  fore- 
closure sale  under  a  mechanic's  lien  filed  before  execution  of 
the  mortgage,  the  mortgage  is  not  merged  in  the  fee,  but  at- 
taches to  the  surplus  arising  on  the  sale  under  the  mechanic's 
lien."^ 

And  in  the  absence  of  special  agreement  to  that  effect  the 
taking  of  a  new  mortgage  from  the  same  party  and  on  the 

^  Scrivner  v.  Dietz,  84  Cal.  295 ;  Carpentier  v.  Brenham,  40  Cal.  221  ;  Crane 
V.  Aultman-Taylor  Co.,  61  Wis.  110;  ]Montgomery  v.  Yickery,  110  Ind.  211 ; 
^tna  L.  Ins.  Co.  v.  Corn,  89  111.  170 ;  Dircks  r.  Logsdon,  59  Md.  173 ;  Warren 
V.  Warren,  30  Vt.  530 ;  Evans  v.  Kimball,  1  Allen  (Mass.),  240.  Compare  By- 
ington  V.  Fountain,  61  Iowa,  512. 

*Ex  parte  Whitbread,  2  Mont.  D.  &  DeG.  415;  Twopenny  r.  Young,  3 
Bam.  &  C.  208. 

3  Scrivner  v.  Dietz,  84  Cal.  295  ;  Brooks  r.  Rice,  56  Cal.  428  ;  Rumpp  v.  Ger- 
kens,  59  Cal.  496. 

*Stantons  v.  Thompson,  49  N.  H.  272. 

5 Bunch  V.  Grave,  111  Ind.  351  ;  Hooper  v.  Henry,  31  Minn.  264  ;  Bell  v. 
Woodward,  34  N.  H.  90  :  Dutton  v.  Ives,  5  Mich.  515 ;  Denzler  v.  O'Keefe,  34 
N.  J.  Eq.  361 ;  Grover  r.  Thatcher,  4  Gray  (Mass.),  526;  New  England  Jew- 
elry Co.  V.  Merriam,  2  Allen  (Mass.),  390. 

eCrombie  v.  Rosentock,  19  Abb.  N.  C.  (N.  Y.)  312. 


1034  RIGHTS    OF    PARTIES    BEFORE   DEFAULT. 

same  property  will  not  merge  or  extinguish  a  prior  mort- 
gage/ 

A  party  holding  a  trust  deed  and  the  accompanying  note 
has  no  legal  estate  in  the  land,  and,  hence,  if  he  acquires  the 
equity  of  redemption  in  the  land  there  is  no  merger.^ 

In  order  to  protect  the  mortgagee  against  an  intervening 
title,  the  law  will  uphold  the  mortgage,  even  when  the  parties 
have  undertaken  to  discharge  it,  unless  injustice  would  be  done 
thereby.^  And  where  a  mechanic's  lien  is  barred  by  limita- 
tion as  to  the  property  against  which  it  is  sought  to  be  enforced, 
it  is  also  barred  as  to  the  owner  of  the  equity  and  his  grantees 
who  have  paid  off  the  mortgage.* 

Where  the  amount  of  the  incumbrance  considerably  exceeds 
the  value  of  the  property,  an  intermediate  lienor,  who  pur- 
chases the  equity  of  redemption,  may,  as  against  junior  lienors, 
protect  his  title  by  acquiring  outstanding  senior  incumbrances, 
and  causing  sales  to  be  made  thereunder ;  and  equity,  if  neces- 
sary, will  prevent  the  title  which  he  acquires  by  purchase 
under  such  sales  from  merging  in  the  title  acquired  by  the 
purchase  of  the  equity  of  redemption.* 

§  1057.  Judgments. — A  judgment  in  personam  against  the 
maker  of  a  promissory  note,  in  which  there  is  a  recognition  of 
the  mortgage,  and  a  decree  for  its  enforcement,  merge  the 
note  but  not  the  mortgage,  which  thereafter  retains  the  same 
force,  effect,  and  rank  as  before  decree.® 

The  debt  is  not  merged  so  as  to  affect  the  security  by  ob- 
taining a  judgment  upon  it,  unless  it  is  satisfied  in  whole  or 
in  part,  when  the  debt  is  extinguished  to  the  extent  of  the 
payment.'^ 

^  Christian  v.  Newberry,  61  Mo.  446 ;  Tenison  v.  Sweeny,  1  Jones  &  L.  710 ; 
Drury  v.  Briscoe,  42  Md.  154. 
'^  Hospes  V.  Almstedt,  13  Mo.  App.  270. 
^Stantons  v.  Thompson,  49  N.  H.272. 

*  Watson  V.  Gardner,  119  111.  312. 

5  Myers  v.  O'Neal  (Ind.),  30  N.  E.  Rep.  510. 

*  Lalane  v.  Payne,  42  La.  Ann.  152. 

'  Ex  parte  Higgins,  3  De  G.  &  J.  33 ;  Bell  v.  Banks,  Man.  &  G.  258 ;  3  Scott 
N.  R.  497. 


MERGER.  1035 

And  where  the  purchaser  of  mortgaged  premises,  sold  on 
a  junior  mortgage,  subsequently  purchased  the  judgment  and 
decree  of  sale  made  on  a  prior  mortgage  foreclosure,  this 
judgment  does  not  thereby  become  merged  in  his  title 
to  the  premises  under  the  first  foreclosure,  nor  prevent 
him  from  buying  at  the  sale,  either  in  his  own  name  or  by 
another/ 

And  an  assignment  of  a  second  mortgage  and  judgment  or 
foreclosure  thereon,  to  a  purchaser  at  a  previous  foreclosure 
sale  under  a  first  mortgage,  does  not  merge  such  judgment 
in  the  fee.^ 

§  1058.  Mortgagee  Taking  the  Equity  of  Redemption. — 
As  a  general  rule  if  the  holder  of  a  mortgage  takes  the  ecjuity 
of  redemption  and  vests  it  in  himself,  a  merger  takes  place, 
the  estate  being  discharged  from  the  incumbrance  and  the 
mortgage  debt  satisfied.*  And  when  he  holds  a  mortgage  on 
real  estate  worth  more  than  the  mortgage  indebtedness,  and 
purchases  the  equity  of  redemption  at  judicial  sale,  equity  will 
not  permit  him  to  hold  the  land  and  also  to  collect  the  mort- 
gage debt  from  the  mortgagor.* 

Taking  the  equity  of  redemption  does  not  merge  his  legal 
estate  as  mortgagee  so  as  to  prevent  his  setting  up  his  mort- 
gage to  defeat  an  intermediate  title,  unless  such  was  the  inten- 
tion.^ 

A  mortgagee  taking  a  conveyance  of  the  equity  of  redemp- 
tion is  entitled  to  be  regarded  as  a  purchaser  for  value  within 

1  Rawiszer  v.  Hamilton,  51  How.  Pr.  (N.  Y.)  297. 

^  Clark  V.  Simmons,  55  Hun  (N.  Y.),  175. 

^McClain  v.  Weise,  22  111.  App.  272;  Lyman  v.  Gedney,  114  111.  388. 

nVeiner  ?'.  Heintz,  17  111.  259;  Robins  v.  Swain,  68  111.  197. 

5  McClai-key  r.  O'Brien,  16  W.  Ya.  791,  793 ;  Fouche  v.  Swain,  80  Ala.  151  ; 
Ann  Arbor  Sav.  Bank  v.  Webb,  56  Mich.  377 ;  Rogers  v.  Herron,  92  111.  583; 
elements  v.  Griswold,  46  Hun  (N.  Y.),  377;  Fithian  v.  Corwin,  17  Ohio  St. 
118 ;  Carpenter  v.  Gleason,  58  Yt.  244 ;  New  Jersey  Ins.  Co.  v.  Meeker,  40 
N.  J.  L.  18  ;  Andrus  v.  Vreeland,  29  N.  J.  Eq.  394 ;  Knowles  v.  Lawton,  18  Ga. 
476 ;  Linscott  v.  Lamart,  46  Iowa,  312 ;  Goodwin  v.  Keney,  47  Conn.  486 ; 
Thomas  v.  Simmons,  103  Ind.  538 ;  Poulson  v.  Simmons,  126  Ind.  227 ;  Free- 
man V.  Paul,  3  Me.  260 ;  Brooks  v.  Rice,  56  Cal,  428 ;  Hospes  v.  Almstedt,  83 
Mo.  473. 


1036  EIGHTS    OF    PARTIES    BEFORE   DEFAULT. 

the  meaning  of  the  statute  relating  to  the  docketing  of  judg- 
ments.^ 

In  South  CaroHna  a  purchase  of  the  mortgaged  premises  by 
the  mortgagee  otherwise  than  under  process  of  foreclosure 
operates,  in  the  absence  of  satisfactory  proof  that  the  parties  to 
the  transfer  intended  a  covenant  at  the  time  it  was  made  to 
keep  the  mortgage  open,  to  extinguish  it  by  the  doctrine  of 
merger,  and  to  let  in  a  subsequent  judgment  duly  entered  of 
record."  This  is  the  settled  law  of  that  State,  that  a  mortgagee 
who  buys  the  estate  under  mortgage,  not  under  process  of  fore- 
closure, extinguishes  the  debt  or  claim  with  the  lien  on  the  prop- 
erty.^ In  general,  the  union  of  the  equity  of  redemption  with 
the  legal  estate  produces  a  merger  of  the  mortgage  unless  it  be 
declared  to  be  kept  on  foot  for  some  beneficial  purpose.* 

§  1059.  Evidence  of  Intention. — Intention  is  a  question 
of  fact,^  and  circumstances  may  indicate  what  the  intention  is. 
Thus,  if  the  mortgagee  takes  to  himself  a  conveyance  of  the 
premises,  it  is  a  question  of  intention  on  his  part  whether  a 
merger  is  wrought ;  if  his  intention  is  expressed,  that  will  con- 
trol. If  it  is  not  expressed,  then  a  court  of  equity  will  presume 
his  intention  to  be  according  to  his  best  interest.^  If  the  con- 
veyance states  that  the  premises  are  subject  to  a  mortgage,  then 
it  will  be  held  that  there  is  no  merger." 

Or  if  the  mortgage  remains  uncancelled  of  record  there  is 
evidence  of  no  merger.^  The  assignment  of  the  mortgage  is 
evidence  that  the  interests  are  to  be  kept  separate.* 

>McClaskey  v.  O'Brien,  16  W.  Va.  791. 

''Bleckley  v.  Branyan,  28  S.  Car.  445 ;  26  S.  Car.  424. 

'  Ex  parte  Sheriff,  1  McCord,  399 ;  McClure  v.  Mounce,  2  McCord,  423 ; 
Schnell  v.  Schroder,  Bail.  Eq.  338 ;  McLure  v.  Wheeler,  6  Rich.  Eq.  343  ;  Al- 
len V.  Richardson,  9  Rich.  Eq.  53;  Trimmier  «.  Vise,  17  S.  Car.  503  ;  Devereux 
V.  Taft,  20  S.  Car.  555. 

*  Lockard  v.  Joines  (N.  J.),  23  At.  Rep.  1075  ;  Starr  v.  Ellis,  6  Johns.  Ch.  ( N.  Y.) 
395 ;  Hoppock  v.  Ramsey,  28  N.  J.  Eq.  413. 

^  Ann  Arbor  Sav.  Bank  v.  AVebb,  56  Mich.  377. 

«  Belknap  v.  Dennison,  61  Vt.  520 ;  Carpenter  v.  Gleason,  58  Yt.  244. 

T^tna  L.  Ins.  Co.  v.  Corn,  89  111.  170  ;  First  Nat.  Bank  v.  Essex,  84  Ind. 
144  ;  Shelden  v.  Edwards,  35  N.  Y.  279. 

8  Hoppock  V.  Ramsey,  28  N.  J.  Eq.  413. 

®  Goodwin  v.  Keney,  47  Conn.  486 ;  Campbell  v.  Vedder,  1  Abb.  App.  Dec. 


MERGER.  1037 

But  where  the  grantees  of  the  fee  are  the  holders  of  a  mort- 
gage on  the  land,  and  having  no  interest  in  preserving  the 
lien,  and  there  is  no  intention  to  keep  it  on  foot,  the  mortgage 
is  merged.^  The  fact  that  the  mortgagor  has  occupied  the 
premises  for  many  years  and  paid  interest,  warrants  the  finding 
that  the  mortgage  has  not  been  foreclosed." 

§  1060.  In  Aid  of  Fraud  or  Wrong. — A  mortgage  may 
be  kept  alive  when  it  is  in  the  advancement  of  justice,  but 
never  when  for  the  purpose  of  perpetrating  fraud.^  And  one 
standing  in  a  fiduciary  caf)acity  to  the  owner  of  the  equity  of 
redemption  will  not  be  allowed  to  merge  the  equities  for  his 
own  personal  benefit.'* 

When  the  decree  is  made  that  the  mortgage  upon  payment 
or  redemption  be  assigned,  it  must  be  so  drawn  as  not  to  work 
injury  to  any  other  liens  he  may  have.^  But,  in  New  York,  it 
is  held  that  an  assigmnent  may  be  enforced  when  the  mort- 
gage is  paid  by  a  person  not  primarily  liable  to  pay  it.^ 

Generally,  however,  an  assignment  will  not  be  enforced,  as 
it  is  only  the  mortgagee's  duty  to  discharge  the  mortgage  upon 
payment  of  the  debt.^  Fraud  will  not  be  allowed  to  merge  the 
mortgage.^ 

§  1061.  Assignment  of  the  Mortgage. — A  mortgage  as- 
signed to  the  owner  of  the  premises,  subject  to  a  life  interest 
reserved  to  the  assignor,  is  not  merged  in  the  fee.^  An  assign- 
ment of  a  mortgage  to  one  of  two  tenants  in  common  of  the 

(N.  Y.)  295  ;  Kellogg  v.  Ames,  41  N.  Y.  259,  reversing  41  Barb.  218 ;  White  v. 
Hampton,  13  Iowa,  259. 

1  Lynch  v.  Pfeiflfer,  110  N.  Y.  33. 

2  Trow  V.  Berry,  113  Mass.  139. 

^  Worthington  v.  Morgan,  16  Sim.  547  ;  McGiven  v.  Wheelock,  7  Barb.  (N.Y.) 
22;  First  Nat.  Bank  v.  Essex,  84  Ind.  144. 
*  Knolls  V.  Barnhart,  71  N.  Y.  474. 
^Cilley  ('.  Huse,  40  N.  H.  358. 
« Johnson  r.  Zink,  52  Barb.  (N.  Y.)  .396. 
'Gatwood  r.  Gatwood,  75  Ya.  407;  Chedel  v.  Millard,  13  R.  I.  461. 

8  Crosby  v.  Taylor,  15  Gray  (Mass.),  64;  Ryer  v.  Gass,  130  ]Mass.  227; 
Franklyn  v.  Hay  ward,  61  How.  Pr.  (N.  Y.)  43;  Wade  v.  Howard,  11  Pick. 
(Mass.)  289  ;  6  Pick.  (Mass.)  492. 

9  Cox  V.  Ledward,  124  Pa.  St.  435. 


1038  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

equity  of  redemption  does  not  merge  it/  Where  one  has  pur- 
chased part  of  the  premises  subject  to  a  mortgage  which  he 
takes  as  assignee,  it  will  not  be  merged  as  to  the  part  which 
he  did  not  take.^ 

And  when  the  owner  of  the  equity  of  redemption  pays  the 
mortgage  debt  and  takes  an  assignment,  in  New  York,  with 
the  provision  that  it  shall  not  merge,  but  remain  alive  as  a 
muniment  of  his  title,  on  his  death,  the  mortgage  will  not  be 
regarded  as  an  existing  lien  on  the  premises  and  an  asset  in 
the  hands  of  his  administrators.^ 

The  acquisition  by  a  mortgagee,  after  his  assignment  or 
transfer  of  the  mortgage,  of  the  absolute  title,  does  not  merge 
the  mortgage.* 

§  1062.  Dower  Rights. — The  assignment  of  a  mortgage  to 
the  mortgagor  does  not  affect  a  merger  with  her  inchoate 
right  of  dower,  where  it  is  the  intention  of  the  parties  that  the 
wife  shall  hold  the  mortgage  as  a  lien  on  the  land.^  A  widow 
is  entitled  to  be  endowed  of  an  equity  of  redemption  ;  and  an 
assignment  of  dower  will  be  valid  and  effectual  against  all 
persons  excepting  the  mortgagee  and  those  claiming  under 
him.^  Where  by  the  terms  of  an  antenuptial  contract,  the 
wife  takes  an  estate  in  fee  in  part  of  her  husband's  lands,  in 
lieu  of  dower,  and  after  marriage,  he  satisfies  the  mortgage 
u]Don  his  land,  which  was  not  in  existence  at  the  date  of  the 
antenuptial  contract,  with  money  raised  by  a  new  mortgage, 
the  wife's  estate  is  discharged  from  the  first  mortgage  and  is 
superior  to  the  second.^ 

§  1063.  Assignment  to  Wife. — By  the  common  law  a  feme 

covert  who  owns  land  in  fee  can  transfer  it  only  by  deed  exe- 

'  Barker  v.  Flood,  103  Mass.  47-1 ;  Sahler  v.  Signer,  44  Barb.  (N.  Y.)  606 ; 
Clark  V.  Clark,  56  N.  H.  105. 

2  Wilhelmi  v.  Leonard,  13  Iowa,  330.    See,  also,  Drury  v.  Holden,  121  111.  130. 

3  Browne  v.  Ferris,  23  Abb.  N.  C.  (N.  Y.)  226. 

*  White  V.  Hampton,  13  Iowa,  259  ;  Purdy  v.  Huntington,  42  N.  Y.  334 ;  1 
Am.  Rep.  532. 

5  Newton  v.  Manwaring,  10  N.  Y.  Sup.  347. 

6  Campbell  v.  Knight,  24  Me.  332  ;  Wilkins  v.  French,  20  Me.  111. 
'Anglade  v.  St.  Avit,  67  Mo.  434. 


MERGER.  1039 

cuted  by  herself  and  husband,  and  where  both  are  parties  to 
the  effective  and  operative  parts  of  the  instrument.^  And  an' 
assignment  of  the  husband's  mortgage  to  his  wife  would  dis- 
charge it ;  but  this  rule  has  been  changed  by  statute.  Thus, 
where  a  husband  gives  a  mortgage  which  is  assigned  to  his 
wife,  and  the  husband  then  quit  claims  to  her,  and  she  there- 
upon conveys  to  a  third  person  by  deed  of  warranty  therein, 
referring  to  the  mortgage  "  as  having  been  cancelled  by  assign- 
ment," the  mortgage  will  not  thereby  become  merged,  but  will 
be  upheld.^ 

So  a  mortgage  is  not  extinguished  by  being  assigned  to  the 
wife  of  the  mortgagor,  after  he  has  conveyed  to  a  third  jDcrson 
all  his  interest  in  the  estate.^  But  a  wife  cannot  hold  the 
mortgage  as  against  a  second  mortgagee  when  she  does  it  with 
fraudulent  intent.* 

So,  also,  the  husband  may  hold  as  purchaser  a  mortgage 
given  by  his  wife ;  it  is  not  merged  by  an  assignment  to  him.^ 

§  1064.  Feme  Sole  Mortgagee — Marriage  with  Mort- 
gagor.— The  marriage  of  a  single  woman  who  is  the  mort- 
gagee to  the  mortgagor  does  not  extinguish  her  right  of  action 
upon  the  mortgage.  AVhere  such  mortgagee  unites  with  her 
husband  in  a  junior  mortgage  on  the  same  land,  the  act  affects 
only  her  inchoate  right  of  dower,  but  does  not,  in  the  absence 
of  words  for  that  purpose,  impair  her  right  to  priority  of 
lien.^ 

The  mere  circumstance  of  a  wife  uniting  with  her  husband 
in  a  second  mortgage,  it  being  done  in  ignorance  of  the  fact 
that  it  was  intended  to  give  such  mortgage  a  preference  over 

^  Lithgow  V.  Kavanagh,  9  Mass.  161,  172 ;  Bruce  v.  "Wood,  1  ]Met.  (Mass.) 
542,  543. 

^  Bean  v.  Boothby,  57  Me.  295  ;  Simonton  v.  Gray,  34  Me.  50  ;  Bemis  v.  Call, 
10  Allen  (Mass.),  512. 

^  Model  House  Lodging  Asso.  v.  Boston,  114  Mass.  133  ;  Bemis  v.  Call,  10 
Allen  (Mass.),  512. 

*  Wright  V.  Patterson,  45  Mich.  261. 

5  Butler  V.  Ives,  139  Mass.  202 ;  Faulks  r.  Dimock,  27  N.  J.  Eq.65 ;  Martin  v. 
Martin,  146  Mass.  517.    See,  also,  Butler  v.  Ives,  139  Mass.  202, 

«  Power  V.  Lester,  23  N.  Y.  527. 


1040  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

the  one  held  by  her,  is  not  sufRcient  in  equity  for  postponing 
her  mortgage  or  rendering  it  subordinate  to  the  second  mort- 
gage, the  intent  of  the  instrument  being  to  cut  off  her 
dower.' 

§  1065.  Heirs  Taking  Assignment. — A  mortgage  becomes 
merged  and  extinguished  when  the  mortgagee  being  an  heir 
of  the  mortgagor,  acquires  the  interest  of  the  other  heirs  in  the 
premises.^  And  an  heir  who  takes  an  assignment  of  a  mort- 
gage of  his  ancestor,  cannot  by  virtue  of  the  mortgage  title,  by 
foreclosure  defeat  the  estate  of  dower  previously  assigned  to 
the  widow  in  the  mortgaged  premises  with  his  assent.^ 

Where  one  takes  the  equity  of  redemption  and  has  the 
mortgage  assigned  to  him  with  the  provision  that  it  shall  not 
merge  but  remain  alive  as  a  muniment  of  his  title,  his  heirs 
on  his  death  cannot  avail  themselves  of  the  lien,  as  the  mort- 
gage will  not  be  considered  as  an  estate  in  the  hands  of  his 
administrator ;  at  his  death  the  mortgage  will  not  be  regarded 
as  an  existing  lien  on  the  premises.* 

§  1066.  Estoppel. — The  owner  of  land  who  recognizes  a 
mortgage  upon  the  same,  which  has  been  assigned  to  him  as  a 
valid  instrument  and  transfers  it  as  such,  is  estopped  from 
insisting,  as  against  the  assignee  or  any  one  claiming  under 
him,  that  in  his  hands  it  had  merged  and  disappeared  in  the 
conveyance.^  So  where  a  party  takes  a  deed  with  constructive 
notice  of  the  existence  of  a  mortgage  on  the  land,  he  is  estopped 
from  denying  its  validity." 

So  where  a  party  sells  mortgaged  estate,  free  from  incum- 
brances, he  is  estopped  as  against  the  purchaser  to  hold  that  there 
was  no  merger.' 

1  Gillig  V.  Maass,  28  N.  Y.  191 ;  Power  v.  Lester,  23  N.  Y.  527  ;  17  How.  Pr. 
(N.  Y.)  413. 
^  Clark  V.  Clark,  76  Wis.  306. 
3  King  V.  King,  100  Mass.  224. 
*  Browne  v.  Perris,  23  Abb.  N.  C.  (X.  Y.)  226. 

5  Powell  V.  Smith,  30  Mich.  451 ;  Skeel  v.  Spraker,  8  Paige  (N.  Y.),  182. 
^  Kellogg  V.  Ames,  41  N.  Y.  259,  reversing  41  Barb.  (N.  Y.)  218. 
T  Bulkeley  v.  Hope,  1  Kay  &  J.  482.    See,  also,  Webb  v.  Meloy,  32  Wis.  319. 


MERGER.  1041 

§  1067.  Express  Intention  Will  Control. — Express  inten- 
tion will  control.  The  law  will  not  enforce  a  merger  where  it 
is  against  the  interest  of  the  owner,  and  there  is  no  express 
intention.^  Thus,  where  one  who  has  the  first  mortgage  takes 
for  further  security  a  deed  for  the  land  and  gives  back  a  bond 
to  reconvey  upon  the  payment  of  the  named  sum,  the  mort- 
gage does  not,  in  the  absence  of  intention  to  that  effect,  merge 
in  the  legal  title,  so  as  to  let  in  a  second  mortgage  as  a  first 
lien  on  the  land.^ 

Merger  may  be  prevented  by  a  recital  in  a  deed  of  release 
from  the  owner  of  the  equity  of  redemption  to  the  holder  of 
the  mortgage.^ 

A  father  held  a  first  mortgage  on  his  son's  land.  Afterward 
he  purchased  the  land  for  a  given  sum,  paying  in  cash  the 
difference  between  that  sum  and  the  amount  of  the  mortg-affe. 
The  father  did  not  know  at  the  time  of  any  junior  liens  on  the 
land,  but  he  did  not  give  up  the  notes  and  mortgage,  and  the 
latter  was  not  cancelled  of  record.  It  was  held  that  there  was 
no  merger  of  the  mortgage  in  the  legal  title,  but  that  it 
remained  the  first  lien  in  his  hands,  and  those  of  his  assignees.* 

The  mortgage  is  not  merged  in  the  deed  where  it  is 
intended  by  the  mortgagee  to  hold  the  lien  separate  for  his 
own  interests.^ 

§  1068.  Deed  of  Quit  Claim. — A  convej-ance  of  a  fee  in 
land  by  a  quit  claim  to  the  beineficiary  in  a  deed  of  trust  on 
the  land  will  not  cause  a  merger  of  the  equitable  and  legal 
estates  in  the  grantee,  where  there  is  an  outstanding  second 
deed'of  trust  at  the  time  of  the  conveyance.^ 

So  a  deed  of  quit  claim  to  a  third  person,  who  pays  the  debt 
at  the  request  of  the  mortgagor,  is  an  assignment,  and  not  a 

'  Smith  V.  Swan,  69  Iowa,  412 ;  Patterson  i'.  Mills,  69  Iowa,  755. 

"McElhaney  r.  Shoemaker,  76  Iowa,  416. 

3  Bailey  r.  Richardson,  9  Hare,  734  ;  Spencer  v.  Ayrault,  10  N.  Y.  202 ;  Hood 
V.  Phillips,  .3  Beav.  513 ;  Parry  >:  Wrieht,  1  Sim.  &  St.  369 ;  Hatch  v.  Skilton, 
20  Beav.  453  ;  Denzler  r.  O'Keefe,  34  N.  .J.  Eq.  361. 

*  Gray  v.  Nelson,  77  Iowa,  63. 

^Vannice  v.  Bergen,  16  Iowa,  555;  "Woodward  v.  Davis,  53  Iowa,  694. 

«  Collins  V.  Stocking,  98  Mo.  290. 
66 


1042  RIGHTS   OF    PARTIES    BEFORE   DEFAULT. 

merger.^  However,  a  quit-claim  deed  by  the  mortgagee  or  his 
assigns,  to  the  owner  of  the  equity  of  redemption,  operates  as 
an  extinguishment  of  the  mortgage,  there  being  no  inter- 
vening equities/ 

So  where  a  holder  of  a  mortgage  conveys  to  the  purchaser  of 
the  equity  of  redemption  all  his  "  right,  title,  interest,  claim, 
and  demand,  both  at  law  and  in  equity,  whether  by  deed,  mort- 
gage, or  otherwise,  and  as  well  in  possession  as  in  expectancy," 
this  operates  as  a  discharge.^ 

§  1069.  Rents  and  Profits. — Where  a  mortgagee  buys  the 
legal  title  to  the  mortgaged  land,  although  his  mortgage  is  not 
merged  therein  in  favor  of  a  junior  lien-holder,  he  is  not  re- 
quired, in  adjustment  of  the  liens,  to  account  to  them  for  rents 
and  profits  of  the  land  for  the  time  he  has  enjoyed  it  under 
his  deed.* 

But  it  is  true  that  a  senior  mortgagee  who  takes  possession 
of  the  mortgaged  premises  under  a  sale  in  foreclosure,  will,  on 
redemption  by  a  junior  mortgagee,  who  was  not  a  party  to  the 
foreclosure  proceeding,  be  required  to  account  for  the  rents  and 
profits  during  the  time  of  possession  so  held.'^ 

§  1070.  Bequest  to  Mortgagor. — A  bequest  to  a  mort- 
gagor in  trust  to  pay  the  income  of  the  mortgage  to  the  mort- 
gagee's widow  during  her  life,  and  afterward  the  principal  to 
the  mortgagor  is  not  a  merger,  and  the  widow  may  foreclose 
during  her  life.^  But  where  the  mortgagee  conveys  direct  to 
the  mortgagor  as  a  trustee  for  the  separate  use  of  a  party  dur- 
ing life,  with  remainder  over  to  her  children,  and  the  mort- 
gagor covenants  to  accept  the  trust  and  carries  it  into  effect, 
the  conveyance  unites  in  the  trustee  the  entire  estate  of  mort- 
gagor and  mortgagee,  and,  upon  the  party's  death,  the  trust 

1  Hinds  V.  Ballou,  44  N.  H.  619;  Freeman  v.  M'Gaw,  15  Pick.  (Mass.)  82  ; 
Wolcott  V.  Winchester,  15  Gray  (Mass.),  461.  Compare  Johnson  v.  Lewis,  13 
Minn.  364. 

'^  Jerome  v.  Seymour,  Harr.  (Mich.)  357. 

'Bassett  v.  Hathaway,  9  Mich.  28. 

*  Gray  v.  Nelson,  77  Iowa,  63. 

*Ten  Eyck  v.  Casad,  15  Iowa,  524  ;  Bunce  v.  West,  62  Iowa,  80. 

«  Hancock  y.  Hancock,  22  N.  Y.'568. 


MERGEE.  1043 

terminates,  devolving  upon  the  remaindermen  tlie  entire  legal 
and  equitable  estate  of  the  lands.* 

§  1071.  Assuming  to  Pay  Mortgage. — Payments  made  by 
a  party  upon  a  mortgage  debt  in  pursuance  of  a  duty  in  the 
proper  performance  of  which  others  are  interested,  must  be 
applied  and  held  as  payments,  and  cannot  be  used  by  such 
party  as  a  part  consideration  for  the  assignment  and  transfer 
of  a  mortgage  and  debt  to  a  third  person.^  So  if  the  money  is 
advanced  by  one  whose  duty  it  is,  by  contract  or  otherwise,  to 
pay  and  cancel  a  mortgage  and  relieve  the  mortgaged  premises 
of  the  lien,  a  debt  in  the  proper  performance  of  which  others 
have  an  interest,  it  should  be  held  a  release,  and  not  an 
assignment,  although  in  form  it  purports  to  be  an  assign- 
ment.^ But  if  the  purchaser  has  not  assumed  the  mortgage, 
after  a  sul^sequent  assignment  to  him  he  holds  it  as  a  sub- 
sisting title.* 

In  Pennsylvania  a  purchaser  at  execution  sale  of  land  sub- 
ject to  a  mortgage  cannot  pay  off  the  mortgage,  without  ex- 
tinguishing the  debt ;  so  he  cannot  take  an  assignment  of  the 
mortgage  and  enforce  it.^ 

§  1072.  Right  to  Dower. — A  woman  who  released  dower, 
by  joining  with  her  husband  in  a  mortgage  of  land,  cannot 
upon  his  death  maintain  a  right  of  dower  against  the  mort- 
gagee or  his  assignees  in  possession.^  However,  a  court  of 
equity  will  afford  her  relief  by  allowing  her  to  redeem.  But 
if  the  mortgage  is  foreclosed   all   right  of  dower  is  thereby 

1  Welsh  r.  Phillips,  5-i  Ala.  309. 

^  Burham  r.  Dorr,  72  Me.  198  ;  Bier  v.  Smith,  25  AV.  Va.  800 ;  Thomp.«on  v. 
Hey  wood,  129  Mass.  401;  Winans  v.  Wilkie,  41  Mich.  264;  Hill  v.  Minor,  79 
Ind.  48. 

'Brown  v.  Lapham,  3  Cush.  (?»Iass.)  551,  554;  <5oodyear  v.  Goodyear,  72 
Iowa,  329 ;  Frey  v.  Yanderhoof,  15  Wis.  397  ;  Coles  v.  Appleby,  22  Hun  (N.  Y.), 
72;  Putnam  v.  Collamore,  120  Mass.  454;  Lilly  v.  Palmer,  51  111.  331. 

*  Matzen  v.  Shaeffer,  05  Cal.  81 ;  Campbell  r.  Kni<:hts,  24  Me.  332 ;  Tucker 
V.  Crowley,  127  Mass.  400 ;  Hall  v.  Harrington,  41  ]Mich.  146 ;  Strong  v.  Con- 
verse, 8  Allen  (Mass.),  557 ;  Pike  v.  Goodnow,  12  Allen  (Mass.),  472. 

*  Dollar  Sa\nngs  Bank  v.  Burns,  87  Pa.  St.  49L 
«Farwell  v.  Cotting,  8  Allen  (Mass.),  211. 


1044  RIGHTS    OF    PARTIES    BEFORE   DEFAULT. 

barred.^  She  is  entitled  to  dower  in  an  equity  of  redemption 
in  real  estate  of  the  husband  against  all  persons  excepting  the 
mortgagee  and  those  claiming  under  him.  But  she  cannot 
have  dower  as  against  the  mortgagee  except  by  payment  of 
the  whole  mortgage  debt."  So  she  cannot  maintain  a  suit 
against  the  mortgagee  or  his  assignee,  who  may  be  in  posses- 
sion in  pursuance  of  a  sale  under  a  second  mortgage  given  by 
her  husband  alone ;  unless  she  redeems  by  paying  the  amount 
due  upon  the  mortgage  in  which  she  had  released  her  dower.^ 

A  quit-claim  deed  from  the  mortgagee,  after  breach  of  con- 
dition of  the  mortgage  to  a  purchaser  of  the  equity  of  redemp- 
tion from  the  mortgagor's  insolvency  does  not  merge  the 
mortgage  for  the  benefit  of  the  mortgagor's  widow  who  joined 
in  the  mortgage  to  release  dower.^  But  if  the  grantee  in  a 
deed,  in  which  the  wife  has  not  joined  her  husband  to  release 
dower,  pays  off  the  mortgage  according  to  agreement,  thus  dis- 
charging the  mortgage,  then  the  widow  will  be  entitled  to 
her  dower.^ 

If  the  mortgage  be  j)aid  out  of  the  assets  of  an  insolvent 
estate,  and  the  assignee  takes  an  assignment  to  himself,  there 
is  no  merger,  and  the  widow  cannot  have  dower.^ 

§  1073.  Assigning  Mortgage  as  Collateral  Security. — 
When  the  mortgagee  assigns  the  mortgage  as  collateral  security 
for  his  own  debt,  the  foreclosure  of  the  mortgage  and  purchase 
at  the  foreclosure  by  the  assignee,  as  against  the  assignor, 
where  the  latter  is  not  made  a  party  to  the  foreclosure,  and  his 

^  Gibson  v.  Crehore,  5  Pick.  (Mass.)  146 ;  Eaton  v.  Simonds,  14  Pick.  (Mass.) 
98 ;  Brown  v.  Lapliam,  3  Cush.  (Mass.)  551. 

'^  Norris  v.  Morrison,  45  N.  H.  490 ;  McCabe  v.  Bellows,  7  Gray  (Mass.), 
148 ;  Hastings  v.  Stevens,  29  N.  H.  564 ;  Cox  v.  Garst,  105  111.  342. 

^  McMahon  v.  Russell,  17  Fla.  698.  See,  also,  Russell  v.  Austin,  1  Paige 
(N.  Y.),  192. 

*  Savage  v.  Hall,  12  Gray  (Mass.),  363.  See,  also,  Hunt  r.  Hunt,  14  Pick. 
(Mass.)  374 ;  Freeman  r.  IM'Gaw,  15  Pick.  (Mass.)  82 ;  Atkinson  v.  Angert, 
46  Mo.  515. 

*  McCabe  v.  Swap,  14  Allen  (Mass.),  188. 

^Sargeant  v.  Fuller,  105  Mass.  119.  Compare  Jones  v.  Bragg,  33  Mo.  337 ; 
Atkinson  v.  Stewart,  46  Mo.  510.  See,  also,  Gibson  v.  Crehore,  3  Pick.  (Mass.) 
475  ;  5  Pick.  (Mass.)  146. 


MERGER.  1045 

equitable  right  foreclosed,  simply  substitutes  the  land  for  the 
mortgage,  and  the  assignee  holds  it  as  a  security  merely,  sub- 
ject to  the  rights  of  the  assignor  to  redeem  by  payment  of  the 
debt,  and  upon  such  payment,  he  is  entitled  to  the  land. 

The  doctrine  of  merger  does  not  apply  in  such  case,  as  in 
equity  merger  will  never  be  allowed  against  the  interest  of 
the  parties  or  their  intention,  or  where  the  two  estates  are  held 
in  different  rights.^ 

Judge  Finch  says  such  an  assignment  is  in  substance  a 
mortgage  or  pledge  of  the  transferred  security  ;  that  it  gives 
to  the  assignee  merely  a  defeasible  title,  which  ends  upon  pay- 
ment of  the  debt,  leaving  the  ownership  in  the  assignor  pre- 
cisely as  if  no  transfer  had  been  made ;  that  such  defeasible 
title  cannot  be  changed  or  enlarged  as  against  the  assignor  by 
any  act  or  dealing  of  the  assignee  or  his  representatives,  to 
which  the  assignor  is  not,  in  some  manner,  a  party ;  that  if 
the  assignee  forecloses  the  mortgage  without  also  foreclosing 
the  assignor's  rights,  and  becomes  the  purchaser  at  the  sale,  he 
holds  the  land  as  a  substitute  for  the  mortgage  precisely  as  he 
held  the  latter,  and  by  no  other  different  or  stronger  title ;  and 
whatever  of  benefit  results  from  extinguishing  the  mort- 
gagor's equity,  inheres  in  the  security  assigned  in  its  changed 
form,  and  goes  of  necessity  to  him  who  resumes  his  ownership 
by  payment  of  the  debt.^  There  is  no  merger  as  against 
the  assignor  and  the  pledgee  who  purchases  under  the  fore- 
closure sale. 

So  if  the  mortgagee  has  assigned  some  of  the  notes,  not  as 
a  pledgor,  the  mortgage  will  be  kept  alive,  though  the  mort- 
gagee has  acquired  the  equity  of  redemption  ;  for  then  the 
mortgagee  holds  the  mortgage  in  trust  for  the  assignee.^ 

§  1074.  The  Record  Does  Not  Show  Merger. — A  sub- 
sequent purchaser  cannot  rely  upon  the  record  to  show 
merger.     The  record  does  not  show  whether  such  conveyance 

'  Slee  r.  Manhattan  Co.,  1  Paige  (N.  Y.),  48;  Hoyt  v.  Martense,  16  N.  Y. 
231  ;  Dalton  v.  Smith,  86  N.  Y.  176. 

2  In  re  Gilbert,  101  N.  Y.  208,  211. 

3  International  Bank  v.  Wilshire,  108  111.  143, 


1046  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

operates  as  a  merger  of  the  mortgage  interest  in  the  land  or 
otherwise/ 

Though  the  record  may  show  ownership  in  a  party,  yet  it 
may  be  that  some  other  party  has  a  vaUd  title  to  the  mort- 
gage.^ The  purchaser  must  go  beyond  the  record  and  find  out 
whether  there  has  been  a  merger  in  fact.^ 

Article  3. 

Discharge  and  Release  of  Mortgage. 

?  1075.  Extinguishment  of  Lien.  §  1079.  Conveyance  "With  Warranty. 

I  1076.  Intention  at  the  Time  of  Pay-  I  1080.  Payment  by  Moi-tgagor. 

ment  Governs.  §  1081.  Payment  by  a  Party  to  Pro- 
l  1077.  Res  Gestae  Tending  to  Show  tect  His  Estate. 

Intention.  2  1082.  Uniting  Estates  of  Mortgagor 
§  1078.  Relation  of  the  Parties  Must  and  Mortgagee. 

Be  Considered.  I  1083.  Parol  Evidence. 

§  1075.  Extinguishment  of  Lien. — Whenever  the  lien  is 
extinguished  there  is  no  merger.  Thus,  the  effect  of  a  sale  of 
the  premises  under  a  prior  judgment,  and  a  failure  to  redeem 
b}^  the  judgment  debtor  or  the  subsequent  incumbrancer,  will 
transfer  the  title  absolutely  to  the  purchaser  and  extinguish 
the  lien.  The  sale  being  entire  and  regular  the  fee  of  the  judg- 
ment debtor  and  mortgagor  will  vest  in  the  purchaser  ;  and  all 
other  subsequent  incumbrances  by  judgment  or  mortgage  will 
be  legally  expunged  from  the  record.* 

After  a  mortgagee  had  assigned  the  mortgage  he  acquired 
the  title  of  the  mortgagor  to  the  mortgaged  premises  and  con- 
veyed the  same  to  a  third  person,  but  this  was  not  a  merger  of 
the  equitable  and  legal  titles.^ 

And  so  where  a  person  buys  a  mortgage,  and  afterward 
takes  another  mortgage  on  the  same  premises  to  secure  other 

1  Worcester  Nat.  Bank  v.  Cheeney,  87  111.  602 ;  Purdy  v.  Huntington,  42  N. 
Y.  334 ;  Oregon  Trust  Co.  v.  Shaw,  5  Saw.  C.  C.  336 ;  6  Saw.  C.  C.  52. 

2  Morgan  v.  Hammett,  34  Wis.  512 ;  Aiken  v.  Milwaukee,  etc.,  Railroad  Co., 
37  Wis.  469 ;  Miller  v.  Lindsey,  19  Hun  (N.  Y.),  207. 

3  Aiken  v.  Milwaukee,  etc.,  Railroad  Co.,  37  Wis.  469. 
*Hill  V.  Pixley,  63  Barb.  (N.  Y.)  200. 

6 Lime  Rock  IS^at.  Bank  v.  Mowry  (N.  H.),  22  At.  Rep.  555. 


MEEGER.  1047 

and  different  debts  than  are  secured  by  the  prior  mortgage, 
there  is  no  such  union  of  estates  as  will  constitute  merger.' 

Where  a  company,  having  mortgaged  property  to  secure  its 
bonds,  and  having  become  insolvent,  has  a  trustee  appointed 
to  settle  its  affairs,  and  the  bondholders  purchase  the  property 
from  the  trustee  subject  to  the  mortgage,  they  cannot  then  pro- 
ceed to  collect  the  bonds  from  the  company,  or  from  the  indi- 
vidual members,  for  the  reason  that  they  have  already  received 
payment  in  the  land.^  And  a  mortgagee,  who,  after  dedication 
of  the  land  to  the  public  by  the  mortgagor,  accepts  from  the 
latter  a  conveyance  thereof  in  pa3'ment  of  the  debt  secured  by 
the  mortgage,  acquires  only  the  mortgagor's  title.^ 

§  1076.  Intention  at  the  Time  of  Payment  Governs. — 
When  a  vendee  takes  an  estate  subject  to  a  mortgage,  and  pays 
it  off  according  to  agreement,  this  discharges  the  mortgage. 
The  fact  that  the  purchaser  obtains  a  discharge  of  the  mort- 
gage, and  does  not  take  an  assignment,  leads  to  the  conclusion 
that  he  was  to  pay  the  mortgage  himself,  as  part  of  the  pur- 
chase-money, and,  of  course,  there  can  be  no  separate  interest 
to  be  kept  alive.* 

If  it  be  the  purchaser's  duty,  by  the  terms  of  the  contract, 
to  pay  and  cancel  the  mortgage,  it  will  be  held  to  be  a  release, 
and  not  an  assignment,  when  he  discharges  the  debt;  and 
W'hen  there  is  no  such  duty  devolving  upon  him,  the  assign- 
ment will  be  held  to  operate  as  an  extinguishment,  or  not 
according  to  the  intention  and  situation  of  the  parties.^ 

When  the  purchaser  takes  no  assignment  of  the  mortgage, 
and  his  payments  are  made  for  the  purpose  of  discharging  the 
debt,  and  has  no  intention  of  keeping  alive  the  mortgage,  he 

iBuzzellr.  Still,  63  Vt.  490. 

"^  Cock  V.  Bailey,  146  Pa.  St.  328. 

3  Archer  v.  Salinas,  93  Cal.  43. 

*  Wedge  V.  Moore,  6  Cush.  (Mass.)  8,  10;  Champney  v.  Coope,  34  Barb. 
(N.  Y.)  539 ;  Hunt  v.  Hunt,  14  Pick.  (Mass.)  374,  383 ;  Loomer  v.  Wheelwright, 
3  Sandf.  Ch.  (N.  Y.)  135,  157 ;  Gardner  v.  Astor,  3  Johns.  Ch.  (N.  Y.)  53. 

^Gayle  v.  Wilson,  30  Gratt.  (Ya.)  166;  Gibson  v.  Crehore,  3  Pick.  (Mass.) 
475 ;  Brown  v.  Lapham,  3  Cush.  (Mass.)  551 ;  Lynch  v.  PfeifFer,  110  N.  Y. 
33 ;  Aiken  v.  Milwaukee,  etc.,  Eailroad  Co.,  37  Wis.  469. 


1048  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

cannot  afterward,  upon  a  change  of  his  intention  or  upon  a 
change  in  the  surrounding  circumstances,  insist  upon  the 
mortgage  as  a  subsisting  security  to  the  injury  of  third 
persons.' 

So,  where  a  mortgage  was  paid  without  an  assignment  or 
discharge  of  it  at  that  time,  a  subsequent  conveyance  by  the 
owner  by  warranty  transferred  a  vaUd  title,  and  the  mortgage 
cannot  be  revived  by  his  grantee.^ 

§  1077.  Res  Gestae  Tending  to  Show  Intention. — Until 
the  party  has  made  a  disposition  of  the  property,  and  until 
some  person  acquires  an  interest,  he  is  at  jDcrfect  liberty  to  con- 
sider the  mortgage  merged  or  not  as  might  be  most  beneficial 
to  him  is  the  general  rule  in  equity ;  and  this  intent  does  not 
become  fixed  and  unchangeable  until  some  one  acquires  an 
interest,  and  thereby  a  right  to  draw  such  intent  in  question.^ 
Whatever  occurs  in  such  interval  between  the  parties  inter- 
ested tending  to  show  that  a  merger  was  or  was  not  intended 
is  admissible  upon  that  issue  as  a  part  of  the  res  gestas.*  In 
equity  the  estates  will  be  kept  separate  where  such  is  the  in- 
tention of  the  parties,  and  justice  requires  it,  and  that  inten- 
tion will  be  gathered  not  only  from  the  acts  and  declarations 
of  the  party,  but  from  the  view  of  the  situation  as  affecting  his 
interest,  at  least  prior  to  the  presence  of  some  third  person's 
right.^ 

Whether  there  is  a  merger  of  a  less  estate  in  a  greater  de- 
pends upon  the  express  or  implied  intention  of  the  person  in 
whom  the  estates  unite." 

§  1078.  Relation  of  the  Parties  Must  Be  Considered. 
— Whether  the  release  of  a  mortgage  will  constitute  a  discharge 

1  Hatch  V.  Kimball,  16  Me.  146 ;  Starr  v.  Ellis,  6  Johns.  Ch.  393  ;  Lynch  v. 
Pfeiffer,  110  N.  Y.  33. 

2  Given  v.  Marr,  27  Me.  212. 

3  James  v.  Morey,  2  Cow.  (N.  Y.)  246. 
*  Smith  V.  Roberts,  91  N.  Y.  470. 

5  Moffatt  V.  Hammond,  18  Ves.  385 ;  Gardner  v.  Aster,  3  Johns.  Ch.  (N.  Y.) 
53;  Starr  v.  Ellis,  6  Johns.  Ch.  (N.  Y.)  393  ;  Champney  v.  Coope,  32  N.  Y. 
543  ;  Sheldon  v.  Edwards,  35  N.  Y.  279. 

6  Bostwick  V.  Frankfield,  74  N.  Y.  207. 


MERGER.  1049 

or  an  assignment  depends  not  so  much  upon  the  form  of  the 
instrument  as  upon  the  relation  of  the  parties  to  the  estate, 
and  their  presumed  interest  derived  from  circumstances  under 
which  the  conveyance  is  made.  If  tlie  release  is  to  a  party 
whose  duty  it  is  to  extinguish  the  mortgage  for  the  benefit  of 
another,  it  will  be  held  to  operate  as  a  discharge.^ 

A  mortgage  lien  purchased  by  the  owner  of  the  equity 
of  redemption  will,  in  the  absence  of  a  contrary  intention, 
be  ke]jt  alive  in  equity  for  the  purchaser's  protection 
against  intervening  incumbrances,  and  will  not  merge ;  and 
Chief  Justice  Durfee  says  this  rule  is  the  same  whether  the 
purchaser  takes  an  assignment  of  the  whole  mortgage  lien  or 
a  release  or  quit  claim  of  the  mortgagee's  interest  in  the  estate 
held  by  the  purchaser.^  If  the  release  is  to  a  party  whose  duty 
it  is  to  extinguish  the  mortgage  for  the  benefit  of  another,  it 
will  be  held  to  operate  as  a  discharge.^ 

When  the  purchaser  agrees,  in  a  deed,  by  express  stipulation 
that  he  will  assume  and  pay  an  existing  mortgage  debt  upon 
the  premises,  his  payment  operates  as  a  discharge  of  the  mort- 
gage, whether  he  takes  an  assignment  of  the  mortgage,  an 
acknowledgement  of  payment,  or  a  release.* 

If  the  money  is  advanced  by  one  whose  duty  it  is,  by  con- 
tract or  otherwise,  to  pay  and  cancel  a  mortgage,  and  relieve 
the  mortgaged  premises  of  the  lien,  a  duty  in  the  proper  per- 
formance of  which  others  have  an  interest,  it  shall  be  held  a 
release,  and  not  an  assignment,  although  in  form  it  purports 
to  be  an  assignment.^ 

^Gibson  v.  Crehore,  3  Pick.  (Mass.)  475;  Brown  r.  Lapham,  3  Cu!?h.  (Mass.) 
552 ;  WadHworth  v.  Williams,  100  Mass.  126 ;  Ryer  v.  Gass,  130  Mass.  227 ; 
Duffy  V.  McGuiness,  13  R.  I.  595. 

'  Duffy  V.  McGuiness,  13  R.  I.  595 ;  Knowles  v.  Carpenter,  8  R.  I.  548 ;  Stan- 
tons  V.  Thompson,  49  N.  H.  272,  279 :  Grover  v.  Thatcher,  4  Gray  (Mass.),  526 ; 
Hunt  V.  Hunt,  14  Pick.  (Mass.)  374,  383. 

^Wadsworth  v.  Williams,  100  Mass.  126.  Compare  Wade  r.  Beldmeir,  40 
Mo.  486 ;  Burnham  v.  Dorr,  72  Me.  198. 

*Kilborn  r.  Robbing,  8  Allen  (Mass.),  466.  Compare  Young  v.  Morgan,  89 
111.  199. 

^  Brown  v.  Lapham,  :>  Cush.  (Mass.)  551,  554 ;  Burnham  v.  Dorr,  72  Me. 
198.  See,  also,  Lappen  v.  Gill,  129  Mass.  349 ;  Androscoggin  Sav.  Bank  v. 
McKenney,  78  Me.  442. 


1050  EIGHTS    OF   PARTIES   BEFORE    DEFAULT. 

When  one  is  bound  to  pay  a  mortgage  debt,  and  pays  it,  he 
will  not  be  allowed  to  hold  it  as  a  subsisting  incumbrance.^ 
Hence,  a  mortgagor  cannot,  after  having  obtained  a  transfer 
of  a  first  mortgage  made  by  himself,  set  it  up  against  another 
mortgage  of  later  date,  which  he  had  made ;  and  this  is  so  where 
he  purchases  the  first  mortgage  title  at  a  sale  under  the  power.^ 

§  1079.  Conveyance  with  Warranty. — After  a  conveyance 
with  warranty  the  vendor  cannot  buy  up  an  outstanding  mort- 
gage and  keep  it  alive.  Such  mortgage  merged  in  the  title  he 
conveyed.^  It  is  only  where  the  purpose  of  justice  requires 
that  a  payment  of  a  mortgage  debt  shall  be  regarded  as  an 
assignment  instead  of  an  extinguishment  of  the  mortgage  that 
it  will  be  held  so  to  operate.*  Hence,  one  who  has  executed  to 
different  persons  two  mortgages  upon  the  same  land  with  cov- 
enants of  warj-anty  cannot,  after  the  titles  under  the  two  mort- 
gages have  both  become  united  in  one  person,  and  the  second 
mortgage  has  been  foreclosed,  be  allowed  to  open  the  foreclosure 
by  paying  the  sum  secured  by  the  first  mortgage."  The  cov- 
enants estopped  him  from  setting  up  the  first  mortgage  as 
against  the  parties  who  were  the  assignees  of  the  second  mort- 
gage, and  to  whom  he  would  be  responsible  for  a  breach,  if  the 
first  mortgage  was  allowed  to  have  effect  against  the  title 
acquired  under  the  foreclosure  of  the  second.^ 

When  one  party  grants  land  with  warranty,  and  afterward 
acquires  a  mortgage  given  by  a  former  owner,  he  takes  such 
mortgage  for  the  benefit  of  his  grantee  and  the  lien  is  discharged 
and  acquitted.^ 

1  Smith  V.  Lowry,  113  Ind.  37  ;  Burnham  v.  Dorr,  72  Me.  198. 

2  Otter  r.  Vaux/2  Kay  &  J.  650  ;  6  De  G.,  M.  &  G.  638  ;  Johnson  v.  Webs- 
ter, 4  De  G.,  M.  &  G.  474. 

^Mickles  r.  Dillaye,  15  Hun  (N.  Y.),  296. 

*  Brown  v.  Lapham,  3  Gush.  (Mass.)  551 ;  Kilborn  v.  Bobbins,  8  Allen 
(Mass.),  471. 

=  Butler  r.  Seward,  10  Allen  (Mass.),  467. 

«Comstock  r.  Smith,  13  Pick.  (Mass.)  119 ;  Trull  v.  Eastman,  3  Met.  (Mass.) 
124. 

'  Mickles  v.  Townsend,  18  N.  Y.  575 ;  Stoddard  v.  Rotton,  5  Bosw.  (N.  Y.) 
378 ;  Co.  Litt.  265  a.  See,  also.  Proctor  v.  Thrall,  22  Vt.  262 ;  Fish  v.  Gordon, 
10  Vt.  288  ;  Tyler  v.  Lake,  4  Sim.  351 ;  Collins  v.  Torry,  7  Johns.  (N.  Y.)  278. 


MERGEE.  1051 

So  if  the  owner  mortgages  the  estate  without  noticing  the 
mortgage  title  held  by  him,  this  operates  as  a  merger  of  his 
title  as  mortgagee/ 

When  the  owner  sells  land  with  warranty,  a  mortgage  held 
by  him  upon  the  land  at  that  time  is  extinguished,  unless  it 
is  agreed  to  be  kept  in  force  for  his  benefit.^ 

§  1080.  Payment  by  Mortgagor.- — Payment  of  the  mort- 
gage by  the  mortgagor  is  to  be  regarded  as  an  extinguishment. 
For  the  purchaser  of  land  cannot  keep  on  foot  his  own  mort- 
gage.^ But  the  rule  that  payment  by  the  mortgagor  is  an  ex- 
tinguishment, does  not  obtain  where  the  payment  is  of  an 
incumbrance  existing  before  the  conveyance  to  him.'^ 

Whenever  a  purchaser  pays  an  incumbrance  on  the  land, 
which  existed  before  the  time  of  his  i)urchase,  he  can  keep  it 
alive  as  a  separate  title  when  it  is  for  his  benefit.^ 

§  1081.  Payment  by  a  Party  to  Protect  His  Estate. — 
Where  a  party  is  so  related  to  a  mortgage  that  he  is  not  per- 
sonally liable  upon  it,  but  is  obliged  to  pay  it  to  save  his 
estate,  and  he  does  pay  it,  the  payment  will  be  presumed  to 
be  made  for  that  purpose,  and,  in  such  case,  no  assignment  of 
the  mortgage  to  the  person  paying  it  nor  proof  of  an  intent 
on  his  part  to  keep  it  alive  is  necessary  to  give  him  the  benefit 
of  it."  So  where  one  having  the  right  to  redeem,  redeems  the 
mortgaged  premises  by  the  payment  of  money,  the  transaction 
will  be  treated  as  an  assignment  of  the  mortgage,  if  this  is 
manifestly  for  the  interest  of  the  party  so  redeeming,  and  is  not 
inconsistent  with  the  justice  of  the  case,  where  no  contrary  in- 
tent is  expressed  or  necessarily  implied/ 

1  Tyler  v.  Lake,  4  Sim.  351. 

2  Stoddard  v  Rotton,  5  Bosw.  (N.  Y.)  378. 
^Gilkeson  v.  Snyder,  8  Watts  &  S.  (Pa.)  200. 
*  Abbott  V.  Kasson  72  Pa.  St.  183. 

^Carll  V  Butman,  7  Me.  102;  Skeel  v.  Spaker,  8  Paige  (N.  Y.),182;  Milla- 
paugh  r.  ]McBride,  7  Paige  (N.  Y.),  509 ;  Pool  v.  Hathaway,  22  Me.  85. 

6  Walker  v.  King,  44  Vt.  601  ;  McDanicls  v.  Flower  Brook  Manf.  Co.,  22  Vt. 
274,  explained ;  Wheeler  v.  Willard,  44  Vt.  640 ;  Warran  v.  Warran,  30  Vt. 
530 ;  Ryer  v.  Gass,  130  Mass.  227  ;  Mahon  v.  Russell,  17  Fla.  698. 

'Hhids  V.  Ballou,  44  N.  H.  619. 


1052  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

The  subsequent  mortgagee  must  redeem  the  prior  mortgage 
before  he  can  foreclose  his  own,  even  if  the  prior  mortgage  has 
been  released  of  record  but  without  consideration.^ 

A  mere  volunteer  who  pays  off  the  mortgage  cannot  be 
treated  as  an  equitable  assignee  of  such  mortgage,  and  cannot 
therefore  keep  it  on  foot  as  against  persons  having  interven- 
ing incumbrances  upon  the  land.  This  is  because  the  payment 
was  not  compulsory,  in  order  to  protect  his  estate.^  And  when 
a  purchaser  is  bound  to  pay  the  debt,  he  cannot  set  up  the 
mortgage  against  a  party  whom  he  is  obligated  to  protect 
against  the  lien.^ 

The  assignee  of  a  mortgage  having  a  lien  upon  two  separate 
parcels  of  land,  having  purchased  one  of  them,  can  collect 
only  the  ratable  proportion  from  the  other.* 

A  purchase  of  the  mortgaged  estate  at  a  tax  sale  by  the 
mortgagee  to  protect  the  mortgage  lien,  and  save  the  property 
from  being  lost  to  him,  does  not  effect  a  merger.^ 

§  1082.  Uniting  Estates  of  Mortgagor  and  Mort- 
gagee.— Where  two  titles  or  interests  become  united  in  the 
same  person  in  the  same  right  and  at  the  same  time  as  that  of 
mortgagor  and  mortgagee,  the  less  will  merge  in  the  greater 
estate  and  become  extinct,  unless  interest  or  intention  be  to 
the  contrary,  or  the  merger  would  work  an  injury  to  some  one.^ 
Thus,  a  deed  by  a  mortgagor  to  a  mortgagee  as  additional  se- 
curity only,  and  not  as  a  satisfaction  of  the  mortgage,  will  not 
merge  the  mortgage  in  the  greater  estate,  so  as  to  give  priority 
to  another  mortgage  which  is  a  second  lien.^ 

Generally,  when  a  greater  and  a  lesser  estate  coincide  and 

1  Spaulding  r.  Crane,  46  Vt.  292  ;  Young  v.  Hill,  31  N.  J.  Eq.  429 ;  Miller  v. 
Wack,  Saxt.  (N.  J.)  204.  See,  also,  Manwaring  v.  Powell,  40  Mich.  371 ; 
McDaniels  v.  Flower  Brook  Manf.  Co.,  22  Vt.  274. 

-  DoAvner  v.  Wilson,  33  Vt.  1. 

'Manwaring  w.  Powell,  40  Mich.  371;  McDaniels  v.  Flower  Brook  Manf. 
Co.,  22  Vt.  274. 

*Colton  V.  Colton,  3  Pliila.  (Pa.)  24. 

=  Jackson  v.  Relf,  26  Fla.  465. 

«  Weiner  v.  Hentz,  17  111.  259. 

^  Iluebsch  V.  Scheel,  81  lU.  281. 


MERGER.  1053 

meet  in  one  and  the  same  person  without  any  intervening  es- 
tate, the  lesser  estate  is  merged  in  the  greater.'  And  where, 
by  a  release  of  the  right  of  redemption,  the  two  estates  are 
united  in  the  mortgagee,  the  mortgage  will  be  upheld  as  a  sub- 
sisting source  of  title  whenever  it  is  required  by  the  justice  of 
the  case  or  the  intent  of  the  parties.^  The  surrender  of  the 
notes  and  mortgage  by  the  mortgagee,  and  his  acceptance  of  a 
deed  from  the  mortgagor,  giving  him  an  absolute  title  when 
there  is  a  mortgage  upon  the  land,  are  neither  a  payment  of  the 
notes  nor  an  extinguishment  of  the  mortgage.^  And  even 
when  the  fee  has  been  vested  in  the  mortgagee  by  conveyance 
from  the  mortgagor,  and  the  mortgage  has  been  released,  it 
will  still  be  upheld  whenever  it  is  for  the  interest  of  the  mort- 
gagee by  reason  of  some  intervening  title  or  other  cause  that 
it  should  not  be  regarded  as  merged.* 

So,  where  a  mortgagee,  to  avoid  the  expense  of  foreclosure, 
takes  a  conveyance  of  the  mortgaged  premises  to  himself  with- 
out releasing  the  mortgage,  it  will  be  upheld  in  favor  of  him 
and  his  grantees  as  against  the  junior  incumbrance,  if  no 
merger  of  the  mortgage  was  intended  or  effected.^ 

The  law  will  presume  that  the  intention  was  in  accord  with 
the  real  interest.*'  And  generally,  when  the  mortgagee  obtains 
the  equity  of  redemption,  the  law  will  presume  that  he  is 
holding  the  two  titles  separate,  if  it  be  for  his  interest.^ 

And,  agreeing  to  pay  off  and  release  a  second  mortgage, 
when  he  takes  the  equity  of  redemption,  does  not  render  such 
mortgage  superior  to  his  own.^ 

'  Lock  wood  V.  Sturdevant,  6  Conn.  387. 

^  Stantons  v.  Thompson,  49  N.  H.  272. 

2  Buchanan  v.  Balkum,  60  N.  H.  406. 

*Hanlon  v.  Dolierty,  109  Ind.  37. 

^  Lowman  v.  Lowman,  118  111.  582  ;  Shaver  v.  Williams.  87  111.  469 ;  Worcester 
Nat.  Bank  v.  Cheeney,  87  111.  615  ;  Richardson  v.  HockenhuU,  85  111.  124  ;  Hatch 
V.  Kimball,  16  Me.  146;  Clift  v.  White,  12  N.  Y.  519;  Cohn  v.  Hoffman,  45 
Ark.  376 ;  Smith  v.  Swan,  69  Iowa,  412,  414. 

^Silliman  v.  Gammage,  55  Tex.  365  ;  Boardman  v.  Larrabee,  51  Conn.  39; 
Lowman  v.  Lowman,  118  111.  582.    Compare  Weidner  v.  Thompson,  69  Iowa,  36. 

'  Besser  v.  Hawthorn,  3  Oreg.  129  ;  Woodward  v.  Davis,  53  Iowa,  694 ;  Stan- 
tons  V.  Thompson,  49  N.  H.  272. 

^  Woodward  v.  Davis,  53  Iowa,  694. 


1054  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

Where  the  holder  of  two  mortgages  on  the  same  land  fore- 
closes the  junior  mortgage  and  buys  in  the  land  subject  to  the 
senior  mortgage  in  part  satisfaction  of  the  junior  mortgage, 
and  no  redemption  is  made,  the  senior  mortgage  will,  when  the 
time  of  redemption  expires,  merge  in  the  fee,  and  the  debt 
which  it  secured  will  be  extinguished,  though  the  mortgagee 
does  not  obtain  a  master's  deed.^  And  where  a  residuary 
legatee,  as  a  purchaser  of  land  of  the  estate,  executes  a  mort- 
gage thereon  to  secure  the  annual  interest  payable  to  a  life 
tenant,  his  interest  in  the  principal  is  merged  in  his  fee,  and 
on  a  judicial  sale  of  the  land  on  a  subsequent  judgment,  his 
title  will  pass  discharged  of  the  mortgage.^ 

And  where  a  party  purchases  swamp  land  of  a  county,  takes 
possession,  and  executes  a  mortgage  to  secure  school  money 
borrowed  thereon  of  the  county  to  pay  the  purchase  price  of 
the  land,  a  deed  subsequently  given  him  by  the  commissioner 
does  not  operate  as  a  merger  with  satisfaction  of  the  mort- 
gage.^ 

§  1083.  Parol  Evidence. — Parol  evidence  is  not  admissible 
for  the  purpose  of  affecting  the  validity  of  a  particular  writing 
which  the  party  is  called  upon  to  meet,  but  for  the  purpose  of 
enlarging  the  sphere  of  juridical  action,  so  as  to  embrace  the 
whole  transaction  to  which  the  writing  belonged,  and  define 
the  rights  growing  out  of  the  whole  case.* 

So  where  the  grantee  in  a  warranty  deed  as  a  part  of  the 
consideration  for  the  conveyance,  agreed  orally  with  the  gran- 
tor to  pay  the  balance  due  upon  an  outstanding  mortgage,  parol 
evidence  of  such  agreement  is  admissible  in  evidence  in  a  real 
action,  wherein  the  plaintiff  relies  upon  such  mortgage  to  sup- 
port his  title.^ 

Parol  evidence  is  admissible  to  show  the  consideration  upon 

'  Bellville  Sav.  Bank  v.  Reis,  136  111.  242. 
2  Estate  of  Dull,  137  Pa.  St.  116. 
'Williams  v.  Brownlee,  101  Mo.  309. 
*  Miller  v.  Fichthorn,  31  Pa.  St.  252. 

5  Burnham  v.  Dorr,  72  Me.  198.  See,  also,  Bartlett  v.  Parks,  1  Gush.  (Mass.) 
82 ;  Preble  v.  Baldwin,  6  Gush.  (Mass.)  549 ;  Goodspeed  v.  Fuller,  46  Me.  141. 


MERGER.  1055 

which  the  conveyance  was  made,  and  that  the  purchaser  is 
under  obligation  to  pay  the  mortgage  debt  so  that  an  assign- 
ment to  him  constituted  a  merger ;  and  to  sliow  the  whole 
transaction  where  the  conveyance  is  only  a  part/ 

But  oral  evidence  cannot  be  admitted  to  contradict  a  writing 
unless  fraud  be  alleged.  Thus,  parol  evidence  that  an  assign- 
ment of  a  mortgage  was  intended  to  be  a  discharge  is  inad- 
missible, except  for  the  purpose  of  proving  fraud.' 

The  legal  effect  of  a  contract  cannot  be  varied  by  the  intro- 
duction of  parol  evidence.^ 

^  Fiske  V.  McGregory,  34  N.  H.  414  ;  Frey  v.  Vanderhoof,  15  "Wis.  397. 
"  Howard  v.  Howard,  3  Met.  (Mass.)  548 ;  McCabe  v.  Swap,  14  Allen  (Mass.) 
188  ;  Astley  v.  Milles,  1  Sim.  298,  345. 
3  McCabe  v.  Swap,  14  Allen  (Mass.)  188. 


CHAPTER  XXVI. 


subrogation. 
Article  1. 


Rights  of  Purchaser  and  of  Party  Paying  the  Debt. 


§  1084.  Bona  Fide  Purchaser  at  a  De- 
fective Sale. 

?  1085.  Equitable  Assignment  or  Sub- 
rogation. 

§  1086.  A  Creature  of  Equity. 

I  1087.  Equitable  Estoppel. 

I  1088,  Party  AVith  a  Partial  Interest 
in  the  Premises. 

§  1089.  Payment  by  One  Partner. 

I  1090.  A  Volunteer. 

I  1091.  Payment    by  Third  Party  at 


the  Solicitation  of  the  Mort- 
gagor. 

^  1092.  Conventional  Subrogation — 
Subrogation  by  Agreement. 

§  1093.  Statutory  Provisions. 

I  1094.  Colorable  Obligation  to  Pay 
the  Debt. 

§  1095.  One  Entitled  to  Redeem. 

^  1096.  When  Mortgagor  Purchases 
His  Own  Mortgage. 


§1084.  Bona  Fidp:  Purchaser  at  a  Defective  Sale. — 
Subrogation  is  not  founded  upon  contract,  but  is  the  creation 
of  equity,  and  is  enforced  solely  for  accomplishing  the  ends  of 
substantial  justice.  It  is  a  mode  which  equity  adopts  to  com- 
pel the  ultimate  payment  of  a  debt  by  one  who,  in  justice 
and  good  conscience,  ought  to  pay  it,  and  is  not  dependent 
upon  contract,  privity,  or  strict  suretyship.  In  this  way  a 
court,  under  a  great  variety  of  circumstances,  may  relieve  one 
who  has  acted  under  a  justifiable  or  excusable  mistake  of  fact. 
Thus,  a  bona  fide  purchaser,  at  a  mortgage  sale  which  proves 
defective,  is,  after  paying  the  purchase-money,  subrogated  to 
the  rights  of  the  mortgagee.  The  mortgage  is  in  equity  re- 
garded as  assigned  to  such  purchaser,  even  if  the  mortgagee's 
deed  to  him  does  not  contain  language  amounting  to  a  legal 
assignment.  Such  a  purchaser  is  not  a  stranger  to  the  estate, 
but  is  equitably  subrogated  to  the  mortgagee's  rights.'  So  a 
purchaser  at  a  sheriff's  sale  on  a  void  foreclosure  of  a  mort- 

1  Brewer  v.  Nash,  16  R,  I.  458. 
1056 


SUBROGATION.  1057 

gage  is  subrogated  to  the  interest  of  the  mortgagee  and  may 
himself  foreclose/ 

And  so  by  a  mortgage  foreclosure  against  the  administrator  of 
the  mortgagor,  without  making  his  heirs  or  devisees  parties, 
the  purchaser  and  his  grantees  will  be  subrogated  to  the  rights 
of  the  mortgagee,  as  they  become  the  equitable  assignees  of 
the  mortgage.^ 

This  doctrine  of  subrogation  will  hold  even  in  a  case  of  a 
minor  whose  guardian  inserted  in  the  mortgage  invalid  powers 
of  sale.^  And  so  one  who  loans  money  on  a  defective  mortgage 
for  the  purpose  of  discharging  a  prior  valid  mortgage  upon  the 
same  property  is  generally  subrogated  to  the  rights  of  the 
prior  mortgagee/ 

The  general  rule  is  that  one  who  loans  his  money  upon  real 
estate  security  for  the  express  purpose  of  taking  up  and  dis- 
charging liens  or  incumbrances  on  the  same  property  has  thus 
paid  the  debt  at  the  instance,  request,  and  solicitation  of  the 
debtor,  expecting  and  believing,  in  good  faith,  that  his  security 
will,  of  record,  be  substituted,  in  fact,  in  place  of  that  which 
he  discharges,  is  neither  a  volunteer,  stranger,  nor  intermed- 
dler,  nor  is  the  debt,  lien,  or  incumbrance  regarded  as  extin- 
guished if  justice  requires  that  it  should  be  kept  alive  for  the 
benefit  of  the  person  advancing  the  money,  who  thereby 
becomes  the  creditor.* 

Subrogation  is  not  founded  upon  contract,  but  is  the  cre- 
ation of  equity,  and  being  administered  upon  equitable  princi- 
ples, it  is  only  when  an  applicant  has  an  equity  to  invoke,  and 
where  innocent  persons  will  not  be  injured,  that  a  court  can 
interfere.* 

1  Dutcher  v.  Hobby,  86  Ga.  198. 

*  Jellison  v.  Halloran,  44  Minn.  199  ;  Muir  v.  Berkshire,  52  Ind.  149. 

3  Barry  v.  Clarke,  13  R.  I.  65 ;  Brewer  v.  Nash,  16  R.  1. 458. 

*Everston  v.  Bank,  33  Kan.  352;  Hammond  v.  Barker,  61  N.  H.  53;  Sid- 
ener  r.  Pavey,  77  Ind.  211 ;  Byerly  v.  Humphrey,  95  N.  Car.  151.  See,  also, 
Milholland  v.  Tiflany,  64  Md.  455  ;  Levy  v.  Martin,  48  Wis.  198  ;  Gilbert  v. 
Gilbert,  39  Iowa,  657,  659. 

^  Cobb  V.  Dyer,  69  Me.  494  ;  Gans  v.  Thieme,  93  N.  Y.  225 ;  Sidener  v.  Pavey, 
77  Ind.  241 ;  3  Pom.  Eq.  Jur.  1212;  Harris,  Subr.  811,  816;  Dixon,  Subr.  165. 

^  Emmert  v.  Thompson  (Minn.),  52  N.  "W.  Rep.  31 ;  Stevens  v.  Goodenough, 
67 


1058  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

It  may  be  conceded  that  subrogation  is  founded  on  the 
principles  of  equity  and  benevolence  ;  ^  but  to  render  its  appli- 
cation practical  the  claim  must  have  substantial  equity,  grow- 
ing out  of  the  nature  of  the  transaction  itself,  and  it  must  not 
work  wrong  or  injury  to  another.^  So,  where  the  proceeds  of 
decedent's  lands,  sold  by  order  of  court,  were  applied  to  the 
payment  of  the  mortgage  made  by  him  and  his  widow,  wdiich 
proceedings  could  not  dispose  of  the  widow's  dower  right,  the 
purchaser  W' as  subrogated  to  the  rights  of  the  mortgagee  as 
against  the  widow's  claim  to  dower.^ 

§  1085.  Equitable  Assignment  or  Subrogation. — When 
any  person  has  a  subsequent  interest  in  the  mortgaged  prem- 
ises, and  who  is  not  the  principal  debtor  primarily  and  abso- 
lutely liable  for  the  mortgage  debt,  and  pays  off  the  mortgage, 
he  thereby  becomes  an  equitable  assignee  thereof,  and  may 
keep  alive  and  enforce  the  lien  as  far  as  may  be  necessary  in 
equity  for  his  own  benefit,  and  is  subrogated  to  the  rights  of  the 
mortgagee,  to  the  extent  necessary  for  his  own  equitable  pro- 
tection.* 

Even  a  donee  of  the  equity  of  redemption,  conferred  in  con- 
sideration of  love  and  affection,  has  an  undoubted  right  to 
redeem  by  paying  the  mortgage  debt ;  and  the  right  of  equit- 
able assignment,  which  is  another  name  for  subrogation,  is  an 
incident  of  the  right  of  redemption.^  A  fortiori  is  this  true 
where  the  grantee  of  the  mortgagor's  interest  is  a  purchaser, 
even  though  for  a  nominal  consideration.  Thus,  lands  being 
conveyed  by  the  husband  on  a  nominal  consideration  besides 
love  and  affection,  in  trust  for  the  wife  for  life,  with  remainder 
in  one-half  to  the  heirs  or  devisees  of  each  of  them  respectively 

26  Vt.  676  ;  Harnsberger  v.  Yancey,  33  Gratt.  (Va.)  527  ;  Smith  v.  Foran,  43 
Conn.  244. 

1  Webster's  Appeal,  86  Pa.  St.  409. 

2  Erb's  Appeal,  2  Pen.  &  W.  (Pa.)  296. 

» House  V.  Fowle  (Oreg.),  29  Pac.  Rep.  890, 

*Hobgood  V.  Schuler  (La.),  10  South  Rep.  812;  3  Pom.  Eq.  Jur.,  sect.  1212, 
note  2 ;  Everson  v.  McMullen,  113  N.  Y.  293  ;  10  Am.  St.  Rep.  445  ;  Averill  v. 
Taylor,  8  N.  Y.  44  ;  Ohmer  v.  Boyer,  89  Ala.  273. 

6  Cole  V.  Malcolm,  66  N.  Y.  363 ;  Harris  on  Subro.,  sect.  718. 


I 


I 


SUBROGATION.  1059 

and  the  lands  being  at  the  time  subject  to  an  outstanding 
mortgage  executed  by  the  husband,  the  wife  has  a  right  to 
pay  off  and  discharge  the  mortgage,  for  her  own  benelit  and 
protection,  either  before  or  after  her  husband's  death  ;  and 
such  payment  being  made  by  her  after  his  death,  by  allowing 
the  mortgagee  to  retain  and  appropriate  the  rents,  she  is 
entitled,  as  against  the  heirs  of  her  husband,  or  any  one  claim- 
ing under  him,  to  be  subrogated  to  the  rights  of  the  mortgagee, 
or  to  stand  as  an  equitable  assignee  of  the  mortgage.' 

As  a  general  rule  all  persons  having  an  interest  in  property 
subject  to  an  incumbrance  by  which  such  interest  may  be  pre- 
judiced or  lost,  have  a  right  to  pay  the  debt  or  charge  which 
creates  it,  and,  if  the  debt  be  one  for  which  the  ultimate  lia- 
bility rests  on  another  party  they  will,  wpon  such  payment,  be 
subrogated  to  the  right  of  the  creditor  against  such  property.^ 
So  a  party  who  advances  money  to  the  mortgage  creditor  of 
his  debtor,  in  the  payment  of  interest  accumulated  on  the  mort- 
gage debt  becomes  legally  subrogated,  pro  tanto,  to  the  mort- 
gage creditor's  rights.^ 

§  1086.  A  Creature  of  Equity. — Having  the  right  to  re- 
deem a  party  becomes  the  equitable  assignee  of  the  mortgage 
on  the  principle  of  subrogation,  a  doctrine  which  is  not  de- 
pendent on  contract,  but  is  the  creature  of  equity  designed  for 
the  promotion  of  justice.  The  doctrine  is  that  even  without 
language  of  assignment,  a  purchaser  wlio  has  j^aid  the  purchase- 
money  under  a  void  sale  is  entitled  to  be  regarded  in  equity  as 
if  he  were  the  assignee  of  the  mortgage.*     Or  the  deed  given 

1  Olimer  v.  Boyer,  89  Ala.  273. 

"  Powers  V.  Lumber  Co.,  43  Mich.  4fiS  ;  Pheldon  on  Subro.,  p.  13  ;  Bigelow  v. 
Cassedy,  26  N.  J.  Eq.  557  ;  Denman  v.  Nelson,  21  N.  J.  Eq.  452 ;  Parst  v. 
Bates,  95  111.  493  ;  White  v.  Hampton,  13  Iowa,  259  ;  Bush  v.  Wadsworth,  60 
Mich  255  ;  Begein  v.  Brehm,  123  Ind.  160  ;  Ohmer  r.  Boyer,  89  Ala.  273. 

^Hobgood  V.  Schuler  (La.),  10  SouthTlep.  812. 

*  Brewer  v.  Nash,  16  R.  I.  458 ;  Jones  v.  Mack,  53  ]Mo.  147 ;  Honaker  v. 
Shough,  55  Mo.  472 ;  Russell  v.  Whitely,  59  Mo.  196 ;  Johnson  v.  Robertson, 
34  Md.  165 ;  Robinson  v.  Ryan,  25  N.  Y.  320 ;  Muir  v.  Berkshire,  52  Ind.  149 ; 
Brobst  V.  Brock,  10  Wall.  (U.  S.)  519, 534  ;  Johnson  v.  Sandhoff,  30  Minn.  197 ; 
Sloan  V.  Frothingham,  72  Ala.  589,  604 ;   Frische  v.  Kramer,  16  Ohio,  125 ; 


1060  RIGHTS   OF    PARTIES    BEFORE    DEFAULT. 

by  the  mortgagee  under  such  sale  may  contain  language  which 
will  amount  to  a  legal  as  well  as  an  equitable  assignment.* 

When  a  party  bids  off  the  estate  in  good  faith  on  the  invi- 
tation of  the  mortgagee  to  do  so,  and  supposing  his  bid  to  be 
effectual  to  invest  him  with  the  equitable  or  executory  title,  he 
pays  the  amount  of  his  bid  and  the  same  is  applied  to  the 
mortgage  debt  ;  then  he  has  a  most  persuasive  equity  to  be 
subrogated  to  the  rights  of  the  mortgagee  who  invited  his  con- 
fidence, and  the  purchaser  has  become  the  assignee  of  the 
mortgage.^  And  where  the  purchaser  has  entered  under  the 
mortgagee's  deed  and  made  improvements,  this  equity  is 
strengthened  ;  ^  and  where  he,  erroneously  supposing  he  had 
an  interest  in  an  estate,  paid  off  a  mortgage  thereon,  it  was 
held  that  he  was  entitled  to  be  treated  as  an  equitable  assignee 
of  the  mortgage.'*  And  it  makes  no  difference  in  equity  that  a 
mortgage  is  discharged  on  the  record,  the  discharge  having 
been  made  on  the  assumption  that  the  title  to  the  estate  had 
vested  in  the  purchaser,  and  after  his  equitable  right  to  subro- 
gation had  already  accrued  to  him.* 

The  right  of  subrogation  is  not  founded  upon  contract  alone, 
nor  upon  the  absence  of  contract,  but  is  founded  upon  the  facts 
and  circumstances  of  the  case,  and  upon  principles  of  natural 
justice." 

Stark  V.  Brown,  12  Wis.  572  ;  Kelly  v.  DufF,  61  N.  H.  435 ;  Taylor  v.  Associa- 
tion, 68  Ala.  229. 

1  Brown  v.  Smith,  116  Mass.  108;  Burns  t).  Thayer,  115  Mass.  89. 

2  Brewer  v.  Nash,  16  R.  I.  458. 

3  Muir  V.  Berkshire,  52  Ind.  149. 
*  Kelly  V.  Duff,  61  N.  H.  435. 

5  Bacon  v.  Goodnow,  59  N.  H.  415  ;  Guckian  v.  Riley,  135  Mass.  71,  74. 

^  Crippen  v.  Chappel,  35  Kan.  495  ;  Tarbell  v.  Durant,  61  Vt.  516 ;  Freeman 
on  Void  Jud.  Sales,  sects.  50,  51 ;  Ayres  v.  Probasco,  14  Kan.  177, 178 ;  Johnson 
V.  Moore,  33  Kan.  90 ;  Everston  v.  Bank,  33  Kan.  352 ;  Levy  v.  Martin,  48  Wis. 
198 ;  IMorgan  v.  Hannnett,  23  Wis.  30 ;  Blodfj;ett  v.  Hitt,  29  Wis.  170  ;  Homoeo- 
pathic Mut.  In."..  Co.  V.  Mai-shall,  32  N.  J.  Eq.  104 ;  Tradesmen's  Building,  etc., 
Asso.  V.  Thompson,  32  N.  J.  Eq.  133 ;  Tyrell  v.  Ward,  102  111.  29 ;  Scott  v. 
Dunn,  30  Am.  Dec.  174,  and  note ;  Gilbert  v.  Gilbert,  39  Iowa,  657 ;  Valle  v. 
riemin,:?.  29  Mo.  152 ;  Hines  v.  Potts,  56  Miss.  347 ;  Caldwell  v.  Palmer,  6  Lea 
(Tenn.),  652 ;  Carter  v.  Taylor,  3  Head  (Tenn.),  30 ;  Mosier's  Appeal,  56  Pa.  St. 
76 ;  Lockwood  v.  Marsh,  3  Nev.  138. 


SUBROGATION.  1061 

§  1087.  Equitable  Estoppel. — So  a  mortgagee  receiving 
the  proceeds  of  a  mortgage  sale,  knowing  them  to  be  such 
money,  and  the  circumstances  wliich  invaUdate,  or  are  sup- 
posed to  invalidate  that  sale  and  conveyance  under  it,  is  es- 
topped from  denying  the  title  of  the  purchaser.^  But  such 
knowledge  is  not  necessary  to  create  the  estoppel ;  ^  but  if  such 
knowledge  was  necessary  to  create  an  estoppel,  if  tlie  mort- 
gagee receives  the  money  from  the  sale  and  keeps  it  he  is  es- 
toj)ped  on  that  ground,  because  he  cannot  repudiate  the 
mortgage  sale  and  at  the  same  time  insist  upon  having  the 
benefit  of  it.^ 

§  1088.  Party  With  Partial  Interest  in  the  Premises. — 
Any  person  having  a  partial  interest  in  the  premises,  and 
whose  rights  would  be  prejudiced  by  a  foreclosure  of  a  mort- 
gage, has  a  right  to  redeem  the  mortgaged  premises,  by  pay- 
ing the  entire  debt.  This  principle  includes  persons  having 
an  estate  in  land  as  tenants  for  life,  as  dowress,  heirs,  devisees, 
grantees,  and  tenants  in  common.*  And  this  will  embrace 
a  tenant  for  life,  whose  estate  is  devised  immediatel}''  from  the 
mortgagor.^  The  statute  of  limitations  applies  to  an  equitable 
assignee,  who  has  paid  the  debt  and  seeks  to  be  subrogated  to 
the  rights  of  the  mortgagee  as  against  the  mortgagor.^ 

This  rule  of  subrogation  applies  where  an  administrator 
borrows  money  to  pay  a  mortgage  debt  of  his  intestate's  estate. 
So  where  the  administrator  borrows  the  money  to  pay  off  a 
mortgage  debt  on  the  estate,  from  a  third  person  with  the 
agreement  and  understanding  between  them  that  sucli  tliird 

1  Sloan  V.  Frothin-liam,  72  Ala.  589,  608 ;  Smith  r.  Warden,  19  Pa.  St.  424 
Maple  V.  Kusgart,  53  Pa.  St.  348 ;  Brewpter  r.  Baker,  16  Barb.  (X.  Y.)  613 
Breeding  r.  Stamper,  IS  B.  Mon.  (Ky.)  175 ;  "Wood  v.  Seely,  32  N.  Y.  105 
Pursley  v.  Hav!?,  17  Iowa,  310  ;  Beford  i:  Mercer,  24  Iowa,  118  ;  Flanigan  v. 
Turner,  1  Black  (U.  S.),  491. 

2  Brewer  v.  Nash,  16  R.  1. 458. 

» Maple  V.  Kuspart,  53  Pa.  St.  348. 

^3  Pom.  Eq.  Jur.,  sect.  1220,  and  note  ;  Butts  v.  Broughton,  72  Ala.  294  ; 
Harris  on  Subro.,  sects.  692-697. 
*  Ohmer  v.  Boyer,  89  Ala.  273. 
«01imer  v.  Boyer,  89  Ala.  273. 


1062  EIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

person  sliall  be  reimbursed  from  the  assets  of  the  estate,  and 
be  secured  by  a  mortgage  lien  upon  the  previously  mortgaged 
property  of  such  estate,  which  is  executed  by  the  adminis- 
trator and  is  void  because  of  a  want  of  power  in  the  adminis- 
trator to  execute  it,  but  if  the  money  is  loaned  and  paid  to  the 
original  mortgagee,  the  second  mortgagee  becomes  subrogated 
to  the  rights  of  the  first  mortgagee/  But  a  guardian,  on  satis- 
fying his  ward's  claim  for  money  wrongfully  invested  in  real 
estate,  cannot  be  subrogated  to  the  latter's  equities  and  enforce 
the  trust  arising  in  favor  of  the  ward,  for  his  own  benefit. 
Nor  can  his  heirs,  on  satisfying  such  a  claim  against  his 
estate.^ 

§  1089.  Payment  by  One  Partner. — Where  one  of  two 
partners  pays  a  mortgage  on  the  partnership  property  which  it 
was  the  duty  of  his  co-partner  to  discharge  on  condition  that 
it  shall  stand  as  security  for  such  payment,  an  equity  arises  in 
his  favor  entitling  him  to  indemnity  through  the  mortgage.^ 

So  a  mortgagee  of  firm  property  to  secure  an  individual 
debt  having  paid  a  firm  debt  secured  by  a  mortgage  on  firm 
property  to  protect  his  own  interest  is  entitled  to  be  subrogated 
to  the  lien.* 

A  stockholder  in  a  corporation  who  is  shown  by  the  articles 
of  association  to  have  paid  in  |50,000,  being  the  amount  of 
his  paid-up  stock,  but  for  whom  the  corporation  has  paid  out 
$40,000  under  an  agreement  at  the  time  of  its  organization, 
cannot  be  subrogated  to  the  rights  of  a  creditor  of  the  corpo- 
ration whose  claims  have  been  paid  by  a  foreclosure  of  a  mort- 
gage given  by  such  stockholder  upon  his  private  property  for 
the  benefit  of  the  corporation  without  knowledge  of  such  pri- 
vate agreement  and  upon  the  strength  of  the  showing  made  by 
the  articles  of  association.'^ 

1  Crippen  v.  Chappel,  o5  Kan.  495  ;  Detroit  F.  &  M.  Ins.  Co.  v.  Aspinwall, 
48  Mich.  238.    See,  also,  Lockwood  v.  Bassett,  49  Mich.  546. 

2  Rowley  v.  Towsley,  5.3  Mich.  329. 

^  Laylin  v.  Knox,  41  Mich.  40 ;  Stebbins  v.  Willard,  53  Vt.  665. 
*  Reyburn  v.  Mitchell,  106  Mo.  365. 
^Dwight  V.  Lumber  Co.,  82  Mich.  624. 


SUBROGATION.  1063 

§  1090.  A  Volunteer. — If  mere  strangers,  mere  volunteers, 
or  mere  intermeddlers,  without  any  contract  or  understanding 
between  themselves  and  the  party  whose  duty  it  is  to  pay  the 
debt,  or  between  themselves  and  the  original  mortgagee,  pay  the 
debt,  they  cannot  rightfully  claim  any  such  thing  as  subrogation 
or  equitable  assignment.  Because  it  always  requires  something 
more  than  a  mere  payment  of  the  debt  in  order  to  entitle  the 
person  paying  the  same  to  be  substituted  in  the  place  of  the 
original  creditor. 

Judge  Valentine  says  that  it  requires  an  assignment,  legal 
or  equitable,  from  the  original  creditor,  or  an  agreement  or 
understanding  on  the  part  of  the  party  liable  to  pay  the  debt, 
that  the  person  furnishing  the  money  to  pay  the  same  shall  in 
effect  become  the  creditor,  or  the  person  furnishing  the  money 
must  furnish  the  same  either  because  he  is  liable  as  surety  or 
liable  in  some  other  secondary  character,  or  for  some  purpose 
of  saving  or  protecting  some  right  or  interest,  or  supposed  right 
or  interest  of  his  own.^ 

While  an  ordinary  stranger  to  the  estate  who  voluntarily 
pays  off  a  mortgage  thereon  is  not  entitled  to  subrogation  to 
the  rights  of  the  mortgagee,  a  purchaser  at  the  mortgagee's 
sale,  even  where  the  sale  is  void,  is  not  to  be  regarded  as  a 
mere  stranger.^ 

Payment  of  a  note  secured  by  a  mortgage  by  one  not  bound 
to  pay  it  to  protect  his  interest  will  not  subrogate  him  to  the 
rights  of  the  party  to  whom  he  paid.  He  will  become  an 
original  creditor.^ 

Where  the  mortgage  is  paid  by  one  having  an  interest  sub- 
ject to  the  mortgage,  but  who  is  under  no  ol^ligation  to  dis- 
charge it,  as  by  a  widow  of  the  mortgagor,  she  will  be  subrogated 
to  the  mortgage  lien  without  proof  of  a  specific  intention  at  the 
time  of  payment  to  keep  the  mortgage  alive.* 

^  Crippen  v.  Chappcl,  35  Kan.  495 ;  Smith  v.  Austin,  9  Mich.  465. 

*  Brewer  v.  Nash,  IG  R.  I.  458. 

'Weil  V.  Enterprise,  etc.,  Co.,  42  La.  Ann.  492.      See,  also,  ^Nlallgry  v. 
Dauber,  83  Ky.  239. 

*  Jeflferpon  v.  Edrington,  53  Ark.  545.    See,  also,  Wadsworth  v.  Blake,  43 
IVIinn.  509 ;  Suppiger  v.  Garrels,  20  111.  App.  625  ;  Bishop  v.  O'Conner,  69  111. 


1064  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

It  is  the  general  rule  that  the  doctrine  of  subrogation  will 
not  be  exercised  in  favor  of  a  volunteer  or  a  stranger  who 
officiously  intermeddles,  such  as  a  person  who  pays  without 
any  obligation  so  to  do,  or  one  who,  without  any  interest  to 
protect,  liquidates  the  debt  of  another.^ 

§  1091.  Payment  by  Third  Party  at  the  Solicitation  of 
THE  Mortgagor. — A  third  party  may  pay  the  debt  at  the 
solicitation  of  the  debtor,  under  an  agreement  that  he  shall 
have  a  mortgage  on  the  same  premises ;  and  on  refusal  of  the 
debtor  to  make  such  mortgage,  he  is  to  be  held  and  regarded 
as  the  equitable  assignee  of  the  paid  mortgage,  and  as  such 
entitled  to  be  subrogated  to  the  lien  of  that  mortgage  for  the 
amount  so  advanced.^  But  one  who  loans  money  to  the  mort- 
gagor to  pay  the  mortgage  is  not  subrogated  to  the  mortgage 
security,  unless  so  agreed  by  the  mortgagor.^ 

§  1092.  Conventional  Subrogation — Subrogation  by 
Agreement. — If  a  third  party,  a  volunteer,  pays  the  entire 
debt  in  pursuance  of  an  agreement  between  him  and  the 
debtor,  upon  his  doing  so,  he  shall  be  subrogated  to  the  cred- 
itor's right.*  The  civil  law  is  in  accord  with  this  doctrine, 
that  one  may  acquire  the  privilege  of  a  creditor  without  sub- 
stitution, in  the  same  manner  as  a  mortgagee,  by  agreement 

431  ;  Beaver  r.  Blanker,  94  111.  175  ;  Acer  v.  Hotchkiss,  97  N.  Y.  395  ;  Sandford 
V.  McLean,  3  Paige  (N.  Y.),  117. 

'  Emmert  v.  Thompson  (Minn.),  52  N.  W.  Rep.  81. 

2  Baker  v.  Baker  (S.  Dak.),  49  N.  W.  Eep.  1064.  See,  also,  Gatewood  v.  Gate- 
wood,  75  Va.  407 ;  Citizens'  Nat.  Bank  v.  Wert,  26  Fed.  Rep.  294  ;  Morrow  v. 
United  States  Mort.  Co.,  96  Ind.  21 ;  Caudle  v.  Murphy,  89  111.  352  ;  Fievel  v. 
Zuber,  67  Tex.  275;  Norton  v.  Highleyman,  88  Mo.  621 ;  Yaple  v.  Stephens, 
36  Kan.  680 ;  Johnson  r.  Moore,  33  Kan.  90 ;  Gans  r.  Thieme,  93  N.  Y.  225 ; 
Loewenthal  v.  McCormick,  101  111.  143. 

*  Smith  V.  Neilson,  13  Lea  (Tenn.),  461 ;  Owens  v.  Johnson,  8  Baxt.  (Tenn.) 
265 ;  Gaskill  v.  Wales,  36  N.  J.  Eq.  527  ;  Van  Winkle  v.  Williams,  38  N.  J. 
Eq.  105 ;  Crippin  v.  Chappel,  35  Kan.  495. 

*  Fievel  v.  Zuber,  67  Tex.  275,  280  ;  Fuller  v.  Hollis,  57  Ala.  4.35  ;  Owen  v. 
Cook,  3  Tenn.  Ch.  78 ;  Mitchell  v.  Butt,  45  Ga.  162;  New  Jersey  Railroad  Co. 
V.  Wortendyke,  27  N.  J.  Eq.  658  ;  Morgan  v.  Hammett,  23  Wis.  30  ;  Caudle  v. 
Murphy,  89  111.  352 ;  Fears  v.  Albea,  69  Tex.  437 ;  Sheldon  on  Subro.,  sects. 
247,  248  ;  Pom.  Eq.  Jur.  1212,  note  2 ;  Shreve  v.  Hankinson,  34  N.  J.  Eq.  76. 


SUBROGATION.  1065 

■with  the  debtor,  that  he  who  shall  pay  for  him,  shall  have  the 
privilege ;  and  it  makes  no  difference  whether  the  payment 
be  made  to  the  creditor  by  him  who  lends  the  money  or  by 
the  debtor  with  whom  the  money  has  been  entrusted. 

The  learned  author's  notes  to  the  text  are  :  "  The  manner  of 
acquiring  the  rights  of  the  creditor  without  substitution  is 
just  and  equitable  in  order  to  facilitate  the  payment  of  the 
debts.  It  is  but  just  that  the  debtors  themselves  should  have 
the  power  to  pay  in  place  of  the  creditors,  those  who  pay  for 
them,  since  nobody  receives  any  prejudice  thereby,  and  since 
it  is  the  interest  of  the  debtor  that  he  should  have  the  power 
to  make  his  condition  easier  by  changing  his  creditor."  ^ 

§  1093.  Statutory  Provisions. — The  law  in  Louisiana  is 
governed  by  statute,  and  when  a  person  making  the  payment 
has  no  interest  in  the  payment  of  the  debt  to  protect,  he  is  not 
entitled  to  subrogation  unless  he  can  show  an  agreement,  made 
at  the  time  of  the  payment,  formally  executed  before  a  notary 
public  and  witnessed.^ 

§  1094.  Colorable  Obligation  to  Pay  a  Debt. — While 
a  mere  stranger  is  not  subrogated  to  the  security  by  paying 
the  debt,  yet  a  person  who  has  paid  a  debt,  under  a  colorable 
obligation  to  do  so,  that  he  may  protect  his  own  claim,  should 
be  subrogated  to  the  rights  of  the  creditor.^ 

But  the  general  rule  is  that  he  who  pa^'s  the  debt  cannot  ask 
subrogation  to  the  rights  of  the  creditor  unless  he  is  a  surety 
or  has  to  pay  the  debt  to  protect  his  own  interests,  or  in  virtue 
of  legal  process,  or  has  a  special  agreement  to  be  subrogated,* 

§  1095.  One  Entitled  to  Redeem. — Where  a  party  has  a 
right  to  redeem,  though  under  no  obligations  to  pay  the  debt, 

'  2  Strahan's  Domat's  Civil  Law,  Cnshing's  ed.,  p.  fiOS,  poct.  1783. 
2  Civil  Code,  art.  2156;  Harrison  v.  Bigland,  5  Rob.  (La.)  204;  Hoyle  v. 
Cazabat,  25  La.  Ann.  438 ;  Brice  v.  Watkins,  30  La.  Ann.  21. 

*  Ellsworth  V.  Lockwood,  42  N.  Y.  89,  97. 

*  Bissell  V.  Lewis,  5G  Iowa,  231 ;  Gatewood  v.  Gatewood,  75  Va.  407  ;  Clev- 
inger  v.  Miller,  27  Gratt.  (Va.)  740 ;  Deering  v.  "Winchelsea,  1  Smith's  Lead. 
Cas.  in  Eq.  154 ;  National  Bank  v.  Gushing,  53  Vt.  321 ;  Fievel  v.  Zuber,  67 
Tex.  273 ;  McClure  v.  Andrews,  68  Ind.  97  ;  Faurot  v.  Neff,  32  Ohio  St.  44. 


1066  EIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

and  pays  the  debt,  he  will  be  subrogated  to  the  rights  of  the 
mortgagee,  though  he  takes  no  formal  assignment  of  it.  His 
payment  of  the  debt  and  his  relation  to  the  estate  uphold  his 
title.^  And  so  if  the  owner  of  the  equity  of  redemption  who 
pays  one  of  several  mortgage  notes,  and  agrees  with  the  mort- 
gagee that  he  shall  hold  the  note  in  the  same  manner  that  the 
mortgagee  held  it,  he  is  entitled  to  the  same  security  and  the 
same  priority  under  the  mortgage  that  a  stranger  would  have 
under  an  assignment,^  and  the  mortgagee  cannot  defeat  the 
substitution  by  executing  a  release  of  the  mortgaged  premises 
instead  of  an  assignment.^ 

And  when  a  party  advances  money  to  pay  a  mortgage  under 
an  agreement  with  the  mortgagor  that  it  shall  be  assigned  to 
him  as  security,  and  takes  a  discharge  of  the  mortgage,  he  is 
entitled  to  be  subrogated  to  the  rights  of  the  mortgagee  and 
have  the  discharge  vacated.^  But  if  the  mortgage  is  discharged 
and  after  some  delay  a  new  mortgage  is  given  to  the  party 
advancing  the  money,  this  does  not  take  priority  of  a  second 
recorded  mortgage  which  was  outstanding  and  of  which  the 
lender  had  no  actual  notice.^ 

§  1096.  When  Mortgagor  Purchases  His  Own  Mort- 
gage.— If  the  mortgagor  sells  his  land  subject  to  the  mort- 
gage and  pays  or  purchases  the  mortgage,  which  the  vendee 
agreed  to  pay  as  part  purchase-money,  this  discharges  the  debt, 
and  the  mortgagor,  without  taking  an  assignment  of  the  mort- 
gage, is  subrogated  to  the  security  of  the  mortgage,  which  has 
become  the  principal  security  for  the  payment  of  the  debt,  and 
the  mortgagor  is  entitled  to  be  reimbursed  out  of  the  land  for 

J  Cobb  V.  Dyer,  69  Me.  494 ;  Ward  v.  Seymour,  51  Vt.  320 ;  Walker  v.  King, 
45  Vt.  525 ;  44  Vt.  601 ;  Wheeler  v.  Willard,  44  Vt.  640 ;  Kelly  v.  Duff,  61  N.  H. 
435  ;  Gatewood  v.  Gatewood,  75  Va.  407 ;  Tradesmen's  Build.  &  L.  Asso.  v. 
Thompson,  32  N.  J.  Eq.  133  ;  White  v.  Hampton,  13  Iowa,  259;  Warren  v. 
Hayzlett,  45  Iowa,  235 ;  Guckian  v.  Riley,  135  Mass.  71 ;  Carithers  v.  Stuart, 
87  ind.  424. 

""  Morrow  v.  United  States  Mort.  Co.,  96  Ind.  21. 

=*  Citizens'  Nat.  Bank  v.  Wert,  26  Fed.  Rep.  294. 

*  Bolman  v.  Lohman,  74  Ala.  507  ;  Morgan  v.  Hammett,  23  Wis.  30. 

6  Holt  V.  Baker,  58  N.  H.  276 ;  Fears  v.  Albea,  69  Tex.  437. 


SUBROGATION.  1067 

the  amount  of  his  payment.^  Or  if  he  is  compelled  to  pay  the 
debt  after  selling  the  land  he  is  subrogated  to  the  rights  of  the 
mortgagee  against  the  land." 

So  the  satisfaction  of  a  judgment  for  a  mortgage  debt,  on 
other  property  of  the  mortgagor,  will  subrogate  the  mortgagor 
to  the  security,  when  equity  requires  that  the  mortgage  should 
be  assigned  to  him  rather  than  discharged.^ 

However  a  mortgagor  will  not  be  subrogated  to  the  rights  of 
the  first  mortgagee  when  such  mortgagee  has  a  second  mort- 
gage upon  the  same  property,  unless  he  pays  both  mortgages. 
Because  the  money  collected  of  the  mortgagor  on  the  judgment 
on  the  first  mortgage  debt  is  a  payment  and  not  a  purchase  of 
the  mortgage.*  And  a  purchaser  of  a  part  of  the  mortgaged 
premises  under  execution,  takes  the  property  subject  to  the 
payment  of  a  share  of  the  mortgage  debt  remaining  unsatis- 
fied.' 

A  senior  mortgagee  purchased  premises  on  foreclosure,  and 
afterward  quit-claimed  to  plaintiff,  a  junior  mortgagee,  who 
paid  in  full  the  debt  secured  by  the  senior  mortgage.  After- 
ward it  was  held  that  no  title  passed  by  the  sale.  Plaintiff,  or 
the  junior  mortgagee,  then  sold  under  his  own  mortgage,  and 
bid  in  the  property  and  took  a  deed  which  passed  to  him  the 
legal  title  and  entered  into  possession.  But  where  plaintiff,  or 
the  junior  mortgagee,  sought  to  foreclose  the  mortgagor's  equity 
of  redemption  under  the  senior  mortgage,  he  was  not  entitled 
to  be  subrogated  to  the  rights  of  the  senior  mortgagee.  And 
if  the  mortgagor  should  bring  suit  to  redeem,  plaintiff,  or  the 

1  Orrick  v.  Durham,  79  Mo.  174 ;  Greenwell  v.  Heritage,  71  Mo.  459  ;  Welton 
V.  Hull,  50  Mo.  296  ;  Stillman  v.  Stillman,  21  N.  J.  Eq.  126 ;  Kamena  v.  Huel- 
bi^,  23  N.  J.  Eq.  78  ;  Hart  v.  Chase,  46  Conn.  207 ;  Ely  v.  Stannard,  44  Conn. 
528  ;  Fla^g  v.  Geltmacher,  98  111.  293  ;  Johnson  v.  Zink,  51  N.  Y.  333  ;  Halsey 
V.  Reed,  9  Paige  (N.  Y.),  446,  453.  See,  also,  Bensieck  v.  Cook  (Mo.),  19  S.  W. 
Rep.  642. 

2  Smith  ?'.  Ostermeyer,  68  Ind.  432,  435  ;  Josselyn  v.  Edwards,  57  Ind.  212 ; 
Orrick  v.  Durham,  79  Mo.  174 ;  Hoffman  v.  Risk,  58  Ind.  113 ;  Russel  v.  Pistor, 
7  N.  Y.  171 ;  Halsy  v.  Reed,  9  Paige  (N.  Y.),  446,  453 ;  Fisher  r.  Dillon,  62  III. 
379 ;  Stebbins  v.  Willard,  53  Vt.  665  ;  Simpson  r.  Gardiner,  97  111.  237. 

nVoodbury  v.  Swan,  58  N.  H.  380 ;  Funk  v.  McReynold,  33  111.  481. 
*  Knoblauch  v,  Foglesong,  37  ]\Iinn.  320. 
'=  Funk  V.  McReynold,  33  111.  481. 


1068  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

junior  mortgagee,  would  then  be  entitled  to  be  reimbursed  for 
the  amount  which  he  paid  to  satisfy  the  senior  mortgage.^ 

Article  2. 
Plights  of  Mortgngee. 

1 1097.  Mortgagee  Must  Be  Fully  Paid.     §1099.  A  Mortgage  Discharged  of  Re- 
'i  1098.  Mortgage  By  Executor.  cord— Paid  By    One    Who 

Bought  the  Land. 

§  1097.  Mortgagee  Must  Be  Fully  Paid. — The  mortgagee 
must  be  fully  paid  before  subrogation  can  take  place.  Thus, 
when  mortgaged  premises  are  sold  by  an  assignee  for  creditors 
subject  to  the  lien  of  a  mortgage,  and  the  mortgagee,  without 
being  first  required  to  proceed  on  his  mortgage,  is  allowed  a 
dividend  upon  his  bond  out  of  the  proceeds,  creditors  whose 
dividends  have  been  thereby  reduced  are  entitled  to  be  sub- 
rogated, to  that  extent,  to  the  mortgagee's  rights.^  But  a 
decree  of  subrogation  cannot  be  made  so  long  as  any  part  of 
the  superior  creditor's  claim  remains  unsatisfied,  as,  until 
then,  he  is  entitled  to  the  sole  direction  and  control  of  his 
security,  and  of  all  actions,  remedies,  or  arrangements  that  he 
may  desire  to  take  thereon.^ 

Until  the  creditor  has  been  fully  j^aid,  subrogation  cannot 
take  place  on  any  terms  whatever.* 

Justice  Mitchell  says :  "  If  bonds,  by  reason  of  judgment 
and  levy,  or  for  any  other  reason,  had  had  preference,  and  the 
fund  had  been  sufficient  to  pay  them  in  full,  no  doubt  could 
have  arisen  as  to  the  duty  of  the  courts  to  subrogate  the  other 
creditors  to  the  remedy  under  the  mortgages  ;  and  the  only 
difference  here  is  that  the  bonds  and  the  debts  they  secure  are 
not  paid  in  full.  This  difference,  however,  has  been  uniformly 
treated   in  our  cases  as  material.     Subrogation  never  takes 

1  Long  V.  Long  (Mo.),  19  S.  W.  Rep.  537  ;  79  Mo.  644  ;  96  Mo.  180. 

"Graff's  Estate,  139  Pa.  St.  69.  See,  also,  Stamford  v.  Benedict,  15  Conn. 
437. 

»Kyner  v.  Kyner,  6  Watts  (Pa.),  221 ;  Forest  Oil  Co.'s  Appeal,  118  Pa.  St. 
138. 

*  Forest  Oil  Co.'s  Appeal,  118  Pa.  St.  138. 


SUBROGATION.  1069 

place  to  the  prejudice  of  any  other  right.  The  appellants  can- 
not be  deprived  of  any  part  of  their  security,  or  have  its  prece- 
dence and  effectiveness  impaired  in  any  way.  However  small 
the  real  debt  to  which  the  mortgage  may  be  reduced,  they  are 
not  only  entitled  to  the  whole  bond  for  its  security  and  ulti- 
mate payment,  but  also  to  the  whole  and  unimpeded  posses- 
sion, direction,  and  control  of  the  mortgage,  and  of  all  actions, 
remedies,  or  arrangements  that  they  may  desire  to  take 
thereon."  ^ 

A  vendor  sold  land  and  gave  the  vendee  notes  to  secure  him 
against  a  mortgage  on  the  jDremises.  The  vendor  paid  the 
mortgage.  The  vendee  collected  the  notes,  sold  the  land,  and 
took  a  mortgage  back  for  security.  It  was  held  that  the  origi- 
nal vendor,  on  foreclosure  of  this  mortgage,  should  be  subro- 
gated to  the  rights  of  the  mortgagee,  who  was  his  vendee,  for 
the  amount  of  the  notes  originally  deposited.^  When  the 
insurance  is  taken  by  the  mortgagor  in  favor  of  the  mortgagee, 
who  assigns  the  policy,  notes,  and  mortgage  to  another,  who 
assigns  to  the  insurers  upon  payment  of  the  loss  after  destruc- 
tion of  the  building,  it  is  a  payment  of  the  mortgage  pro  taiito? 

§  1098.  Mortgage  by  Executor. — A  mortgagee  who  takes 
a  mortgage  of  the  executor  of  an  estate  in  pursuance  of  the 
order  of  the  county  court,  which  is  invalid,  is  entitled  to  be 
subrogated  to  the  rights  of  the  prior  mortgagee  whose  mort- 
gage was  thus  paid.  He  will  not  be  treated  as  a  volunteer  in 
the  legal  sense  of  that  term.* 

§  1099.  A  Mortgage  Discharged  of  Record — Paid  By 
One  Who  Bought  the  Land. — When  a  mortgage  has  been 
paid  by  one  who  has  bought  the  premises  subject  to  the  mort- 
gage, and  in  ignorance  of  the  existence  of  a  judgment  lien 
subsequent  to  the  mortgage,  and  the  mortgage  has  been  dis- 
charged of  record,  it  may  be  reinstated,  and  he  takes  all  rights 

>  Graff's  Estate,  139  Pa.  St.  69,  75.    See,  also,  Shutea  v.  Woodard,  57  Mich. 
213 ;  Myres  v.  Yaple,  60  Mich.  339. 
2  McGuffey  v.  McClain  (Ind.),  30  N.  E.  Rep.  296. 
2  Home  Ins.  Co.  v.  Marshall  (Kan.),  29  Pac.  Rep.  161. 
*  Levy  V.  Martin,  48  Wis.  198.    See,  also,  Chaffe  v.  Oliver,  39  Ark.  531. 


1070  RIGHTS    OF    PARTIES    BEFORE    DEFAULT, 

that  the  mortgagee  had,  because  it  was  discharged  by  mistake, 
and  ecpity  will  presume  such  mistake  and  give  him  the  bene- 
fit of  subrogation.  In  New  York  he  would  also  be  entitled  to 
an  assignment  of  the  mortgage.^ 

But  where  a  person  purchases  land  subject  to  a  mortgage 
pending  proceedings  to  establish  a  ditch,  and  afterward  pays 
the  mortgage,  he  pays  it  as  owner,  and  presumptively  as  part 
of  the  purchase-money,  and  thereby  extinguishes  it ;  and  he  is 
not  entitled  to  be  subrogated  to  the  lien  of  the  mortgage,  so  as 
to  defeat  the  lien  of  the  assessment  for  constructing  the  ditch.^ 


Article  3. 

Rights  of  Junior  Mortgagee. 

I  1100.  Legal  Sul)rogation.  Foreclosure  of  First  Mort- 

§  1101.  Priorities  of  Liens.  gage. 

§  1102.  Payment— Tender.  ?  1105.  Usurious  Mortgages. 

§  1103.  Intervening  Mortgage.  ^  1106.  Rights  as  to  the  First  Mort- 

§  1104.  Second  Mortgagee  Cut  off  By  gagee. 

§  1100.  Legal  Subrogation. — Legal  subrogation  takes  place 
for  the  benefit  of  one  who  being  himself  a  creditor  pays  the 
claim  of  another  who  has  a  preference  over  him  by  reason  of 
liens  and  securities.  Hence,  at  common  law,  if  a  junior  mort- 
gagee pays  off  a  prior  mortgage,  he  is  entitled  to  demand  an 
assignment  thereof. 

The  mere  fact  that  the  proceeds  of  a  second  mortgage  are 
used  in  paying  off  a  prior  mortgage  does  not  always  entitle 
the  second  mortgagee  to  be  subrogated  to  the  rights  of  the  prior 
mortgagee.^  Subrogation  will  not  take  place  to  the  injury  of  an 
innocent  party,  who  has  acquired  interests  in  the  property 
relying  upon  the  apparent  discharge  of  the  mortgage  upon  the 
records.^ 

1  Barnes  v.  Mott,  64  N.  Y.  397. 

2  Shirk  V.  Whitten  (Ind.),  31  N.  E.  Rep.  87.  See,  also,  Hancock  v.  Fleming, 
103  Ind.  533 ;  Robins  v.  Swain,  68  111.  197  ;  Johnson  v.  Zink,  51  N.  Y.  333. 

3  Jeffries  i'.  Allen,  29  S.  Car.  501. 

*Gaskill  V.  Wales,  36  N.  J.  Eq.  527;  Ahern  v.  Freeman,  46  Minn. 
156. 


1 


SUBROGATION.  1071 

§  1101.  Priorities  of  Liens. — A  grantee  of  land  incum- 
bered by  a  mortgage  and  a  judgment,  who  agrees  to  assume 
all  incumbrances  cannot,  after  paying  the  mortgage,  have  a 
lien  declared  in  his  favor  as  against  the  judgment,  though  it  is 
subsequent  to  the  mortgage ;  ^  nor  can  he  on  paying  the  mort- 
gage be  subrogated  to  the  rights  of  a  mortgagee  as  against  a  pur- 
chaser of  the  land  under  a  foreclosure  of  a  second  mortgage.^ 

But  where,  on  a  foreclosure  of  a  second  mortgage,  it  appeared 
that  the  loan  by  the  second  mortgagee  was  made  under  an 
agreement  with  the  mortgagor  that  it  should  be  apj^lied  to  ex- 
tinguish the  first  mortgage,  and  that  part  of  the  loan  was 
actually  so  applied,  the  second  mortgagee  is  entitled  to  a  decree 
subrogating  him  to  the  rights  of  the  first  mortgagee  on  pay- 
ment of  the  balance  due  on  the  first  mortgage.^  The  fact  that 
a  part  of  the  proceeds  of  a  subsequent  mortgage  was  applied 
by  the  mortgagor  in  discharge  of  a  purchase-money  mortgage, 
does  not  entitle  the  subsequent  mortgagee  to  subrogation  to 
the  rights  of  the  purchase-money  mortgage.*  But  when  one 
who  contracts  to  sell  land  subject  to  a  mortgage,  but  afterward 
pays  the  same  and  has  it  satisfied  of  record,  he  is  entitled  when 
sued  for  specific  performance  to  be  subrogated  to  the  rights  of 
the  mortgagee.^  And  where  funds  of  an  estate  have  been 
diverted  to  pay  an  unprobated  debt  secured  by  a  first  mort- 
gage, a  junior  mortgage  will  be  postponed  to  the  rights  of  cred- 
itors with  probated  claims,  but  subrogated  to  the  lien  of  the 
debt  discharged.® 

The  holder  of  a  second  mortgage  cannot  control  the  sale  or 
disposal  of  proceeds  under  the  first  mortgage  without  making 
payment.^ 

1  IMartin  v.  Aultman,  SO  Wis.  150. 
=  Kellogg  V.  Colby  (Iowa),  40  N.  W.  Rep.  1001. 
3Quinlan  v.  Stratton,  128  N.  Y.  059. 
*Ayers  v.  Staley  (N.  J.),  18  At.  Rep.  1046. 

*  Arnold  r.  Green,  116  X.  Y.  566.  See,  also,  Swain  r.  Stockton  Sav.  and  L. 
Sec,  78  Cal.  600 ;  Gerdine  v.  Menage,  41  Minn.  417 ;  Jeffries  v.  Allen,  29  S. 
Car.  501 ;  Scriven  v.  Hursh,  68  :Mich.  176. 

*  Jefferson  v.  Edrington,  5.3  Ark.  545. 

^  Andrews  v.  Fiske,  101  Mass.  422 ;  Meysenburg  v.  Schlieper,  46  Mo.  209  ; 
Gilbert  v.  Gilbert,  39  Iowa,  657. 


1072  EIGHTS    OP    PARTIES    BEFORE    DEFAULT. 

Where  a  widow  renounces  her  right  of  dower  in  a  mortgage 
by  her  husband's  executor,  the  fact  that  the  proceeds  of  the 
mortgage  were  used  to  pay  a  prior  mortgage  given  by  the  hus- 
band and  wife  does  not  entitle  the  second  mortgagee  to  be 
subrogated  to  the  rights  of  the  prior  mortgagee.^ 

§  1102.  Payment — Tender, — It  is  sufficient  to  entitle  a 
junior  mortgagee  to  be  subrogated  to  the  rights  of  a  senior 
mortgagee,  if  he  tender  to  such  senior  mortgagee  the  amount 
secured  by  his  mortgage,  with  interest  and  costs  before  the 
foreclosure  sale,  though  the  amount  tendered  be  not  accepted 
until  after  such  sale.^  And  the  right  of  the  junior  mortgagee 
to  pay  off  the  debt  is  not  affected  by  an  agreement  by  the 
parties  to  the  senior  mortgage  for  a  higher  rate  of  interest  than 
that  specified  in  the  mortgage.^ 

§  1103.  Intervening  Mortgage. — Where  the  proceeds  of  a 
third  mortgage  were  used  in  the  discharge  of  a  part  of  the  first 
mortgage,  and  the  first  mortgagee  agreed  with  the  third  mort- 
gagee that  the  third  mortgage  should  have  priority  over  the 
unpaid  balance  of  the  first  mortgage,  it  was  held  that  the  pro- 
ceeds should  be  applied,  first,  to  the  payment  of  the  amount 
remaining  due  on  the  first  mortgage,  and  the  third  mortgagee 
be  subrogated  thereto ;  second,  to  the  payment  of  the  second 
mortgage  ;  third,  to  the  payment  of  the  balance  due  on  the 
third  mortgage.* 

So,  where  a  junior  mortgagee  redeems  from  a  prior  lien, 
intermediate  or  subsequent  incumbrancers,  in  equity,  must  re- 
fund the  redemption  money  before  they  can  enforce  their 
claims  upon  the  property  ;  they  must  also  pay  all  prior  liens 
to  theirs,  and  then  they  will  be  subrogated  to  the  rights  of  the 
first  mortgagee.^  This  is  done  in  order  that  junior  mortgagees 
may  be  able  to  secure  their  own  claims,  as  the  first  mortgagee 

1  Jeffries  v.  Allen,  29  S.  Car.  501. 

2  Marshall  v.  Ruddick,  28  Iowa,  487  ;  Dings  v.  Parshall,  7  Hun  (N.  Y.),  522. 

3  Gardner  v.  Emerson,  40  111.  29(3. 
*  Bank  r.  Moore,  94  N.  Car.  734. 

^Milligan's  Appeal,  104  Pa.  St.  503 ;  Clark  v.  Mackin,  95  N.  Y.  346. 


SUBROGATION.  1073 

is  not  obliged  to  assign  his  mortgage  as  a  general  rule.^  And 
a  party  who  purchases  'the  equity  of  redemption  in  a  first 
mortgage,  with  full  knowledge  of  the  rights  of  the  assignees 
of  the  mortgagee,  and  who,  as  mortgagee  under  a  second  mort- 
gage, is  tenant  in  common  with  the  assignee  of  the  assignees 
of  the  first,  in  the  lands  therein  conveyed,  which  lands  are 
charged  with  an  incumbrance  under  a  decree  of  partition,  is 
primarily  bound  to  extinguish  such  incumbrance,  as  well  as 
all  others  existing  or  afterward  accruing.^ 

A  third  mortgagee  may  protect  himself  by  purchasing  at  the 
foreclosure  sale  of  the  senior  mortgage,  or  pay  the  prior  debts 
before  foreclosure.^ 

§  1104.  Second  Mortgagee  Cut  Off  by  Foreclosure  of 
First  Mortgage. — Where  the  junior  mortgagee's  right  of  re- 
demption has  been  cut  off  by  the  foreclosure  of  the  first,  he 
may  sometimes  have  the  right  of  subrogation,  or  even  be  enti- 
tled to  an  assignment,  but  it  will  depend  on  circumstances  to 
show  equity,  and  he  will  not  be  entitled  to  a  stay  of  the  sale 
by  injunction  without  clearly  showing  that  the  payment  of 
the  first  or  its  foreclosure  or  sale  will  work  him  injustice.^ 

§  1105.  Usurious  Mortgages. — A  junior  mortgagee  cannot 
avail  himself  of  usury  in  the  senior  mortgage.^  So,  on  the 
other  hand,  if  a  valid  mortgage  is  discharged  and  a  new  mort- 
gage is  taken  in  its  place  which  is  void  for  usury,  the  mort- 
gagee cannot  be  subrogated  to  the  mortgage  discharged,  because 
his  right  is  based  upon  a  usurious  mortgage.^ 

§  1106.  Rights  as  to  the  First  Mortgagee. — A  mortgagee 
who  diminishes  the  security  of  a  second  mortgagee  by  releas- 
ing the  mortgagor's  personal  liability,  if  he  does  not  absolutely 

'  Ward  r.  Seymour,  51  Vt.  320 ;  Flachs  v.  Kelly,  30  111.  4G2  ;  Shimer  v.  Ham- 
mond, 51  Iowa,  401 ;  Downer  v.  Fox,  20  Vt.  388  ;  Wood  v.  Hubbard,  50  Vt. 
82. 

*  Pullen  V.  Heron  Mininj?  Co.,  71  N.  Car.  563. 

'  Blooniingdale  v.  Barnard,  7  Hun  (N.  Y.),  459. 

*  Bloomingdale  v.  Barnard,  7  Hun  (N.  Y.),  460. 
^Powell  V.  Hunt,  11  Iowa,  430. 

•Perkins  v.  Hall,  105  N.  Y.  539 ;  Baldwin  v.  Moffett,  94  N.  Y.  82. 
68 


1074  EIGHTS    OF    TARTIES    BEFORE    DEFAULT. 

discharge  the  premises  from  the  lien  of  his  mortgage,  as  in  the 
case  of  a  subsequent  purchaser,  at  least  subordinates  his  lien 
to  that  of  the  second  mortgagee.'  And  a  prior  mortgagee  is 
not  entitled  to  notices  of  a  junior's  application  to  be  subrogated 
to  a  tax  lien  which  he  has  paid,  as  it  is  immaterial  to  him  by 
whom  the  tax  lien  is  held.^ 

Where  a  senior  mortgagee  at  his  foreclosure  sale  buys  in  the 
mortgaged  premises  for  less  than  the  debt,  and  after  receiving 
his  certificate  of  purchase  procures  an  award  for  a  special  exe- 
cution to  make  the  residue,  a  junior  mortgagee,  redeeming 
under  the  statute  from  the  sale,  takes  the  land  free  from  any 
lien  of  the  first  mortgage.^ 

A  purchaser  at  a  sale  under  a  senior  mortgage  cannot  inter- 
vene to  keep  down  the  amount  claimed  in  a  suit  against  the 
mortgagor  by  a  junior  mortgagee.* 

A  second  mortgagee  who  has  paid  the  taxes  or  other  assess- 
ments is  entitled  by  equitable  subrogation  to  hold  the  lien  of 
such  taxes  or  assessments  as  against  all  parties.^ 

But  his  voluntary  payment  of  claims  against  the  mortgaged 
property,  which  was  not  necessary  for  his  own  protection  that 
he  should  pay,  does  not  entitle  him  to  subrogation.^  But  when 
he  is  compelled  to  pay  for  his  own  protection,  and  instead  of 
taking  an  assignment  of  the  mortgage  this  is  discharged  of 
record,  he  can  claim  indemnity  for  this  payment  out  of  the 
mortgaged  estate,^  except  as  to  a  bona  fide  purchaser  who  has 
relied  upon  the  record.^ 

If  a  joint  mortgagor  pays  the  debt,  he  is  subrogated  to  the 
interest  of  the  joint  mortgagor  until  he  is  reimbursed.^ 

1  Sexton  V.  Pickett,  24  Wis.  346 ;  Ingalls  v.  Morgan,  10  N.  Y.  178,  187. 

2  Abbott  V.  Ins.  Co.,  127  Ind.  70.     See,  also,  Horton  v.  Ingersoll,  13  Mich.  409. 
^Seligman  v.  Laubheimer,  58  111.  124.    As  to  the  relative  rights  of  senior 

and  junior  mortgages,  see  Carpentier  v.  Brenham,  40  Cal.  221. 

*Bronson  v.  Railroad  Co.,  2  Black  (U.  S.),  524. 

5  Fiacre  r.  Chapman,  32  N.  J.  Eq.  463. 

«  Bayard  v.  McGraw,  1  111.  App.  134. 

'  Ebert  v.  Gerding,  116  111.  216 ;  Rappanier  v.  Bannon  (Md.),  8  At.  Rep.  555. 

»  Davis  V.  Winn,  2  Allen  (Mass.),  111. 

9  Simpson  v.  Gardiner,  97  111.  237  ;  Stebbins  v.  Willard,  53  Vt.  665 ;  Fisher 
t?.  Dillon,  62  111.  379. 


SUBROGATION.  1075 

The  first  mortgagee,  after  he  has  purchased  the  equity  of 
redemption,  cannot  give  a  mortgage  wliich  shall  take  prece- 
dence, b}^  way  of  subrogation,  of  tlie  incumbrance  existing  at 
the  time  he  became  the  owner  of  the  equity  of  redemption.^ 

Article  4. 
Rights  of  Sureties  or  Guarantors. 

?  1107.  Rights  of  Sureties  to  Subroga-  §  lll-l.  For  Further  Security  and  for 

tion.  Further  Advances. 

§  1108.  Doctrine  of  Equity.  §  1115.  Purchaser  Becoming  Surety. 

§  1109.  Holding  as  Trustee.  1 1116.  Subrogation      of      Principal 
^  1110.  Efiect  of  Discharging  the  Se-  Creditor  to  Indemnity. 

curity.  OH"-  Security  Given  by  a  Stranger. 

§  1111.  Rights  to  Subrogation  to  Debt  ?  1118.  Laches  May  Defeat  Subroga- 

and  Security — American  Doc-  tion. 

tiine.  1 1119.  Defense  to  Equitable  Claim 
§  1112.  English  Doctrine.  of  the  Creditor. 

1 1113.  The  Surety  is  Entitled  to  All 

Equities. 

§  1107.  Rights  of  Sureties  to  Subrogation. — A  surety 
may  be  subrogated  to  tlie  rights  of  the  creditor  to  whom  tlie 
principal  debtor  has  made  a  mortgage  as  security  for  tlie  pay- 
ment of  the  debt,  if  such  surety  is  compelled  to  pay  it.^  So 
the  indorser  of  a  note  will  be  subrogated,  on  paying  the  note, 
to  the  rights  of  the  owner  of  the  note  in  the  mortgage  given 
him  as  security.^ 

So  a  creditor  may  avail  himself,  as  a  security  for  his  debt, 
of  the  benefit  of  a  mortgage  which  his  debtor  has  made  to  a 
surety  for  such  debt  by  way  of  indemnity.^  Thus,  where  one 
gives  to  an  accommodation  indorser  a  mortgage  of  indemnity 

^Durgan  v.  Lyman  (N.  J.),  23  Atl.  Rep.  057. 

^  Burton  v.  Wheeler,  7  Ired.  Eq.  (X.  Car.)  217  ;  Cheesebrough  v.  Millard,  L 
Johns.  Ch.  (N.  Y.)  409;  Drew  ?-.  Lockett,  32  Beav.  499;  O'Hara  v.  Haas,  4(3 
Miss.  374  ;  Fields  v.  Sherrill,  18  Kan.  365. 

3  Nat.  Bank  v.  Shields,  55  Hun  (N.  Y.),  274 ;  Gossin  v.  Brown,  11  Pa.  St.  527  ; 
Ottman  v.  Moak,  3  Sand.  Ch.  (N.  Y.)  431 ;  Motley  r.  Harris,  1  Lea  (Tenn.), 
577 ;  Rooker  v.  Benson,  83  Ind.  250 ;  Knight  v.  Rountree,  99  N.  Car.  389 ; 
Thomas  v.  Stewart,  117  Ind.  50. 

*  Curtis  V.  Tyler,  9  Paige  (N.  Y.),  432;  Stewart  v.  Preston,  1  Fla.  10;  Moore 
V.  Moberly,  7  B.  Mon.  (Ky.)  299. 


1076  RIGHTS    OP    PARTIES    BEFORE   DEFAULT. 

and  both  maker  and  indorser  become  insolvent,  the  holder  of 
the  notes  may  avail  himself  of  the  mortgage  security ; '  so  one 
surety  may  avail  himself  of  a  mortgage  made  by  the  principal 
to  his  co-surety.^ 

A  surety  is  subrogated  to  the  benefit  of  the  security  without 
any  assignment  of  it,  by  force  of  law.^ 

§  1108.  Doctrine  of  Equity. — The  right  of  subrogation 
was  originally  a  doctrine  of  equity,  but  has  become  recognized 
as  a  legal  right.*  So  if  two  co-debtors  mortgage  land  belong- 
ing to  them  jointly  to  secure  a  joint  debt,  and  one  of  them 
is  obliged  to  pay  the  whole  debt,  technically  he  is  subrogated 
to  the  rights  of  the  mortgagee,  as  to  the  mortgage  upon  the 
co-debtor's  half  of  the  estate,  as  security  for  his  contributing 
his  share  of  the  debt.^ 

But  if,  as  between  the  debtors,  one  is  principal  and  the 
other  the  surety  in  the  mortgage  debt,  and  the  real  principal  pay 
the  debt,  the  doctrine  of  subrogation  as  to  the  land  of  the 
other  mortgagor  does  not  apply .^ 

§  1109.  Holding  as  Trustee. — A  mortgage  given  to  several 
guarantors  to  indemnify  them  against  a  several  and  joint  lia- 
bility upon  it,  when  the  debt  is  paid  by  one  of  them,  is  held 
in  trust  by  the  mortgagee  for  the  payer's  benefit.'^ 

So  a  surety  paying  one  of  several  notes  or  bonds  secured  by 

^  Rice  V.  Dewey,  13  Gray  (Mass.),  47. 

"^  Hall  V.  Cushman,  16  N.  H.  462. 

3  Beaver  v.  Slanker,  94  111.  175 ;  Murrell  v.  Scott,  51  Tex.  520 ;  Richeson  v. 
Crawford,  94  111.  166 ;  Darst  v.  Bates,  95  111.  493  ;  Gerber  v.  Sharp,  72  Ind. 
553 ;  Dick  v.  Moon,  26  Minn.  309  ;  Jones  v.  Tincher,  15  Ind.  308  ;  National 
Bank  v.  Gushing,  53  Vt.  321 ;  Taylor  v.  Bank,  87  Ky.  398  ;  Macklin  v.  Bank, 
83  Ky.  314  ;  Legett  v.  McClellan,  39  Ohio  St.  624  ;  Eddy  v.  Traver,  6  Paige 
(N.  Y.),  521 ;  Rooker  v.  Benson,  83  Ind.  250.  Compare  Lynn  v,  Richardson, 
78  Me.  367. 

*  La  Farge  v.  Herter,  11  Barb.  159  ;  Aiken  v.  Gale,  37  N.  H.  501. 

^Sargent  v.  M'Farland,  8  Pick.  (Mass.),  502;  Fisher  v.  Dillon,  62  111.  379; 
Simpson  v.  Gardiner,  97  111.  237  ;  Stebbins  r.  Willard,  53  Vt.  665. 

« Crafts  V.  Crafts,  13  Gray  (Mass.),  362;  Cherry  r.  Monro,  2  Barb.  Ch.  (N.Y.) 
618.  See,  also,  as  to  co-sureties,  Hall  v.  Cushman,  16  N.  H.  462 ;  Low  v. 
Smart,  5  N.  H.  353. 

^  Dye  V.  Mann,  10  Mich.  291. 


SUBROGATION.  1077 

a  mortgage,  is  subrogated  to  a  proportionate  part  of  the  mort- 
gage, and  the  mortgagee  holds  as  a  trustee  for  him/ 

Where  a  mortgage  has  been  assigned  to  a  surety  or  to  a 
trustee  to  secure  him  against  his  hability  upon  the  debt,  the 
creditor  is  entitled  to  the  benefit  of  the  security,^  because  the 
mortgage  creates  a  trust  and  equitable  lien  in  favor  of  the 
creditor,  which  attaches  to  the  property.* 

And  whenever  the  mortgagor  is  compelled  to  pay  the  debt, 
after  transfer  of  his  estate  in  the  propert}^  subject  to  the  mort- 
gage, he  is  subrogated  to  the  rights  of  the  mortgagee  upon  the 
land  mortgaged  ;  *  and  a  surety  may  have  the  benefit  of  the 
mortgage,  even  though,  before  he  has  been  called  on  to  pay  the 
debt,  the  mortgagor  has  sold  and  conveyed  the  estate  to 
another.^ 

A  mortgage  made  by  a  principal  to  a  surety  to  secure  the 
payment  of  a  note  is  not  to  be  regarded  in  equity  simply  as  an 
indemnity  to  the  surety.  It  is  not  important  whether  it  is  in 
form  to  pay  the  debt  or  to  indemnify  the  surety. 

Where  its  object  is  to  provide  for  the  payment  of  debts,  or 
to  enable  the  surety  to  do  so,  he  is  constituted  a  trustee  for  the 
creditors  whose  debts  are  enumerated  in  the  condition.''  The 
implication  is  that  a  pledge  made  expressly  to  one  is  in  trust 
for  another,  because  the  relation  between  the'  parties  is  such 
that  that  construction  of  the  transaction  best  effectuates  the 
express  purpose  for  which  it  was  made.' 

Where  a  mortgage  provides  that  if  the  mortgagor  shall  pay 
the  notes,  and  in  every  way  indemnify  and  save  harmless  the 
mortgagee  from  trouble  and  expense,  then  the  deed  shall  be 
void,  the  mortgage  to  the  surety  creates  a  trust  and  an  equit- 
able lien  for  the  holders  of  the  notes.      Such  lien  attaches  to 

'Lynch  v.  Hancock,  14  S.  Car.G6. 

^Cullum  V.  Bank,  23  Ala.  797  ;  Curtis  r.  Tyler,  9  Paige  (N.  Y.),  432. 
^  Graydon  v.  Church,  7  Mich.  36 ;  Eastman  v.  Foster,  8  Met.  (Mass.)  19. 
*  Baker  v.  Terrell,  8  Minn.  195 ;   Risk  v.  Hoffinan,  69  Ind.  137 ;  Johnson  v. 
Zink,  52  Barb.  (N.  Y.)  396. 
^Gossin  V.  Brown,  11  Pa.  St.  527. 
«  Aldrich  v.  Blake,  134  Mass.  582. 
^  Hampton  v.  Phipps,  108  U.  S.  260. 


1078  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

the  property  in  the  nature  of   a  trust    and  would  so  remain 
until  the  debts  are  paid/ 

§  1110.  Effect  OF  Discharging  the  Security. — Where  the 
creditor  voluntarily  does  an  act  invalidating  or  discharging  the 
security  that  he  held  from  the  principal  debtor,  to  which  there 
is  a  surety,  he  thereby  loses  his  claim  on  the  surety,  to  the 
same  extent  as  the  latter  is  injured  by  such  act  of  the  creditor.^ 

But  a  surety  is  not  entitled  to  be  subrogated  as  to  the  secur- 
ity until  the  whole  debt  shall  have  been  discharged.^ 

And  he  may  lose  the  benefit  of  the  subrogation  by  his  own 
laches  in  suffering  other  persons  to  acquire  a  valuable  interest 
in  the  land  in  consequence  of  his  omitting  to  make  known  his 
own  claim  upon  it.* 

§  1111.  Rights  to  Subrogation  to  Debt  and  Security — 
American  Doctrine. — The  general  doctrine  of  the  American 
courts  is,  that,  upon  the  payment  of  a  debt  by  the  surety,  he  is 
entitled  to  the  benefit  of  the  collateral  security  and  of  the  debt 
as  represented  by  the  bond  or  note,  and  to  the  assignment  of 
the  debt  as  well  as  the  mortgage.^ 

A  purchaser  who  has  bought  a  portion  of  the  mortgaged 
premises,  and  has  assumed  the  whole  mortgage  debt,  is  per- 
sonally liable  to  another  purchaser  who  has  bought  another 
portion  of  the  estate,  and  is  compelled  to  pay  the  mortgage 
debt,  and  is  also  subrogated  to  the  mortgagee's  right.^ 

§  1112.  English  Doctrine. — The  surety,  upon  paying  the 
debt  of  his  principal,  is  entitled  to  the  full  benefit  of  all  col- 
lateral securities  which  the  creditor  has  taken  for  the  payment 
of  the  debt,  but  is  not  subrogated  to  the  creditor's  rights  as  to 

1  Eastman  v.  Foster,  8  Met.  (Mass.)  19 ;  Plaut  v.  Storey  (Ind.),  30  N.  E.  Kep. 
886 ;  Brandt  on  Sur.  (2d  ed.),  sect.  324. 

2  Hayes  r.  Ward,  4  Johns.  Ch.  (N.  Y.)  123. 

3  Stamford  Bank  v.  Benedict,  15  Conn.  437. 
*  Jarvis  v.  Whitman,  12  B.  Mon.  (Ky.)  97. 

5  Ellsworth  V.  Lockwood,  42  N.  Y.  89,  98. 

®  Rardin  /'.  Walpole,  38  Ind.  146,  which  is  an  able  discussion  of  the  doctrine 
of  subrogation  as  applicable  to  the  parties  to  a  mortgage. 


SUBROGATION.  1079 

the  debt  itself.  The  general  rule  is  that  the  suret}''  is  entitled 
to  the  benefit  of  all  the  securities  which  the  creditor  has  against 
the  principal,  but  it  applies  only  to  such  securities  as  continue 
to  exist,  and  does  not  get  back  upon  payment  to  the  person  of 
the  principal  debtor/ 

§  1113.  The  Surety  is  Entitled  to  All  Equities. — 
The  surety  is  entitled  to  the  equities  which  the  creditor  holds 
against  the  principal  debtor,  and  to  those  he  has  against  all 
parties  claiming  under  him.^  And  if  he  pays  off  a  j)art  of  the 
mortgage  debt  he  is  entitled  as  against  the  mortgagor  to  hold 
the  estate  for  the  amount  he  has  paid.^  And  after  paying  the 
whole  debt,  he  is  entitled  to  the  securities  given  by  the  debtor 
after  the  contract  of  suretyship  as  well  as  those  given  before  or 
at  the  same  time,  and  whether  the  surety  knew  of  the  exist- 
ence of  the  securities  or  not.* 

An  indorser  upon  a  note  not  yet  matured  gave  a  mortgage 
upon  a  vessel  to  secure  his  contingent  liability,  by  which  he 
was  entitled  to  an  extension  of  time  of  payment.  It  was  held 
that  as  to  the  mortgagee  it  was  to  be  deemed  a  mortgage  for  a 
valuable  consideration,  and  the  mortgagee  was  entitled,  as  such, 
to  intervene  for  the  protection  of  his  interest  in  a  libel  against 
the  vessel  to  recover  wages. 

Either  the  extension  of  time  for  the  payment  of  the  debt,  or 
the  waiver  by  the  holder  of  the  note  of  the  right  to  sue  the  in- 
dorser, and  in  such  suit  to  attach  the  vessel,  constituted  a  suffi- 
cient consideration  for  this  purpose.^ 

§  1114.  For  Further  Security  and  for  Further  Ad- 
vances.— Where  the  principal  debtor  executes  to  the  payee  of 
a  note,  on  which  there  is  personal  security,  a  mortgage  for 
further  security,  until  the  surety  pays  the  debt,  he  has  no 

» Copis  V.  Middletown,  Turn.  &  R.  224,  229 ;  Hodgson  v.  Shaw,  3  Myl.  &  K. 
183,  190 ;  Craythorne  v.  Swinburne,  14  Ves.  160. 

^  Havens  v.  Willis,  100  N.  Y.  482 ;  Drew  t'.  Lockett,  32  Beav.  499. 

^Gedge  v.  Matson,  25  Beav.  310. 

*Mayhew  v.  Crickett,  2  Swanst.  185,  191.  See,  also  Curtis  v.  Tyler,  9  Paige 
(N.  Y.),  432 ;  Gossin  v.  Brown,  11  Pa.  St.  527. 

5  The  Dubuque,  2  Abb.  (U.  S.)  20. 


1080  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

right  to  be  subrogated  to  the  rights  of  the  mortgagee,  and  to 
have  the  mortgaged  premises  sold  and  the  money  paid  to 
him.^ 

And  he  is  not  entitled  to  an  assignment  from  the  creditor 
of  a  mortgage  upon  which  the  creditor  has,  after  first  taking  it, 
made  further  advance,  unless  he  pays  off  such  advance  in  ad- 
dition to  the  original  sum  for  which  he  became  surety.^ 

Where  there  is  a  special  contract  on  the  part  of  the  creditor 
that  the  securities  given  by  the  principal  debtor  shall  be  pri- 
marily liable,  or  that  the  surety  may  redeem  upon  paying  a 
certain  amount,  the  creditor  cannot,  as  against  him,  make  a 
further  loan  to  the  debtor,  but  must  transfer  the  securities 
upon  a  tender  from  the  surety  of  the  amount  of  the  original 
loan.^ 

§  1115.  Purchaser  Becoming  Surety. — When  a  party  pur- 
chases land,  and  assumes  in  his  deed  to  pay  off  a  bond  and 
mortgage  of  his  grantor  to  which  the  land  is  subject,  he  thereby 
becomes  a  surety  in  respect  to  the  mortgage  debt.* 

And  the  acceptance  by  the  grantee  of  a  deed  of  conveyance 
of  land  subject  to  a  specified  mortgage,  and  providing  that  he 
shall  assume  and  pay  the  mortgage,  binds  him  as  effectually 
as  tliough  the  deed  was  inter  partes,  and  executed  by  both 
grantor  and  grantee.  The  mortgagee  may  treat  both  the 
mortgagor  and  his  grantee  under  such  a  promise  as  principal 
debtors,  and  may  have  personal  decree  against  either  or  both.^ 

A  promise  by  the  grantee  to  the  grantor  to  pay  a  mortgage 
debt  as  part  of  the  purchase-money  of  the  land  conveyed  does 
not  render  the  grantee  surety  for  the  grantor,  but,  as  between 
the  parties,  the  grantee  is  the  principal  debtor  and  the  grantor 
the  surety." 

1  Conwell  V.  McCowan,  53  111.  364. 

"Williams  v.  Owen,  13  Sim.  597. 

^Bowker  v.  Bull,  1  Sim.  (N.  S.)  29.  See,  also,  Farebrother  r.  Wodehouse,  23 
Beav.  IS,  23. 

*  Klapworth  v.  Dressier,  2  Beas.  (N.  J.)  G2 ;  Hoysradt  v.  Holland,  50  N.  H. 
433. 

^Crawford  v.  Edwards,  33  Mich.  354, 

«Huyler  v.  Atwood,  26  N.  J.  Eq.  504. 


subrogation.  1081 

§  1116.  Subrogation  of  Principal  Creditor  to  Indem- 
nity.— Collateral  securities  given  by  a  debtor  to  his  surety  are 
considered  as  trusts  for  the  better  security  of  the  creditor's  debt, 
and  chancery  will  see  that  their  intention  be  fulfilled.^  This 
doctrine  is  the  corollary  of  the  doctrine  that  a  surety  is  en- 
titled to  the  benefit  (5f  any  security  which  the  creditor  may 
have  taken  from  the  principal.  The  creditor  and  the  surety 
have  correlative  rights  ;  they  are  each  entitled  to  the  benefit  of 
the  securities  by  the  action  for  the  payment  of  the  debt.^ 

In  some  cases  an  attempt  has  been  made  to  raise  a  distinc- 
tion between  a  mortgage  executed  by  the  debtor  to  his  surety 
to  secure  the  debt,  and  a  mortgage  simjDly  to  indemnify  the 
surety.  It  is  held  that  such  a  mortgage  merely  indemnifying 
the  surety  does  not  in  the  first  instance  attach  itself  to  the 
debt  as  an  incident  to  it ;  but  \\ibatever  equity  arises  in  favor 
of  the  creditor  in  regard  to  the  security  arises  afterward,  and 
comes  into  existence  only  upon  the  insolvency  of  the  parties 
holden  for  the  debt ;  and  until  this  equity  arises  the  surety 
has  a  right  in  equity  as  well  as  at  law  to  release  such  security. 
But  upon  the  insolvency  of  the  principal  and  surety  the  cred- 
itor will  be  entitled  to  the  benefit  of  the  security  held  by  the 
surety  from  the  principal.^ 

But  it  is  well  settled  that  the  creditor  has  an  equitable  claim 
to  the  security,  as  well  when  the  mortgage  is  given  for  mere 
indemnity  as  when  the  condition  is  added  that  the  principal 
shall  pay  the  debt.  The  equitable  right  of  the  creditor  does 
not  rest  upon  contract,  but  upon  the  same  equitable  footing 
with  a  co-surety.  It  cannot  be  that  if  an  indorser,  who  has 
been  made  liable  by  demand  and  notice,  goes  into  insolvency, 

'  Keene  Five  Cents  Sav.  Bank  r.  Herrick,  62  N.  H.  174  ;  Demott  v.  Stockton 
Paper  Ware  Manuf.  Co.,  32  N.  J.  Eq.  124. 

'^  Saviors  v.  Saylors,  3  Heisk.  (Tenn.)  525;  Osborn  v.  Noble,  46  Mips.  449; 
Wrijiht  V.  Morley,  11  Ves.  22;  Bank  v.  Throop,  18  Johns.  (N.  Y.)  505;  Pratt 
V.  Adams,  7  Paige  (N.  Y.),  617,  627  ;  Curtis  v.  Tyler,  9  Paijxe  (N.  Y.),  432,  435 ; 
Parsons  v.  Briddock,  2  Vern.  608 ;  Ex  parte  Waring,  19  Ves.  345 ;  Ex  parte 
Parr.  Buck,  191 ;  Ex  parte  Prescott,  3  Deac.  &  Ch.  218. 

^  Jones  V.  Bank,  29  Conn.  25.  See,  also,  Shelden  on  Subro.,  sects.  160,  161, 
162 ;  In  re  Foye,  16  Bank.  Reg.  572 ;  In  re  Fickett,  72  Me.  266 ;  Keyea  v. 
Brush,  2  Paige  (N.  Y.),  311 ;  King  v.  Harman,  6  La.  607. 


1082  EIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

the  mortgage  taken  by  him  for  indemnity  is  thereby  released. 
It  ought  to  be  held  by  his  assignee  for  the  benefit  of  his  estate. 
But  it  was  taken  for  the  general  benefit  of  all  his  creditors,  and 
its  object  was  to  indemnify  his  estate  from  the  payment  of  the 
particular  debt.  Primarily,  therefore,  it  would  seem  to  be  the 
proper  course  to  apply  the  security  to  the  payment  of  that  debt, 
and  thus  leave  the  other  creditors  of  the  indorser  in  the  same 
condition  as  if  the  indorsement  had  not  been  made.^ 

In  case  where  the  principal  and  the  sureties  are  all  insol- 
vent, the  creditor  is  entitled  to  the  benefit  of  the  security  held 
by  the  sureties.'  Thus,  the  payee  of  a  promissory  note  is  en- 
titled to  have  a  mortgage  given  by  the  maker  to  his  surety  as- 
signed to  him  after  their  insolvency,  although  the  condition  of 
the  mortgage  is  for  indemnity  of  the  surety  and  not  to  pay  the 
note.^ 

§  1117.  Security  Given  by  a  Stranger. — But  when  secu- 
rity is  given  by  a  stranger  to  indemnify  the  surety,  and  not  for 
the  payment  of  the  debt,  a  trust  does  not  attach  to  it  for  the 
creditor,  and  he  cannot  be  subrogated  to  the  rights  of  the 
surety.  Nor  is  it  material  that  the  security  was  given  by 
the  wife  of  the  principal,  she  being  a  stranger  to  the  debt. 
Thus,  when  a  wife  gives  a  mortgage  on  her  property  to  in- 
demnify an  indorser  of  her  husband's  draft,  to  which  the  wife 
was  not  a  party,  a  holder  or  acceptor  of  the  draft  who  did  not 
take  it  on  the  faith  of  such  mortgage,  is  not  subrogated  to  the 
indorser's  mortgage.* 

Nor  can  the  principal  creditor  obtain  subrogation  to  securi- 
ties which  several  sureties  of  the  principal  debt  have  pi-ovided 

1  Moses  V.  Murgatroj'd,  1  Johns.  Ch.  (N.  Y.)  119;  Phillips  v.  Thompson, 
2  Johns.  Ch.  (N.  Y.)  418 ;  Ten  Eyck  v.  Holmes,  3  Sandf.  Ch.  (N.  Y.)  428 ; 
Aldrich  r.  Martin,  4  K.  I.  520;  Hopewell  v.  Bank,  10  Leigh  (Va.),  214,  221; 
New  Bedford  Sav.  Inst.  v.  Bank,  9  Allen  (Mass.),  175. 

2  In  re  Fickett,  72  Me.  266  ;  In  re  Foye,  16  Bank.  Reg.  572 ;  In  re  Jay  Cox, 
8  Bank.  Res.  241. 

=*  Keene  Five  Cents  Sav.  Bank  v.  Herrick,  62  N.  H.  174 ;  Holt  v.  Bank,  62 
N.  H.  551. 

*  Taylor  v.  Bank,  87  Ky.  398;  Leggett  r.  McClelland,  39  Ohio  St.  624; 
MackHn  v.  Bank,  83  Ky.  314. 


I 


SUBROGATION.  1083 

among  themselves  to  secure  the  payment  by  each  of  his  equal 
share  of  the  principal  debt,  because  the  sureties'  liabilities  have 
never  become  fixed  and  absolute/ 

Where  the  principal  creditor  has  a  right  to  be  subrogated  to 
the  indemnity  mortgage,  his  equity  is  the  same  whether  he 
knew  of  the  surety's  indemnity  or  not.^ 

When  the  design  of  the  mortgage  is  merely  to  protect  the 
sureties  against  the  note,  and  protection  having  been  given  by 
the  creditor's  discharge  of  the  sureties,  the  condition  of  the 
mortgage  is  fulfilled.  Thus,  when  the  sureties  assign  the  mort- 
gage to  the  creditor  for  his  security,  and  take  a  discharge  under 
seal,  the  mortgage  is  no  longer  in  force.^ 

§  1118.  Laches  May  Defeat  Subrogation. — Subrogation 
is  founded  on  the  principles  of  equity  and  benevolence,  and 
is  not  to  be  allowed  in  favor  o-^  one  who  has  permitted  the 
equity  he  asserts  to  sleep  in  secrecy  until  rights  of  others  would 
be  injuriously  affected  by  its  assertion  and  enforcement.^ 

So  when  one  has  purchased  or  expended  money  in  good  faith, 
without  notice,  he  is  in  no  fault,  and  there  is  no  ground  for 
demand  upon  his  conscience  in  favor  of  one  who  lacks  dili- 
gence in  making  known  a  latent  equity  which  he  claims.^ 

§  1119.  Defense  to  Equitable  Claim  of  the  Creditor. 
— It  is  no  defense  to  the  equitable  claim  of  the  creditor  that 
his  personal  remedy  by  an  action  at  law  against  the  surety  is 
barred  by  the  statute  of  limitations  ;  the  debt  remains  in  force 
and  the  lien  is  not  discharged  as  a  general  rule  until  the  debt 
is  paid.  The  creditor  has  a  double  remedy,  one  upon  the 
mortgage  to  recover  the  land,  and  the  other  upon  the  note 
against  the  principal  or  surety  to  recover  the  debt." 

1  Seward  ?-.  Huntington,  94  N.  Y.  104 ;  Grant  v.  Ludlow,  8  Ohio  St.  1. 
''Carpenter  v.  Bowen,  42  Miss.  28 ;  McMuUen  v.  Neal,  60  Ala.  552. 
3  Sumner  r.  Bacheldcr,  30  Me.  35. 

*  Grins's  Appeal,  89  Pa.  St.  336 ;  Sheldon  on  Subro.,  sects.  110,  111 ;  Jarvis  v. 
Whitman,  12  B.  Mon.  (Ky.)  97. 

*  Thomas  v.  Stewart,  117  Ind.  50. 

«  Eastman  v.  Foster,  8  Met.  (Mass.)  19  ;  Crosby  ?•.  Crafts.  5  Hun  (N.  Y.),327; 
Thayer  ;■.  Mann,  19  Pick.  (Mass.)  535 ;  Holt  r.  Bank,  62  X.  H.  551.  See,  also, 
Spears  v.  Hartly,  3  Esp.  81 ;  Clark  v.  Ely,  2  Sandf.  Ch.  (N.  Y.)  166. 


1084  RIGHTS    OF    PARTIES   BEFORE    DEFAULT. 

Security  was  given  by  the  principal  on  a  note  to  the  indorser 
or  surety  to  indemnify  him ;  and  it  was  held  that  the  security 
inured  to  the  benefit  of  the  creditor.^  And  so  where  property 
mortgaged  to  an  indorser  as  security  is  sold  by  the  assignee  of 
the  insolvent  principal,  the  proceeds  will  be  applied  in  payment 
of  the  debts  for  which  the  security  was  given.^ 

When  the  surety  takes  a  mortgage  from  the  principal  to  in- 
demnify him  against  the  debt,  and  afterward  assigns  the  mort- 
gage to  the  creditor  in  consideration  that  he  will  release  him 
from  all  liability  on  the  debt  other  than  the  use  of  his  name 
in  the  collection  of  the  same,  he  is  not  discharged  from  the 
incumbrance  of  the  mortgage,  and  the  creditor  is  entitled  to 
hold  the  land  as  against  a  subsequent  purchaser  of  the  equity 
of  redemption,  until  the  latter  shall  pay  the  amount  of  the 
creditor's  claim.^  And  when  the  notes  upon  which  the  mort- 
gagee is  surety  are  held  by  different  persons,  he  holds  the  mort- 
gaged premises  in  trust  for  the  benefit  of  all  holders,  and  can- 
not by  assigning  the  mortgage  to  one  of  the  creditors  terminate 
the  trust  as  to  the  others.*  And  when  the  principal  debtor  has 
become  insolvent  it  would  seem  that  even  under  the  authority 
of  the  Connecticut  cases,  which  modify  somewhat  the  rule  fol- 
lowed in  other  jurisdictions,^  the  equitable  lien,  which  attached 
to  the  property  in  the  hands  of  the  mortgagee  in  the  nature  of 
a  trust  for  the  security  and  payment  of  the  notes  will  remain 
so  attached  in  the  hands  of  assignees  of  the  mortgage. 

It  is  no  defense  to  the  equitable  claim  of  the  creditor  that 
the  mortgage  of  indemnity  has  been  foreclosed  against  the 
mortgagor  by  an  assignee  of  the  mortgage.® 

>  In  re  Fickett,  72  Me.  266. 
2  Aldrieh  v.  Martin,  4  R.  I.  520. 
2  Hayden  v.  Smith,  12  Met.  (Mass.)  511. 
*Hoiti).  Bank,  62N.  H.  551. 

*  Jones  V.  Bank,  29  Conn.  25;  Thrall  v.  Spencer,  16  Conn.  139;  Homer  v. 
Savings  Bank,  7  Conn.  478. 
«Holt  V.  Bank,  62  N.  H.  551. 


I 


CHAPTER  XXVII. 

payment  of  the   debt. 

Article  1. 

Constructive  Payment. 

I  1120.  Tender.  I  1130.  Effect  of  a  Valid  Tender. 

§  1121.  Reinvestment  of  Title.  ^  1131,  Defense  by  Mortgagee. 

§  1122.  Tender  After  Default.  |  1132.  Mode  of  Making  Tender. 

§  1123.  Where  a  Mortgage  is  Merely  a  §  1133.  In  What  Money. 

Lien.  I  1134.  United  States  Treasury  Notes. 

?  1124.  By  Whom  Made.  I  1135.  In  Bank  Bills. 

§1125.  To  Whom  Made.  I  1136.  Depreciated  or  Un  cur  rent 

§  1126.  Where  to  be  Made.  Money. 

I  1127.  When  a  Tender  May  be  Ex-  I  1137.  Mortgagor  May  Collect  Over 
cused.  Payments. 

I  1128.  Time  of  Day  of  Making  Ten-  §  1138.  Costs. 

der.  I  1139.  Production  of  Money. 

I  1129.  A  Valid  Tender  Must  Be  Un- 
conditional. 

§  1120.  Tender — at  Common  Law. — At  common  law  a  ten- 
der of  the  anount  due  must  be  made  on  the  very  day  on  which 
the  money  is  due ;  ^  so  at  common  law  where  the  legal  title  is 
in  the  mortgagee,  the  effect  of  the  tender  at  the  law  day  will 
satisfy  the  condition  of  the  mortgage  as  fully  as  if  payment 
had  been  made,  and  the  estate  is  revested  in  the  mortgagor," 
and  the  mortgagor  may  re-enter,  and  the  lien  is  discharged,  but 
the  mortgagee  may  recover  the  debt  by  action  against  the 
mortgagor.^  But  a  tender  of  money  before  it  is  due  is  of  no 
avail,  as  the  mortgagee  or  creditor  is  not  bound  to  receive  it 
before  due  according  to  the  terms  of  the  contract.* 

1  Salinas  v.  Ellis,  26  S.  Car.  337 ;  Dixon  v.  Clark,  5  C.  B.  365 ;  Powe  v.  Powe, 
42  Ala.  113  ;  Toulmin  v.  Sager,  42  Ala.  127. 

2  Salinas  v.  Ellis,  26  S.  Car.  337;  Grain  v.  McGoon,  86  HI.  431 ;  Doody  r. 
Pierce,  9  Allen  (Mass.),  141. 

'  Martindale  v.  Smith,  1  Add.  &  El.  N.  S.  389 ;  Weeks  v.  Baker,  152  Mass.  20. 
*Tillou  V.  Brittan,  4  Halst.  (N.  J.)  120;  Saunders  v.  Frost,  5  Pick.  (Mass.) 

1085 


1086  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

But  it  has  been  held  that  if  the  debt  does  not  draw  interest, 
a  tender  before  the  law  day  will  be  good/  and  that  a  tender 
before  due  of  the  amount  with  all  interest  up  to  law  day  may 
be  good.^  However,  if  the  creditor  accej^ts  the  payment,  it  is 
sufficient  and  valid.'* 

§  1121,  Reinvestment  of  Title. — Whenever  the  condition 
of  the  mortgage  has  been  fully  performed  by  payment  the 
title  revests  in  the  mortgagor.*  If  the  condition  be  to  sup- 
port the  mortgagee,  upon  his  death  the  title  revests  in  the 
mortgagor  without  any  reconveyance.^  But  a  failure  to  perform 
according  to  condition  is  not  sufficient  to  revest  the  title 
without  a  reconveyance." 

And  in  general  whenever  the  mortgagee  receives  satisfaction 
of  the  debt  according  to  agreement,  the  title  then  revests  in 
the  mortgagor.'  And  if  the  mortgagee  accepts  the  money  after 
condition  broken  and  before  suit,  this  action  as  to  chattels 
revests  the  title  in  the  mortgagor.^ 

§  1122.  Tender  After  Default. — At  common  law  a  tender 
after  default  is  not  sufficient,  and  does  not  discharge  the 
lien.^ 

The  general  rule  is  that  a  tender  made  after  default  in  the 
terms  of  the  mortgage  must  be  kept  good  and  paid  into  court 

267 ;  Mitchell  v.  Cook,  29  Barb.  (N.  Y.)  243 ;  Brown  v.  Cole,  14  Sim.  427 ; 
Abbe  V.  Goodwin,  7  Conn.  377. 

1  M'Hard  v.  Whetcroft,  3  Harr.  &  McH.  (Md.)  85. 

^  Hoyle  V.  Cazabat,  25  La.  Ann.  438. 

^Carpenter  i'.  Welch,  40  Vt.  251 ;  Talbott  v.  Braddell,  1  Vem.  394. 

*  Merrill  v.  Chase,  3  Allen  (Mass.),  339 ;  Erskine  v.  Townsend,  2  Mass.  493  ; 
Richardson  r.  Cambridge,  2  Allen  (Mass.),  118;  Hohnan  v.  Bailey,  3  Met. 
(Mass.)  55. 

^  Munson  v.  Munson,  30  Conn.  425. 

^  Camp  V.  Smith,  5  Conn.  80. 

T  Patchin  v.  Pierce,  12  Wend.  (N.  Y.)  61 ;  West  v.  Crary,  47  N.  Y.  423 ; 
Harrison  v.  Hicks,  1  Port.  (Ala.)  423  ;  Greene  v.  Dingley,  24  Me.  131 ;  Moak  v. 
Bourne,  13  Wis.  514 ;  Barry  v.  Bennett,  7  Met.  (Mass.)  354. 

8  Leighton  v.  Shapley,  8  N.  H.  359. 

9  Shields  v.Lozear,  .34  N.  J.  L.  496;  Powell  v.  Mitchell,  68  Me.  21 ;  Powe  v. 
Powe,  42  Ala.  113 ;  Maynard  v.  Hunt,  5  Pick.  (Mass.)  240 ;  Storey  v.  Krewson, 
55  Ind.  397. 


PAYMENT  OF  THE  DEBT.  1087 

to  be  sufficient.'  The  mortgagor  must  keep  the  tender  good  by 
bringing  it  into  court,  where  an  action  is  begun.^ 

Payment  after  condition  broken  does  not  revest  the  mortgagor 
with  the  legal  title  is  the  general  rule,  and  he  will  have  to  resort 
to  a  court  of  equity  for  a  reconveyance  of  the  title  when  the  mort- 
gagee refuses  to  make  such  a  release  of  title,  and  this  doctrine 
is  held  by  many  States  where  the  common-law  rule  is  adopted.^ 

In  ejectment  by  a  mortgagor  against  a  mortgagee  in  posses- 
sion after  condition  broken,  proof  that  the  mortgagor  tendered 
what  he  claimed  was  the  balance  due  on  the  mortgage  debt, 
without  showing  that  the  sum  tendered  was  the  full  amount 
due,  is  insufficient  to  show  that  the  mortgagee's  right  to  pos- 
session has  terminated.* 

§  1123.  Where  a  Mortgage  is  Merely  a  Lien. — In  most 
of  those  States  where  a  mortgage  is  merely  a  lien,  a  tender  made 
after  default  before  action  brought  will  discharge  the  lien  of 
the  mortgage.^  So  a  tender  of  the  money  due  at  any  time  be- 
fore foreclosure  discharges  the  lien,  though  made  after  the  law 
day  and  not  kept  good.^  In  New  York,  in  reference  to  real 
estate  mortgages,  a  tender  on  the  law  day  discharges  the  lien 
of  the  mortgage  ;  and  a  tender  after  the  law  day  will  have  the 
same  effect,  if  made  before  action  to  foreclose,  though  not  kept 
good  by  depositing  the  amount  in  court,^  but  this  rule  does  not 
apply  to  chattel  mortgages.^ 

In  Massachusetts  the  equitable  rule  is  adopted  as  to  tender 
that  the  payment  or  tender  of  payment  of  the  debt  and  all 

'Musgat  V.  Pumpelly,  46  "Wis.  660 ;  Greer  v.  Turner,  .36  Ark.  17  ;  Alexander 
V.  Caldwell,  61  Ala.  543. 

^  Werner  v.  Tuch,  127  N.  Y.  217 ;  Strusguth  v.  Pollard,  62  Yt.  157. 

3  Stewart  r.  Crosby,  50  Me.  130 ;  Parsons  v.  Welles,  17  Mass.  419 ;  Howe  v. 
Lewis,  14  Pick.  (Mass.)  329 ;  Cross  v.  Robinson,  21  Conn.  379. 

*  Brown  v.  Bookstaver  (111.),  31  N.  E.  Rep.  17. 

*  Salinas  v.  Ellis,  26  S.  Car.  337. 

«  Kortright  v.  Cady,  21  N.  Y.  343  ;  Moynahan  r.  Moore,  9  Mich.  9  ;  Thornton 
V.  Bank,  71  Mo.  221 ;  Ferguson  v.  Popp,  42  Mich.  115;  Flanders  v.  Chamber- 
lain, 24  Mich.  305 ;  Yan  Husan  v.  Kanouse,  13  Mich.  303 ;  Potts  v.  Plaisted, 
30  Mich.  149 ;  Salinas  v.  Ellis,  26  S.  Car.  337. 

•^  Kortright  r.  Cady,  21  N.  Y.  343 ;  Jackson  v.  Crafts,  18  Johns.  (N.  Y.)  110. 

sNoyes  v.  Wyckoff,  30  Hun  (N.  Y.),  466. 


1088  RIGHTS    OF    PARTIES   BEFORE    DEFAULT. 

proper  charges  at  any  time  before  foreclosure,  has  the  same  effect 
upon  the  rights  of  the  parties  in  the  property  which  it  would 
have  had  if  made  when  the  debt  was  due.'  And,  in  Minne- 
sota, a  tender  of  the  amount  due,  even  after  the  law  day  and 
before  action  to  foreclose,  discharges  the  lien  of  the  mortgage, 
and  the  tender  need  not  be  kept  good  by  bringing  the  money 
into  court/  In  New  Hampshire  the  money  must  be  brought 
into  court,  if  made  after  the  law  day.^ 

Under  this  doctrine,  the  mortgage  being  merely  a  lien,  when 
the  debt  is  paid  the  lien  is  discharged.*  This  rule,  however, 
does  not  apply  where  the  debt  is  discharged  by  the  statute  of 
limitations,  or  by  a  discharge  in  bankruptcy.^ 

§  1124.  By  Whom  Made. — If  there  be  but  one  debtor,  he 
is  the  right  person  to  make  the  tender ;  or,  if  there  are  several 
debtors,  a  tender  by  one  or  by  all  of  them  is  sufficient ;  and 
this  is  so  whether  the  debt  is  joint  or  joint  and  several.  Or  an 
authorized  agent  may  make  the  tender.®  So  the  mortgagor 
may  make  the  tender,  even  though  he  has  sold  his  estate,^  and 
a  purchaser  who  has  assumed  the  payment  of  the  mortgage 
may  make  a  valid  tender  of  payment.^ 

But  a  party,  having  no  interest  in  the  mortgaged  premises 
or  in  a  tender  made,  has  no  right  to  make  a  tender  on  his  own 
behalf  of  the  amount  due  on  the  mortgage.^  And  so  a  tender 
of  the  amount  due  on  a  joint  and  several  promissory  note,  by  a 

1  Weeks  v.  Baker,  152  Mass.  20. 

*  Moore  v.  Norman,  43  Minn.  428. 

3  Robinson  v.  Leavitt,  7  N.  H.  73,  93 ;  Bailey  v.  Metcalf,  6  N.  H.  156. 

*  Kortright  v.  Cady,  21  N.  Y.  343, 366 ;  Remington  Paper  Co.  v.  O'Dougherty, 
81  N.  Y.  474 ;  Wanzer  v.  Gary,  76  N.  Y.  526 ;  Griffin  v.  Lovell,  42  Miss.  402 ; 
McNair  v.  Picotte,  33  Mo.  57 ;  Caruthers  v.  Humphrey,  12  Mich.  270 ;  Dutton 
V.  Merritt,  41  Mich.  537  ;  Sliields  v.  Lozear,  34  N.  J.  L.  496 ;  Osborne  v.  Tunis, 
25  N.  J.  L.  633,  651 ;  Johnson  v.  Sherman,  15  Cal.  287 ;  McMillan  v.  Richards, 
9  Cal.  365 ;  Salinas  v.  Ellis,  26  S.  Car.  337 ;  Moore  v.  Norman,  43  Minn.  428 ; 
Ledyard  v.  Chapin,  6  Ind.  320 ;  Terrio  v.  Guidry,  5  La.  Ann.  589 ;  Shinkel  v. 
Hanewinkel,  19  La.  Ann.  260. 

*  Bush  V.  Cooper,  26  Miss.  599  ;  Chamberlain  v.  Meeder,  16  N.  H.  381. 
6Read  u.  Goldring,  2  Maul.  &  Selvv.  86. 

•'  Blim  V.  Wilson,  5  Phil.  (Pa.)  78. 

8  Harris  v.  Jex,  66  Barb.  (N.  Y.)  232 ;  55  N.  Y.  421. 

'Mahler  v.  Newbaur,  32  Cal.  168. 


PAYMENT  OF  THE  DEBT,  1089 

surety,  while  an  action  brought  by  the  holder  against  the  prin- 
cipal is  pending,  will  not  discharge  the  surety,  unless  he  also 
offers  to  indemnify  the  holder  against  the  costs  of  such  action.^ 
So,  where  a  mortgage  is  given  to  indemnify  a  surety  on  the 
mortgagor's  note,  and  four  days  before  maturity  a  third  per- 
son, in  pursuance  of  an  arrangement  made  by  the  surety,  paid 
the  note,  it  does  not  amount  to  the  payment  of  the  note  by  the 
debtor.' 

It  has  been  held  that  the  grantee  of  the  redemption,  who  is 
not  jiersonall}^  liable  for  the  mortgage  debt,  cannot  discharge 
the  mortgage  lien  by  tender ;  that  he  must  redeem  by  actual 
payment.^ 

In  general,  a  tender,  in  order  to  bar,  must  be  made  by  the 
debtor  or  his  legal  representative,  and  not  by  a  stranger.* 

§  1125.  To  Whom  Made. — A  tender  to  the  mortgagee  or 
creditor  in  person  is  legal.  And  if  the  debt  is  due  to  several 
persons  jointly,  it  may  be  tendered  to  either  of  them,  though 
it  must  be  pleaded  as  a  tender  to  them  all.^  The  tender  must 
be  made  to  the  creditor,  or  to  some  one  authorized  to  receive  it 
on  his  behalf^ 

Mone}'  due  a  cestui  que  trust  must  be  tendered  to  the  trustee.^ 
The  party  having  the  right  to  reconvey  or  to  satisfy  the  mort- 
gage after  payment  is  a  proper  party  to  tender  the'  amount  of 
the  debt.^  And  a  tender  to  an  assignee  of  the  debt  is  a  good 
tender,*  and  if  the  debtor  or  mortgagor  has  notice  of  such 

1  Hampshire  ]Manuf.  Bank  >\  Billings,  17  Pick.  (Mass.)  87. 

^  Camp  r.  Smith,  5  Conn.  SO. 

3  Harris  r.  Jex,  66  Barb.  (X.  Y.)  232. 

♦McDougald  v.  Dougherty,  11  Ga.  570.  Pee,  also,  Cropp  r.  Hambledon,  Cro. 
Eliz.  4S ;  Watkins  r.  Ashwick,  Cro.  Eliz.  132. 

s  Douglas  v.  Patrick,  3  Term  R.  683;  Oatman  v.  Walker,  33  Me.  67. 

6  Hornby  v.  Cramer,  12  How.  (X.  Y.)  490;  King  v.  Finch,  60  Ind.  420;  Kir- 
ton  V.  Braithwaite,  1  Mees.  &  Wei.  310 ;  Goodland  v.  Blewith,  1  Camp.  477 ; 
Smith  V.  Goodmn,  4  Barn.  &  Ad.  413 ;  Crozer  v.  Pilling,  4  Barn.  &  Cres.  26 ; 
Billiot  V.  Robinson,  13  La.  Ann.  529 ;  Jackson  v.  Crafts,  18  Johns.  (N.  Y.) 
110. 

^Chahoon  >i  Hollenback,  16  Serg.  &  R.  (Pa.)  425. 

^Van  Buren  r.  Olmstead,  5  Paige  (N.  Y.),  9. 

'Goodland  v.  Blewith,  1  Camp.  477. 
69 


1090  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

assignment  he  must  tender  the  amount  to  the  assignee.^  But 
it  has  been  held  that  if  the  mortgagor  has  no  knowledge  of 
the  assignment,  he  may  make  a  valid  tender  to  the  mortgagee 
which  will  extinguish  the  lien.^ 

A  tender  to  one  who  is,  in  fact,  the  attorney  of  the  creditor, 
although  he  denies  his  authority,  is  a  good  tender.^ 

An  agent  may  have  authority  to  demand  payment,  but  no 
authority  to  receive  it,  in  which  case  a  tender  to  him  would 
be  ineffectual.* 

§  1126.  Where  to  be  Made. — When  the  contracts  provide 
for  the  payment  at  a  particular  place,  a  tender  at  that  place 
will  be  sufficient.  When  no  place  of  payment  is  mentioned, 
and  the  debt  is  due  in  money,  a  tender  to  the  person  is  suffi- 
cient,^ and  the  debtor  is  bound  to  seek  the  creditor  wherever 
he  may  be  within  the  State,  and  make  tender  to  him,''  but  he 
is  not  bound  to  go  to  another  State  for  that  purpose ;  "^  with  this 
exception,  the  debtor  must  seek  the  creditor.^  But  when  the 
mortgagee  has  removed  from  the  State,  leaving  no  authorized 
agent  to  receive  the  payment  of  the  debt,  then  the  mortgagor  is 
relieved  from  the  duty  of  making  a  tender.^ 

§  1127.  When  a  Tender  May  Be  Excused. — A  mortgagor 
or  debtor  may  be  excused  in  making  tender  under  some  cir- 
cumstances. Thus,  where  the  creditor  designedly  absents  him- 
self from  home,  for  the  fraudulent  purpose  of  avoiding  a  ten- 

1  Dockray  v.  Noble,  8  Me.  278. 

•^  Hetzell  V.  Barber,  6  Hun  (N.  Y.),  534.  See,  also,  Reed  v.  Marble,  10  Paige 
(N  Y.),  409. 

3  Mclniffe  v.  Wheelock,  1  Gray  (Mass.),  600 ;  Moffat  v.  Parsons,  5  Taunt.  307. 

*Grussy  v.  Schneider,  50  How.  Pr.  (N.  Y.)  134. 

^Slingerland  v.  Morse,  8  Johns.  (N.  Y.)  474;  Bates  v.  Bates,  "Walk.  (Miss.) 
401. 

«  King  V.  Finch,  60  Ind.  420 ;  Littell  v.  Nichols,  Hard.  (Ky.)  71 ;  Houbie  v. 
Volkening,  49  How.  Pr.  (N.  Y.)  169. 

•^  Allshouse  V.  Ramsey,  6  Whart.  (Pa.)  331. 

8  Smith  V.  Smith,  25  Wend.  (N.  Y.)  405. 

9  Conklin  v.  Conklin,  54  Ind.  289  ;  Houbie  v.  Volkening,  49  How.  Pr.  (N. 
Y.)  169.  See,  also,  Hale  v.  Patton,  60  N.  Y.  233 ;  Hoag  v.  Parr,  13  Hun 
(N.  Y.),  95. 


PAYMENT    OF    THE    DEBT. 


1091 


der.'  The  mortgagee's  conduct  or  declarations  may  be  such 
as  to  excuse  a  tender  being  made,  as  when  he  endeavors  to 
avoid  a  tender.^  Mr.  Fisher  says  that  a  tender  may  be  suffi- 
cient when  made  at  the  mortgagee's  house  in  his  absence, 
where  the  mortgagee  is  dehberately  keeping  out  of  the  way  to 
avoid  the  tender ;  or,  in  case  the  mortgagee  has  expressed  a 
determination  to  hold  the  property  as  long  as  he  could,  and 
after  tliat  to  transfer  it.^ 

The  mortgagor  will  be  excused  from  making  a  tender,  when 
it  is  shown  that  a  proper  tender  would  not  be  accepted  by  the 
mortgagee.*  A  mortgagee  claiming  more  than  is  due  does  not 
excuse  the  making  of  the  tender,  because  if  made,  he  may  ac- 
cept it.^ 

§  1128.  Time  of  Day  of  Making  Tender. — AVhere  a  thing 
is  to  be  done  anywhere,  a  tender  at  a  convenient  time  before 
midnight  is  sufficient ;  where  a  thing  is  to  be  done  at  a  par- 
ticular place,  and  where  the  law  im|:Jies  a  duty  on  the  party 
to  whom  the  thing  is  to  be  done  to  attend,  that  attendance  is 
to  be  by  daylight,  and  a  convenient  time  before  sunset.*^ 

A  tender  after  sundown  of  the  day  on  which  the  payment, 
under  a  contract  whereof  time  was  of  the  essence,  was  due,  was 
held  to  be  sufficient.^ 

If  some  hour  has  been  fixed  upon  for  payment,  a  tender  at 
any  time  within  the  hour  following  the  time  named  continued 
to  the  end  of  the  hour  is  sufficient.^ 

^  Southworth  v.  Smith,  7  Cush.  (Mass.)  391 ;  Gilmore  v.  Holt,  4  Pick.  (:Mass.) 
257. 

2  Manning  r.  Burges,  1  Cas.  in  Eq.  29 ;  Gyles  v.  Hall,  2  P.  Wms.  .378 ;  2  Fisher 
on  Mort.  (3d  ed.)  790. 

3  2  Fisher  on  Mort.  (3d  ed.)  790. 

*Gorham  v.  Forson,  119  111.  435 ;  Atkinson  v.  Morrissy,  3  Oreg.  332 ;  Vaupcll 
V.  Woodward,  2  Sandf.  Ch.  (N.  Y.)  143 ;  Kerford  v.  Mo'ndel,  28  L.  J.  Eq.  303 ; 
Scarfe  r.  Morgan,  4  Mees.  &  Wels.  270. 

s  Allen  r.  Smith,  12  C.  B.  X.  S.  638;  Ashmole  v.  Wainwright,  2  Ad.  &  El. 
(N.  S.)  837. 

^  Startup  V.  Macdonald,  6  Man.  &  Gr.  593. 

'  McClartey  v.  Gokey,  31  Iowa,  505. 

8  Knox  V.  Simmona,  4  Bro.  C.  C.  433.  See,  also,  Bernard  v.  Norton,  10  L.  T. 
N.  S. 183. 


1092  EIGHTS   OF   PARTIES   BEFORE   DEFAULT. 

§  1129.  A  Valid  Tender  Must  be  Unconditional. — A 
tender  of  money  in  paj^ment  of  a  debt  must  be  without  qual- 
ifications ;  there  must  be  nothing  raising  the  impUcation  that 
the  debtor  intends  to  cut  off  or  bar  a  claim  for  any  amount 
beyond  the  sum  tendered,^  And  the  mortgagee  must  have  a 
reasonable  time  to  compute  the  amount  due.^  The  mortgagee 
must,  in  every  case,  have  a  reasonable  opportunity  to  look  over 
the  mortgage  and  accompanying  papers  to  calculate  and  ascer- 
tain the  amount  due,  and  if  such  papers  are  not  present  he 
must  be  allowed  a  reasonable  time  to  procure  them  and  make 
the  computations.^ 

A  condition  that  the  holder  shall  execute  a  quit-claim  deed 
or  a  discharge  of  the  record  or  an  assignment  is  insufficient 
and  invalid.^  And,  on  the  other  hand,  the  mortgagee  has  no 
right  to  add  conditions  to  his  acceptance.^ 

A  tender  must  be  unconditional  and  unqualified,  and  if 
there  is  either  an  express  or  implied  demand  of  a  receipt,  or 
that  the  mone}^  shall  be<i'eceived  in  full,  it  will  not  be  a  suffi- 
cient tender.''  And  the  tender  is  not  valid  if  it  be  accom- 
panied with  a  demand  of  a  discharge  of  the  party  by  whom  or 
for  whom  the  money  is  tendered.^ 

An  offer  to  pay,  under  protest,  the  sum  claimed  is  a  good 
tender.^ 

§  1130.  Effect  of  a  Valid  Tender. — The  tender  of  money 
to  pay  a  debt  will  stop  the  running  of  interest  and  protect  the 

1  Tompkins  r.  Batie,  11  Nebr.  147  ;  Wood  v.  Hitchcock,  20  Wend.  (N.  Y.)  47 ; 
Sager  v.  Tuppor,  35  Mich.  134. 

''Potts  V.  Plaisted,  30  INIich.  149. 

^  Storej'  V.  Krewson,  55  Ind.  397 ;  Harmon  v.  Magee,  57  Miss.  410 ;  Parks  v. 
Allen,  42  Mich.  482;  Roosevelt  ?•.  Bank,  45  Barb.  (N.  Y.)  579;  Roosevelt  v. 
Railroad  Co.,  45  Barb.  (N.  Y.)  554. 

*  Lindsay  v.  Matthews,  17  Fla.  575 ;  Frost  v.  Bank,  70  N.  Y.  553 ;  Loring  v. 
Cooke,  3  Pick.  (Mass.)  48 ;  Eagle  r.  Hall,  45  Mich.  57  ;  Dodge  v.  Brewer,  31 
Mich.  227. 

^  Burnet  v.  Denniston,  5  Johns.  Ch.  (N.  Y.)  35. 

*=  Holton  V.  Brown,  18  Vt.  224 ;  Sanford  v.  Buckley,  30  Conn.  344 ;  Laing  v. 
Meader,  1  Can-.  &  P.  257. 

^  Rice  r.  Kahn,  70  AVis.  323. 

8  Manning  r.  Luna,  2  Carr.  &  Kir.  (N.  S.)  13 ;  Scott  v.  Railroad  Co.,  L.  R.  1 
C.  P.  596. 


i 


PAYMENT  OF  THE  DEBT.  1093 

debtor  from  subsequent  costs,  but  it  will  not  extinguish  the 
debt/ 

So  a  tender  regularly  and  lawfully  made  discharges  a  lien, 
and  while  the  debt  is  not  thereby  discharged  without  payment, 
yet  the  security  is  discharged,  because  the  tender  is  equivalent 
to  payment  as  to  all  things  which  are  incidental  and  accessorial 
to  the  debt.  The  mortgagee,  by  refusing  to  accept,  does  not  for- 
feit his  right  to  the  money  tendered,  but  he  loses  all  collateral 
benefits  or  securities.^ 

§  1131.  Defense  by  Mortgagee. — A  mortgagee  cannot  de- 
fend because  he  refused  a  tender,  thinking  that  the  debt  was 
not  due  when  it  really  was  matured.  He  is  bound  to  notice  the 
rights  of  the  mortgagor.^  He  is  bound  to  accept  the  amount 
when  he  knows  it  is  sufficient.* 

Where  an  action  is  begun  to  foreclose  a  mortgage  on  default 
in  payment,  and  the  mortgagor  tenders  a  part  of  the  mortgage 
debt,  and  demands  a  release  of  a  part  of  the  mortgaged 
premises  pursuant  to  an  agreement  contained  in  the  mortgage, 
he  must  keep  the  tender  good  by  bringing  the  money  into 
court,  in  order  to  entitle  him  to  a  release  of  such  part  of  the 
premises/  and  the  tender  must  cover  the  taxable  costs." 

A  mortgage  of  indemnity  for  a  part  of  the  mortgagee's  or 
surety's  liabilit}^  is  not  discharged  by  the  mortgagor's  paying 
part  of  the  debt,  still  leaving  a  debt  equal  to  the  amount  of  the 
mortgage.  It  will  continue  until  the  whole  debt  is  extin- 
guished.^ 

^Moffat  V.  Parfjons,  5  Taunt.  .307  ;  Fuller  v.  Pelton,  10  Ohio,  457  ;  Woodruff 
V.  Trapnall,  12  Ark.  640 ;  Hanilett  v.  Tallman,  30  Ark.  505 ;  Cornell  r.  Greon, 
10  Serg.  &  R.  (Pa.)  14  ;  Haynes  v.  Thorn,  28  N.  H.  3SG ;  Raymond  v.  Bcarnard, 
12  Johns.  (N.  Y.)  274. 

2  Kortright  v.  Cady,  21  N.  Y.  360 ;  Weeks  v.  Baker,  152  Mass.  20  ;  Colunibia 
Build.  Aflso.  V.  Crump,  42  ^Id.  i92 ;  Greer  v.  Turner,  30  Ark.  17 ;  Donohue  v. 
Chase,  139  Mass.  407. 

3  Campbell  v.  Seeley,  43  Mo.  App.  23. 

*  Kronebusch  t.  Raumin,  0  Dak.  243  ;  Burnet  v.  Dennison,  5  Johns.  Ch. 
(N.  Y.)  35. 
5  Warner  v.  Tuch,  127  N.  Y.  217. 
«Strusguth  V.  Pollard,  62  Vt.  157. 
'  Hannum  v.  Wallace,  4  Humph.  (Tenn.)  143. 


1094  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

In  those  States  where  a  mortgage  is  considered  a  mere  lien, 
a  part  j^ayment  of  the  debt  accepted  b}^  the  creditor  satisfies 
and  releases  the  mortgage  to  that  extent/ 

A  tender  is  not  kept  good  when,  after  making  the  tender,  the 
party  deposits  the  money  in  a  bank  in  his  own  name  and  who 
uses  it,  and  it  is  not  shown  that  other  money  was  kept  ready 
to  pay  the  debt.^ 

The  tender  must  be  for  the  whole  amount  of  the  debt ;  ^  and 
this  is  so  though  only  a  part  of  the  debt  due  belongs  to  the 
holder  of  the  mortgage,  and  the  balance  to  another  ])erson  for 
whom  he  holds  the  mortgage  in  trust,*  and  the  mortgagee  has 
not  acccounted  for  rents  and  profits.^ 

A  junior  incumbrancer  may  make  a  tender  with  the  same 
effect  that  the  mortgagor  can  make  it.®  But  a  purchaser  of  a 
portion  of  the  mortgaged  premises  cannot  make  an  effectual 
tender  of  that  part  of  the  mortgage  debt  covering  his  pur- 
chase, unless  so  provided  in  the  mortgage/ 

§  1132.  Mode  of  Making  Tender. — The  mortgagor  in 
making  a  tender  of  money  upon  his  mortgage  debt  by  way  of 
payment,  and  with  the  purpose  of  insisting,  in  case  of  refusal, 
that  the  lien  is  thereby  discharged,  is  bound  to  act  in  a  straight- 
forward way,  and  distinctly  and  fairly  make  known  his  true 
purpose,  without  mystery  or  ambiguity,  and  allow  a  reasonable 
opportunity  for  intelligent  action  by  the  mortgagee  or  holder  of 
the  mortgage.^ 

§  1133.  In  What  Money. — The  common  law  requires  a  ten- 
der to  be  made  in  the  current  coin  of  the  realm,  or  in  foreign 
money  legally  made  current  by  proclamation.®  Tender  must  be 

1  Howard  v.  Gresham,  27  Ga.  347 ;  Champney  v.  Coope,  32  N.  Y.  543 ;  Briggs 
V.  Seymour,  17  Wis.  255. 

2  Grain  r.  McGoon,  8(3  111.  431. 

^  Graham  v.  Linden,  50  N.  Y.  547  ;  Cupples  v.  Galligan,  6  Mo.  App.  62. 

*  Graham  v.  Linden,  50  N.  Y.  547. 

5  Bailey  v.  Metcalf,  0  N.  H.  156. 

8  Fi-ost  ('.  Bank,  70  N.  Y.  553 ;  Sager  v.  Tupper,  35  Mich.  134. 

^  Flake  v.  Nuse,  51  Tex.  98. 

8  Potts  r.  Plaisted,  30  Mich.  149;  Proctor  v.  Robinson,  35  Mich.  284. 

9  Wade's  Case,  5  Co.  114  ;  Polglass  v.  Oliver,  2  Tyrw.  89. 


I 


PAYMENT  OF  THE  DEBT.  1095 

made  in  such  funds  or  currency  as  the  payee   has  a  legal 
right  to  demand/ 

The  Constitution  of  the  United  States  provides  that  no  State 
shall  make  anything  but  gold  and  silver  coin  a  tender  in  pay- 
ment of  debts.^  But  this  does  not  apply,  in  terms,  to  the  gov- 
ernment of  the  United  States,  and  Congress  can  designate  what 
shall  be  legal  tender.^ 

§  1134.  United  States  Treasury  Notes. — In  18G2r  and 
1863  Congress  made  United  States  Treasury  notes,  greenbacks, 
a  legal  tender  in  payment  of  debts  between  private  persons ; 
and  these  acts  have  been  declared  constitutional  and  valid, 
both  as  to  debts  contracted  after  their  passage,  and  also  as  to 
those  entered  into  before  their  passage,  and  when  coined  money 
was  the  only  legal  tender.* 

In  New  York,  a  mortgage  was  executed  before  the  passage 
of  the  legal-tender  act.  After  the  decision  of  the  United  States 
Supreme  Court,^  declaring  the  act  void  as  to  contracts  made 
prior  to  its  passage,  the  grantee  of  the  mortgagor  tendered  pay- 
ment of  the  mortgage  debt  in  legal  tender  notes,  which  the 
mortgagee  refused.  Subsequently  the  United  States  Supreme 
Court  reversed  this  decision,*'  and  it  was  held  by  the  New  York 
court  that  the  tender  did  not  discharge  the  lien  of  the  mortgage, 
it  being  insufficient  according  to  the  law  as  then  declared.^ 

Now  a  mortgage  made  payable  in  coin  of  the  United  States 
may  be  paid  in  United  States  Treasury  notes,  which  are  legal 
tender.® 

1  Durham  v.  Roberts,  33  Ga.  (Supp.)  123. 

''U.  S.  Connt.  art.  1,  sect.  10. 

3  Wilson  V.  Morpan,  30  How.  (N.  Y.)  380. 

*Knox  V.  Lee,  12  Wall.  (U.  S.^.  457;  Parker  v.  Davis,  12  Wall.  (U.  S.)  457; 
Verges  r.  Gibcjney,  38  Mo.  458  ;  Black  v.  Lusk,  69  111.  70 ;  George  r.  CiMicord, 
45  N.  H.  434  ;  Murray  v.  Harrison,  47  Barb.  (N.  Y.)  484  ;  People  v.  Cook,  44 
Cal.  638 ;  ]\Iurray  v.  Gale,  52  Barb.  (X.  Y.)  427 ;  Metropolitan  Bank  v.  Van 
Dyck,  27  N.  Y.  400. 

*  Hepburn  v.  Griswold,  8  AVall.  (U.  S.)  605.  See,  also,  Morrow  v.  Rainey, 
58  111.  357  ;  Chamblin  v.  Blair,  58  111.  385. 

«Knox  V.  Lee,  12  Wall.  (U.  S.)  457. 

^Harris  v.  Jex,  55  N.  Y.  421 ;  14  Am.  Rep.  285. 

8  Verges  r.  Giboney,  38  Mo.  458 ;  Stark  v.  Coffin,  105  Mass.  328 ;  Rodes  v. 
Bronson,  34  N.  Y.  649  ;  Kimpton  v.  Bronson,  45  Barb.  (N.  Y.)  618. 


1096  EIGHTS    OF    PARTIES   BEFORE    DEFAULT. 

§  1135.  In  Bank  Bills. — Bank  notes  are  not  a  lawful  tender 
as  a  general  rule  to  pay  a  debt,'  but  a  tender  of  bank  notes  of  a 
specie-paying  bank,  current  at  the  place  of  payment,  has  been 
held  sufficient/  and  bank  notes  may  be  made  a  sufficient  tender 
by  an  offer  to  change  them  into  specie  at  once.^  So  a  tender  in 
solvent,  current  bank  bills  has  been  held  sufficient,  when  the 
party  to  whom  they  were  tendered  made  no  objection  to  the 
kind  of  money  offered,  but  placed  his  objection  upon  a  differ- 
ent ground,  as  that  it  was  not  enough,  or  upon  some  other 
similar  objection.*     A  bank  check  is  not  a  legal  tender.^ 

The  mortgage  will  be  taken  as  reciting  the  amount  due  as 
to  third  persons,  though  the  bond  will  control  the  amount  as 
between  the  parties  to  the  mortgage.*^ 

A  tender  is  not  objectional  on  account  of  being  a  larger 
sum  than  the  amount  due,^  and  a  demand  for  change  makes 
no  difference,  if  no  objection  be  made  to  it  on  this  account ;  ^ 
but  if  objection  is  made,  then  it  is  not  a  good  tender.^ 

When  the  condition  of  the  mortgage  is  for  the  performance 
of  an  act  or  duty  and  not  for  the  payment  of  money,  an 
offer  to  perform  the  duty  will  have  the  same  effect  that  a  ten- 
der of  money  has  in  other  cases.^" 

§  1136.  Depreciated  or  Uncurrent  Money. — Bank  notes 

not  current  at  their  par  value,  nor  redeemable  on  presentation 
are  not  a  good  tender,  whether  there  be  any  objection  to  them 

^Donaldson  v.  Benton,  4  Dev.  &  B.  (N.  Car.)  L.  435. 

''Augur  r.  Winslow,  Clarke  (N.  Y.),  258. 

3  Austen  v.  Dodwell,  1  Eq.  Cas.  Abr.  318. 

*  Brown  v.  Simons,  44  N.  H.  475 ;  Fosdick  v.  Van  Husan,  21  Mich.  567  ;  Bid- 
dulph  V.  St.  John,  2  Sch.  &  Lef.  521 ;  Lockyer  v.  Jones,  Peake,  180,  n. ;  Pol- 
glass  V.  Oliver,  2  Tyrw.  89 ;  Cooley  v.  Weeks,  10  Yerg.  (Tenn.)  141 ;  Snow  v. 
Perry,  9  Pick.  (Mass.)  539 ;  Saunders  v.  Graham,  Grow.  111. 

5  Grassy  r.  Schneider,  50  How.  Pr.  (N.  Y.)  134. 

6  Beneficial  Society's  Appeal,  75  Pa.  St.  226. 
^  Dean  v.  James,  4  Barn.  &  Ad.  547. 

« Black  r.  Smith,  Peake,  88. 

8  Robinson  v.  Cook,  6  Taunt.  336. 

"•Young  r.  Hunter,  6  N.  Y.  203  ;  Carman  v.  Pultz,  21  N.  Y.  547  ;  Morrison 
V.  Morrison,  4  Hun  (N.  Y.),  410 ;  Holmes  v.  Holmes,  9  N.  Y.  525,  527  ;  Gaven 
V.  Hagen,  15  Cal.  208.  See,  also,  Henry  v.  Raiman,  25  Pa.  St.  354  ;  Rollins  v. 
Thornburg,  22  Iowa,  389. 


\ 


PAYMENT  OF  THE  DEBT.  1097 

or  not.^  When  the  mortgage  specifies  payment  "  in  current 
paper  funds,"  current  notes  are  sufficient  in  making  a  tender, 
though  greatly  depreciated,^  but  if  the  mortgage  had  not  made 
that  specification  the  depreciated  current  notes  would  not  have 
been  sufficient.^ 

Exchange  on  foreign  mone}''  should  be  calculated  according 
to  the  rate  at  the  time  of  trial.*  A  tender  by  the  debtor  of 
notes  that  are  worthless  is  a  nullity.^ 

§  1137.  MoETGAGOR  May  Collect  Over-Paymexts. — If  by 
mistake  or  otherwise  the  mortgagor  tenders  too  much  he  may 
recover  the  over-payment  as  money  received  by  the  mortgagee 
to  his  use.  Thus,  when  the  holder  of  a  mortgage,  upon  pay- 
ment of  it,  extorts  more  than  the  amount  due,  and  the  mort- 
gagor, in  order  to  prevent  a  foreclosure,  pays  the  amount  de- 
manded, he  can  recover  it  from  the  mortgagee.^  Or  if  by 
mistake,  the  mortgagor  pays  an  installment  interest  twice,  he 
may  have  it  credited  upon  the  debt.^  And  when  payments 
have  been  made  on  the  debt,  upon  redemption  from  a  fore- 
closure sale,  he  may  be  allowed  for  them.* 

§  1138.  Costs. — Costs  are  an  incident  to  the  debt,  when  suit 
has  been  legally  begun,  and  a  tender  then  made  must  include 
them.^  And  the  costs  of  a  suit  to  enforce  the  security  or  a  suit 
to  recover  the  debt  are  covered  by  the  mortgage,  and  a  valid 
tender  must  include  them.^"    And  costs  incurred  in  the  prepara- 

1  Ontario  Bank  v.  Lightbody,  13  Wend.  (N.  Y.)  101,  105  ;  Ward  v.  Smith,  7 
Wall.  (U.  S.)  447. 

'^Stalworth  v.  Blum,.  41  Ala.  319. 

^  Lynch  v.  Hancock,  14  S.  Car.  66.  See,  also,  Graves  v.  Hardesty,  19  La. 
Ann.  186 ;  Parker  v.  Broas,  20  La.  Ann.  167 ;  Love  i'.  Johnston,  72  N.  Car.  415 ; 
Tate  V.  Smith,  70  N.  Car.  685. 

*  Lee  V.  Wilcocks,  5  Serg.  &  R.  (Pa.)  48. 

*Roget  V.  Merrit,  2  Caines  (N.  Y.),  117. 

sWindbiel  v.  Carroll,  16  Him  (N.  Y.),  101. 

^Jackson  v.  McKnight,  17  Hun  (N.  Y.),  2. 

^Spottswood  V.  Herrick,  22  Minn.  548. 

» Marshall  v.  Wing,  50  Me.  62;  Weeks  v.  Baker,  152  Mass.  20;  Maynard  v. 
Hunt,  5  Pick.  (INIass.)  240 ;  Cox  v.  Wheeler,  7  Paige  (N.  Y.),  248 ;  Jones  v. 
Phelps,  2  Barb.  Ch.  (N.  Y.)  440. 

"Hartley  v.  Tatham,  1  Keyes  (N.  Y.),  222;  Rawson  v.  Hall,  56  Me.  142; 
Hurd  V.  Coleman,  42  Me.  182. 


1098  RIGHTS    OP    PARTIES    BEFORE    DEFAULT. 

tion  for  foreclosing  a  sale  mortgage  must  also  be  included  in 
the  tender/ 

After  a  valid  tender,  if  the  mortgagee  goes  ahead,  all  costs 
subsequently  made  he  must  pay.^ 

§  1139.  Production  of  Money. — To  make  the  tender  valid 
the  production  of  the  money  is  necessary,^  unless  the  production 
is  dispensed  with  by  the  express  declaration  or  an  equivalent 
act  of  the  creditor.*  The  money  must  be  produced  as  the  sight 
of  it  might  induce  the  creditor  to  yield  and  accept  it.^ 

It  is  not  enough  to  show  the  creditor  that  the  debtor  has  the 
money  in  his  pocket,  and  for  the  debtor  to  inform  him  that  the 
money  is  ready  for  him.  The  creditor  is  not  bound  to  say  that 
he  will  take  the  money  until  it  is  actually  produced  and  offered 
to  him.*^ 

Article  2. 

Actual  Payment. 

§  1140.  Payment  in  Chattels.  ?  1148.  Payment  as  to  Surety. 

I  1141.  By  Whom  Made.  §  1149.' Place  of  Payment. 

§1142.  By  Purchaser  Taking  Subject     ^  lloO.  Mortgagee   Purchasing  at  the 

to  the  Mortgage.  Sale  of  the  Mortgagor's  As- 

§  1143.  By  Junior  Mortgagee.  signee  in  Insolvency. 

§  1144.  To  Whom  Made.  ?  1151.  Assignee  of  Mortgage  and  Debt. 

§  1145.  Payment    to  Agent    of  the     ^  1152.  Assignment  of  Mortgage  and 

Mortgagee.  Note  as  Collateral  Security. 

§  1146.  Joint  Mortgagees,  ^  1153.  Equitable  Assignee. 

§  1147.  Several  Mortgagees.  |  1154.  Receiver. 

§  1140.  Payment  in  Chattels. — Payment  must  ordinarily 
be  made  in  money.  But  delivery  of  other  things,  if  accepted 
as    payment    by  the   creditor,  will    discharge    the   debt    in 

1  Allen  V.  Bobbins,  7  R.  I.  33. 

2  Columbian  Build.  Asso.  v.  Crump,  42  Md.  192;  Marshall  v.  Wing,  50  Me. 
62 ;  Robinson  v.  Leavitt,  7  N.  H.  73,  93 ;  Cliff  v.  Wadsworth,  2  Younge  &  C. 
Ch.  598,  604 ;  Bailey  v.  Metcalf,  6  N.  H.  156. 

^Ladd  V.  Patten,  1  Cranch  C.  C.  263 ;  Walker  v.  Brown,  12  La.  Ann.  266. 

■*  Englander  v.  Rogers,  41  Cal.  420  ;  Camp  v.  Simon,  34  Ala.  126 ;  Thomas  v. 
Evans,  10  East,  101 ;  Leatherdale  v.  Sweepstone,  3  Carr.  &  P.  342 ;  Sands  v. 
Lyon,  18  Conn.  18  ;  Strong  v.  Blake,  46  Barb.  (N.  Y.)  227. 

"s  Finch  V.  Brook,  1  Bing.  N.  C.  253. 

^Bakeman  v.  Pooler,  15  Wend.  (N.  Y.)  637. 


PAYMENT  OF  THE  DEBT.  1099 

respect  to  which  it  is  made.^  Thus  a  mortgage  debt  may  be 
discharged  by  articles  of  merchandise,  or  in  any  other  personal 
property,  tendered  and  received  for  that  purpose.^ 

But  where  a  mortgage  is  given  as  collateral  security  for  notes 
and  drafts,  and  not  in  satisfaction  thereof,  the  latter  will 
not  be  extinguished  by  the  former?  So,  the  transfer  of 
the  mortgage  of  a  third  person  for  a  pre-existing  debt  is 
not  a  payment  of  the  indebtedness,  unless  it  is  expressly  so 
agreed/ 

When  a  mortgage  is  given  to  secure  the  payment  of  the  pur- 
chase-money, and  subsequently  a  draft  is  given  for  the  amount 
and  dishonored,  this  is  not  an  extinguishment  of  the  mort- 
gage, but  only  a  mode  of  payment,  and,  if  the  holder  uses 
due  diligence  and  cannot  collect,  he  may  resort  to  his  mort- 
gage.' 

And  an  agreement  between  the  mortgagor  and  the  mort- 
gagee that  a  certain  debt  due  from  the  latter  shall  be  applied 
to  the  mortgage  debt,  operates  as  a  payment  of  such  debt, 
though  such  payment  is  not  indorsed  on  the  mortgage  as 
agreed.'' 

And  a  surety  may  redeem  from  a  mortgage  sale,  and  thus 
acquire  the  judgment  for  which  he  was  security,  and  hold  it 
for  his  own  protection  and  this  does  not  extinguish  the  debt 
as  to  him.^ 

Though  mortgagees  were  instructed  by  the  mortgagor  to  ap- 
propriate to  the  mortgage  debt  the  proceeds  of  a  sale  of  cer- 
tain goods  shipjied  them,  yet  where  the  mortgagor  subsequently 
drew  on  them  for  such  proceeds,  the  instructions  first  given 
are  thus  revoked  to  the  extent  of  the  drafts  to  which,  if  ac- 

1  Waugh  V.  Montgomery,  67  Ala.  573 ;  Rhinesmith  r.  Slote,  44  N.  J.  Eq.  578  ; 
Benson  v.  Tilton.  58  X.  H.  137  ;  Bean  v.  Bean,  28  S.  Car.  G07  ;  Green  v.  Fry, 
93  N.  Y.  353  ;  2  Story  on  Cont.,  sect.  1.342 ;  Tinsley  v.  Ryon,  9  Tex.  405. 

2  Ketehiim  v.  Gulick  (N.  J.),  20  At.  Rep.  487. 

3  Averill  v.  Louekn,  6  Barb.  (N.  Y.)  470. 
^Coonley  v.  Coonley,  Hill  &  Denio  (N.  Y.),  312. 
s  Be  Yampert  r.  Brown,  28  Ark.  166. 
«Holcomb  V.  Campbell,  118  N.  Y.  46. 

^  Bleckman  v.  Butler,  77  Iowa,  128.  See,  also,  Martin  v.  Central  L.  &  T.  Co., 
78  Iowa,  504. 


1100  RIGHTS    OF    PARTIES    BEFORE   DEFAULT. 

cepted  by  the  mortgagees,  the  proceeds  of  the  sale  may  be 
ajDj^Ued/ 

§  1141.  By  Whom  Made. — When  the  mortgagor  still  holds 
the  land  and  the  mortgagee  has  not  assigned  the  mortgage,  the 
former  should  tender  the  money  to  the  latter  ;  and  the  mort- 
gagor should  not  pay  unless  the  note  or  bond  and  mortgage 
are  produced,  in  order  to  guard  against  a  secret  assignment  of 
the  debt  or  a  formal  assignment  of  the  mortgage.^  However, 
if  the  negotiable  note  be  overdue  and  the  mortgagor  has  no 
notice  of  the  assignment,  he  will  be  protected.^  But  the  mort- 
gagor cannot  compel  an  assignee  of  a  mortgage  to  receive  pay- 
ment of  the  amount  due  and  ex^jenses  from  a  third  person  and 
to  assign  the  mortgage  to  the  latter.* 

Nor  can  a  son  make  payment  of  his  mortgage  to  his  father, 
by  services  rendered  to  his  father  in  his  last  sickness,  unless 
such  was  the  agreement  duly  proved.^ 

Cash  to  pay  a  mortgage  debt  was  left  in  the  hands  of  a  third 
party  by  the  mortgagor.  In  collecting  this  sum  the  mortgagee 
accepted  the  third  party's  note  in  lieu  of  a  part  of  the  cash  and 
purposely  concealed  this  fact  from  the  mortgagor  for  a  period  of 
ten  years.  It  was  held  that  the  conduct  of  the  mortgagee  was  a 
continuing  admission  to  the  mortgagor  that  he  had  received  the 
cash  deposited  on  his  mortgage  and  that  he  was  estopped  from 
asserting  rights  inconsistent  with  such  admissions." 

And  the  payment  of  a  bond  secured  by  a  mortgage  by  the 
mortgagor  to  the  mortgagee,  without  notice  of  an  unrecorded 
assignment,  defeats  the  claim  of  the  assignee  and  entitles  the 
mortgagor  to  the  mortgage's  cancellation  and  discharge.^ 

1  Kennedy  v.  Davis,  82  Ga.  210. 

^Keohane  v.  Smith,  97  111.  156;  Fassett  v.  Mulock,  5  Colo.  466;  "Williams  •?;. 
Paysinger,  15  S.  Car.  171 ;  Windle  v.  Bonebrake,  23  Fed.  Rep.  165  ;  Lee  v. 
Clark,  89  Mo.  553 ;  Burhans  v.  Hutcheson,  25  Kan.  625 ;  Brayley  v.  Ellis,  71 
Iowa,  155. 

3  Hodgdon  r.  Naglee,  5  Watts.  &  S.  (Pa.)  217 ;  Clark  v.  Ingelstrom,  51  How. 
Pr.  (N.  Y.)  407. 

*McCulla  V.  Beadleston  (R.  I.),  20  At.  Rep.  11. 

^  Portz  r.  Schantz,  70  Wis.  497. 

«  Rhinesmith  v.  Slote,  44  N.  J.  Eq.  578. 

^  Ingalls  V.  Bond,  66  Mich.  338 ;  Goodale  v.  Patterson,  51  Mich.  535. 


PAYMENT  OF  THE  DEBT.  1101 

A  subsequent  ratification  by  the  mortgagor  of  payment  made 
by  a  third  person  without  his  previous  request  is  equivalent  to 
an  original  authority  to  make  payment/ 

§  1142.  By  Purchaser  Taking  Subject  to  the  Mort- 
gage.— But  when  the  land  is  taken  subject  to  the  mortgage,  as 
respects  the  land,  it  would  be  for  the  purchaser  and  not  for 
the  seller  or  mortgagor  to  pay  the  same.^ 

And  when  a  prior  mortgage  has  been  satisfied  of  record,  the 
recorded  certificate  of  satisfaction  not  showing  by  whom  pay- 
ment was  made,  a  purchaser  may  assume  that  it  was  made  by 
the  person  upon  whom  rested  the  primary  duty  to  make  it.^ 

Where  the  purchaser  conveys  the  premises  in  terms  "  sub- 
ject "  to  the  mortgage  to  the  jjresident  of  a  corporation,  which 
is  the  mortgagee,  the  corporation  paying  the  purchase  price 
and  entering  into  possession  and  enjoyment  of  the  property, 
but  causing  the  conveyance  to  be  made  to  its  president  for  the 
purpose  of  preventing  the  merging  of  the  mortgage  in  the  es- 
tate purchased,  the  land  thus  purchased,  subject  to  the  mort- 
gage, becomes  the  primary  fund  for  its  payment,  and,  the 
mortgagee  having  thus  beneficially  acquired  the  property, 
although  it  may  not  hold  the  legal  title,  the  transaction  will 
be  operative  as  a  payment  of  the  mortgage,  and  the  corporation 
cannot  recover  the  mortgage  debt  in  an  action  against  the 
mortgagor."* 

The  purchaser  under  such  conditions  ctamot  be  allowed 
thus  to  acquire  and  hold  the  property,  and  at  the  same  time 
to  recover  against  the  mortgagor  the  debt  for  the  payment  of 
which  the  land,  in  its  hands,  had  been  made  primarily  charge- 
able.^ 

1  Commercial  Bank  v.  WaiTen,  15  N.  Y.  580;  Heermans  v.  Clarkson,  64  N. 
Y.  171.    See,  also,  Coursin  r.  Shrader,  14(5  Pa.  St.  475. 

2  Cmiiberland  ?'.  Codrington,  3  Johns.  Ch.  (X.  Y.)  229,  262;  Atherton  v. 
Toney,  43  Ind.  211 ;  Guernsey  v.  Kendall,  55  Vt.  201 ;  Bunch  v.  Grave,  111 
Ind.  351 ;  Dinglodein  v.  Third  Avenue  R.  Co.,  37  N.  Y.  575 ;  Belmont  v.  Co- 
man,  22  N.  Y.  438 ;  Gerdine  v.  Menage,  41  Minn.  417. 

^  Ahern  v.  Freeman,  46  Minn.  156. 

*  National  Invest.  Co.  v.  Nordin  (Minn.),  52  N.  W.  Rep.  899. 
5  Baker  v.  Loan  Co.,  36  Minn.  185 ;  Merritt  r.  Byers,  46  Minn.  74,  78  ;  Dicka- 
Bon  V.  Williams,  129  Mass.  182. 


1102  EIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

§  1143.  Junior  Mortgagee. — Where  a  second  mortgagee 
buys  in,  at  the  foreclosure  sale  of  the  first  mortgagee,  the  land, 
this  is  a  satisfaction  of  that  mortgage,  but  not  of  the  second 
unless  the  amount  paid  at  the  foreclosure  sale  is  sufficient  to 
cover  the  amount  due  on  the  second.^ 

An  agent,  to  procure  a  loan  upon  a  mortgage,  received  the 
money  from  the  mortgagee,  but  in  violation  of  his  agreement 
with  the  mortgagor,  retained  it  in  his  hands  for  some  months 
before  applying  it  to  the  satisfaction  of  a  prior  indebtedness  of 
the  mortgagor.  In  such  case,  even  if  the  agent  were  the 
agent  of  the  mortgagee  and  not  of  the  mortgagor,  the  latter 
was  not  entitled  to  a  credit  upon  the  mortgage  on  which  the 
new  loan  was  obtained  of  interest  for  the  time  the  money  was 
held  in  the  hands  of  the  agent.^ 

Subsequent  parties  cannot,  as  a  general  rule,  redeem  the  first 
mortgage  and  hold  it  against  a  second  mortgagee.  Equity  will 
regard  it  as  a  payment.^  And  where  the  grantee  in  a  deed, 
which  is  in  fact  a  mortgage,  mortgages  part  of  the  land  con- 
ve3^ed,  and  such '  mortgage  is  foreclosed  in  which  both  the 
grantor  and  grantee  are  made  parties,  the  grantor  should  have 
payment  on  the  debt  secured  by  the  deed  for  the  amount  real- 
ized upon  the  foreclosure.* 

§  1144.  To  Whom  Made. — Of  course  a  payment  to  the 
mortgagee  himself  discharges  the  debt.  And  generally,  pay- 
ment of  a  whole  debt  to  one  of  several  obligees  or  creditors  is 
payment  to  all.^ 

But  if  the  mortgagor  pays  the  amount  of  the  debt  to  one 
who  he  knows  has  not  the  possession  of  the  papers,  but  who 
undertakes  merely  to  procure  a  release  from  the  mortgagee, 
the  mortgagor  assumes  the  risk  of  the  release  being  procured 
in  that  manner.'' 

1  Belleville  Sav.  Bank  v.  Reis,  34  111.  App.  495. 

2  Sergeant  v.  Aberle,  134  Pa.  St.  613.  See,  also,  Pepper  v.  Cairns,  133  Pa.  St. 
114 ;  Sergeant  v.  Martin,  133  Pa.  St.  122. 

^  Lewis  V.  Hinman,  56  Conn.  55. 

^Turman  v.  Forrester,  55  Ark.  336. 

5  Morrow  v.  Starke,  4  J.  J.  Marsh.  (Ky.)  367, 

«  Lane  v.  Duchac,  73  Wis.  646. 


I 


PAYMENT  OF  THE  DEBT.  1103 

When  a  person  other  than  the  mortgagee  takes  the  money 
and  discharges  the  mortgage,  subsequent  purchasers  are  bound 
to  inquire  what  authority  he  had  to  take  payment  or  discharge 
the  mortgage.^ 

The  mortgagee  cannot  be  compelled  to  divide  his  debt  and 
security  into  portions  ;  ^  and  the  right  to  claim  that  the  whole, 
and  not  a  part,  shall  be  redeemed,  is  a  right  which  appertains 
to  the  mortgagee,  and  not  to  the  mortgagor.^  Thus,  several 
pieces  of  land  were  sold  under  a  mortgage  foreclosure  to  the 
mortgagee.  The  owner  of  one  of  the  pieces  afterward  sued  to 
redeem,  on  the  ground  that  he  was  not  a  party  to  the  fore- 
closure. In  such  case  the  mortgagee  can  elect  whether  the 
plaintiff  shall  pay  the  entire  amount  due  under  the  mortgage, 
and  so  redeem  all  the  property  sold,  or  shall  pay  a  propor- 
tional part  of  that  amount,  and  redeem  merely  the  piece  of 
which  he  is  the  owner.* 

§  1145.  Payment  to  Agent  of  the  Mortgagee. — An  author- 
ized agent  can  take  the  money  due  on  the  mortgage  debt. 
Thus,  where  the  entire  negotiation  and  collecting  of  mortgage 
loans  are  intrusted  to  an  agent,  the  mortgagor  not  having  any 
intercourse  with  the  agent's  principal,  paj^ment  on  demand 
to  the  agent  discharges  the  mortgage,  though  the  bond  was  by 
its  terms  payable  elsewhere  at  the  time  of  payment,  and  the 
agent  had  not  in  his  possession  the  bond  and  mortgage.^ 

But  when  an  agent  has  only  the  right  to  collect  the  interest 
as  it  becomes  due,  though  he  has  in  his  possession  the  bond 
and  mortgage,  yet  he  has  no  right  to  collect  the  principal  and 
discharge  the  mortgage."     But  the  possession  of  the  bond  and 

^  Foster  v.  Paine,  03  Iowa,  85  ;  Cerney  v.  Pawlot,  66  Wis.  202  ;  Harris  v. 
Cook,  28  N.  J.  Eq.  345 ;  Williams  v.  ravfintier,  15  S.  Car.  171 ;  Smith  v.  Kidd, 
68  N.  Y.  130 ;  Tradesmen's  Build.  Asso.  v.  Thompson,  31  N.  J.  Eq.  530 ;  Reeves 
V.  Hayes,  95  Ind.  521. 

^  Green  v.  Dixon,  9  Wis.  532. 

3  Robinson  ;;.  Fife,  3  Ohio  St.  551. 

MVilson  V.  Tarter  (Ore^.),  30  Pac.  Rep.  499. 

*  Kent  V.  Congdon,  33  Fed.  Rep.  228  ;  Sessions  v.  Kent,  75  Iowa,  GDI ;  Har- 
bach  V.  Colvin,  73  Iowa,  038. 

« Schermerhorn  v.  Farley,  58  Hun  (N.  Y.),  66. 


1104  RIGHTS    OF    PARTIES    BEFORE   DEFAULT. 

mortgage  by  the  mortgagee's  attorney  will  be  a  presumption 
that  he  has  the  right  to  collect  the  money  due  thereon.' 

So  a  legatee  who  has  possession  of  the  bond  and  mortgage, 
and  is  entitled  to  the  interest  for  life,  is  presumed  to  be  author- 
ized to  receive  the  interest.^ 

But  if  the  papers  are  withdrawn  from  the  agent,  then  no 
presumption  exists  that  he  is  authorized  to  receive  payment 
of  the  mortgage,^  except  where  the  actions  of  the  mortgagee 
have  been  such  to  estop  him  from  denying  the  agency.* 

But  the  attorney  or  agent  cannot  exceed  his  authority.  Thus, 
he  cannot  satisfy  a  mortgage  unless  the  debt  is  paid  ;  ^  nor  can 
he  extend  the  payment  of  the  debt  without  authority  from  his 
principal.'^ 

The  general  rule  is  well  settled,  that  one  paying  to  an  agent 
the  amount  due  upon  negotiable  paper,  when  the  agent  does 
not  have  the  papers  in  his  possession,  does  so  at  his  peril ;  ^ 
and  it  has  often  been  held  that  authority  of  an  agent  to  secure 
the  interest  on  a  note  does  not  authorize  one  to  pay  him  the 
principal.^  So  it  may  be  laid  down  as  a  general  rule  that,  if  a 
debtor  owing  money  on  a  written  security  pays  to  or  settles 
with  another  as  an  agent,  it  is  his  duty,  at  his  peril,  to  see  that 
the  person  thus  paid  or  settled  with  is  in  possession  of  the 

1  Donaldson  v.  Wilson,  79  Mich.  181 ;  Verdine  v.  Olney,  77  Mich.  310;  Lee 
V.  Clark,  89  Mo.  553 ;  Hagerman  v.  Sutton,  91  Mo.  519  ;  Harbach  v.  Colvin,  73 
Iowa,  638  ;  Williams  v.  Walker,  2  Sand.  Ch.  (N.  Y.)  325 ;  VanKeuren  v.  Cor- 
kins,  66  N.  Y.  77  ;  Cox  v.  Cutter,  28  N.  J.  Eq.  13 ;  Smith  v.  Kidd,  68  N.  Y. 
130 ;  Curtis  v.  Drought,  1  Molloy,  487  ;  Gerard  v.  Baker,  1  Ch.  Cas.  9-4 ;  Henn 
V.  Conisby,  1  Ch.  Cas.  93,  n.;  Wostenholme  v.  Davis,  2  Freem.  Ch.  289. 

=*  Giddings  v.  SeAvard,  16  N.  Y.  365. 

3]\Iegary  v.  Funtis,  5  Sandf.  (N.  Y.)  376;  Cox  r.  Cutter,  28  N.  J. 
Eq.  13. 

*  Kent  V.  Congdon,  33  Fed.  Rep.  228 ;  Haines  v.  Pohlmann,  25  N.  J.  Eq.  179  ; 
Smith  V.  Kidd,  68  N.  Y.  130 ;  Security  Co.  v.  Richardson,  33  Fed.  Rep.  16 ; 
Tooker  v.  Sloan,  30  N.  J.  Eq.  394 ;  Mallory  v.  Mariner,  15  Wis.  172 ;  Hawkes 
V.  Inn.  Co.,  11  Wis.  188. 

^Hutchings  v.  Clark,  64  Cal.  228. 

"Hoyman  v.  Beringer,  1  Abb.  N,  C.  (N.  Y.)  315. 

T  Haines  v.  Pohlmann,  25  N.  J.  Eq.  179 ;  Smith  v.  Kidd,  68  N.  Y.  130 ;  Brewster 
V.  Carncs,  103  N.  Y.  556 ;  Meehem  on  Ag.,  sect.  373. 

« IMeehem  on  Ag.,  sect.  379 ;  Fisher  v.  Lodge,  50  Iowa,  459  ;  Draper  v.  Rice, 
56  Iowa,  114. 


r 


PAYMENT  OF  THE  DEBT.  1105 

security.  If  not  thus  in  possession,  the  debtor  must  show  that 
the  person  to  whom  he  pays  or  with  whom  he  settles  has  spe- 
cial authority,  or  has  been  represented  by  the  creditor  to  have 
such  authority,  although  for  some  reason  not  in  possession  of 
the  security.^  If  there  are  no  facts  in  the  case  from  which  the 
mortgagor  has  a  right  to  suppose  that  the  agent  has  authority 
to  receive  the  money  on  the  mortgage  for  the  mortgagee,  the 
mortgagee  is  not  responsible  for  the  payment.^ 

§  1146.  Joint  Mortgagees. — When  two  or  more  mortgagees 
hold  a  mortgage  jointly  for  a  joint  debt,  payment  to  either  is  suf- 
ficient ;  ^  and  upon  the  death  of  one  of  the  joint  mortgagees, 
the  survivor  has  the  exclusive  right  to  receive  payment.*  As 
between  the  mortgagees  of  the  joint  debt,  payment  to  one 
makes  him  a  trustee  for  the  benefit  of  the  other  who  has  an 
interest  in  the  payment  received. 

And  when  the  joint  mortgage  is  taken  only  in  the  name  of 
one  of  the  joint  loaners,  who  dies,  the  survivor  can  legally 
take  payment.^ 

On  the  other  hand,  the  joint  obligors  owe  to  each  other  the 
exercise  of  good  faith  for  their  joint  interest,  and  these  con- 
fidential relations  existing,  each  owes  a  duty  to  the  others  to 
disclose  to  them  anything  affecting  the  general  interest,  and 
each  will  be  held,  in  matters  concerning  the  payment  and 
discharge  of  the  general  liability,  to  act  and  speak  for  all.^ 

§  1147.  Several  Mortgagees. — If  the  mortgage  secures 
notes  which  are  held  by  the  mortgagees  separately,  all  of  them 
must  receive  payment,  and  one  cannot  act  for  the  other  under 

^  Tappan  v.  Morseman,  18  Iowa,  500. 

*  Security  Co.  w.  Graybeal  (Iowa),  52  N.  W.  Rep.  407.  See,  also,  Ilippee  v. 
Pond,  77  Iowa,  236 ;  Artley  v.  Morrison,  73  Iowa,  132. 

'Wright  V.  Ware,  58  Ga.  150;  Carman  v.  Pultz,  21  N.  Y.  547,  550;  Bowes  v. 
Seeger,"8  Watts  &  S.  (Pa.)  222  ;  Goodwin  v.  Richardson,  11  Mass.  469 ;  Stuy- 
vesant  v.  Hall,  2  Barb.  Ch.  (N.  Y.)  151. 

*  People  V.  Keyser,  28  N.  Y.  226,  235 ;  Gilson  v.  Gilson,  2  Allen  (Mass),  115 ; 
Blake  v.  Sanborn,  8  Gray  (Mass.),  154. 

=  Wall  V.  BisseU,  125  U.  S.  382. 
6  Green  v.  Pick,  121  Pa.  St.  130. 
70 


1106  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

such  a  mortgage  without  authority.^  But  one  of  the  mort- 
gagees may  make  the  other  his  agent  in  receiving  payment 
from  the  mortgagor  and  he  is  bound  thereby.^ 

And  tlie  fact  the  mortgage  secures  notes  owned  by  different 
mortgagees  is  sufficient  to  put  a  subsequent  purchaser  upon 
inquiry  and  charge  him  with  notice  of  the  separate  interests 
of  the  mortgagees.^  One  of  the  owners  in  severalty  of  the 
mortgage  debt  may  merge  his  own  interest  without  affecting 
tlie  others.* 

§  114S.  Payment  as  to  Surety. — The  surety  is  entitled  to 
have  the  instrument  whereby  he  binds  himself  for  the  j)rin- 
cipal's  liability  strictly  construed,  and  any  agreement  under 
which  the  time  of  principal's  performance  is  enlarged,  with- 
out consent  of  the  surety,  releases  him.^ 

But  where  a  mortgage,  given  to  secure  the  debt  of  one  who 
does  not  own  the  land,  provides  that  the  holder  of  the  note 
may  extend  the  time  of  payment,  on  the  maker's  executing 
coupons  for  interest  to  accrue  during  such  extension,  the  holder 
of  the  notes  may  extend  it  and  fix  the  rate  of  interest  which 
such  coupons  shall  bear  after  maturity  without  further  consent 
of  the  mortgagor.^ 

Where  a  purchaser,  after  buying  the  property  at  foreclosure 
sale,  refuses  to  take  the  property,  claiming  that  the  title  was 
defective,  the  sureties  on  the  bond  are  not  thereby  discharged, 
and  may  be  compelled  to  pay  the  debt.^ 

§  1149.  Place  op  Payment. — The  payment  must  be  made 
at  the  place  stipulated.  But  this  may  be  waived  where  the  con- 
duct of  the  payee  indicates  artfulness,  trickery,  or  stratagem  in 
avoiding  such  satisfaction.^ 

1  Burnett  v.  Pratt,  22  Pick.  (Mass.)  556. 

^  Hubbard  v.  Jasinski,  46  111.  160. 

3  Lynch  v.  Hancock,  14  S.  Car.  66. 

*  Loomer  v.  Wheelwright,  3  Sand.  Ch.  (N.  Y.)  135. 

^  Burson  v.  Andes,  83  Va.  445. 

epenneson  v.  Savage,  130  111.  352. 

7  Howell  County  v.  Wheeler  (Mo.),  18  S.  W.  Rep.  1080. 

8  Noyes  v.  Clark,  7  Paige  (N.  Y.),  179 ;  Broderick  v.  Smith,  26  Barb.  (N.  Y.)  539. 


PAYMENT  OF  THE  DEBT.  1107 

Thus,  where  a  mortgage  securing  several  instruments  stipu- 
lates tliat  if  one  of  these  remains  sixty  days  overdue  the  whole 
amount  shall  become  due  and  payable  at  the  mortgagee's  elec- 
tion, the  mortgagee  must,  if  he  knows  that  the  mortgagor  has 
the  installment  ready  at  its  usual  place  of  payment,  and  requires 
payment  at  the  place  stipulated  in  the  mortgage,  so  notify  the 
mortgagor,  and  if  he  does  not  do  so,  and  his  agent,  at  the  usual 
place  of  payment,  refuses  to  receive  payment,  except  on  certain 
conditions,  the  mortgagee  waives  the  right  of  payment  elsewhere, 
and  cannot  in  default  thereof  treat  the  whole  debt  as  due.^ 

§  1150.  Mortgagee  Purchasing  at  the  Sale  of  the  Mort- 
gagor's Assignee  in  Insolvency. — The  purchase  of  the  ecjuity 
of  redemption  in  land  by  the  mortgagee  at  the  sale  by  the 
mortgagor's  assignee  in  insolvency,  does  not  amount,  in  law, 
to  a  payment  of  the  mortgage  debt,  nor  is  the  mortgagee  es- 
topped to  sue  for  the  balance  of  the  debt.^ 

§  1151.  Assignee  of  Mortgage  and  Debt. — The  payment 
of  the  bond  by  the  mortgagor  to  the  mortgagee,  without  notice 
of  an  unrecorded  assignment,  defeats  the  claim  of  the  as- 
signee, and  entitles  the  mortgagor  to  its  cancellation.^ 

The  performance  of  an  agreement  by  a  mortgagor  to  pay 
the  mortgagee  a  sum  equal  to  the  amount  of  his  mortgage 
debt,  if  he  would  assign  the  mortgage  to  the  mortgagor's  at- 
taching creditor  as  security  instead  of  the  attachment,  does 
not  extinguish  the  mortgage ;  it  can  be  enforced  by  the  cred- 
itor, althougli  for  temporary  purposes  he  had  re-assigned  it  to 
the  mortgagee,  who  afterward  assigned  it  Ijack  again.*  And 
the  mortgagee  can  be  the  agent  of  the  assignee  to  collect  in- 
terest and  principal,  which  must  be  credited  on  the  debt,^ 

» Union  Mutual  Ins.  Co.  v.  Union  ^Nlill  Co.,  37  Fed.  Rep.  280. 

2  Clark  r.  Jackson,  64  N.  IT.  388;  Murphy  i;.  Elliott,  6  Blackf.  (Ind.)  482; 
Lydecker  v.  Bogert,  38  N.  J.  Eq.  136 ;  Findlay  v.  Hosmer,  2  Conn.  350  ;  Post  v. 
Tradesman's  Bank,  28  Conn.  420. 

^  Ingalls  V.  Bond,  66  Mich.  338 ;  Goodale  v.  Patterson,  51  Mich.  535.  See 
Williams  v.  Keyes  (Mich.),  51  N.  W.  Rep.  520. 

*Sheddy  v.  Geran,  113  Mass.  378. 

6  Emery  v.  Gordon,  33  N.  J.  Eq.  447. 


1108        RIGHTS  OF  PARTIES  BEFORE  DEFAULT. 

The  mortgagor  may  pay  or  settle  with  a  person  having  the 
apparent  authority  to  receive  satisfaction  of  the  mortgage, 
and  a  payment  thus  made  will  prevail  against  one  having  a 
secret,  concealed,  and  reserved  interest  in  the  mortgage/ 

After  the  mortgagor  has  notice  of  the  assignm^ent,  he  cannot 
then  deal  lawfully  with  the  mortgagee  in  making  payment  of 
the  debt.' 

A  stranger  cannot  receive  payment  of  a  mortgage  debt.^ 

§  1152.  Assignment  of  Mortgage  and  Note  as  Collat- 
eral Security. — Where  the  debt  has  been  paid,  and  the  note 
and  mortgage  were  transferred  as  collateral  security,  and  subse- 
quent satisfaction  of  the  mortgage  upon  the  records  by  the  mort  ■ 
gagee,  it  is  a  valid  payment  although  the  mortgagor  when  he 
paid  the  note  knew  that  the  instrument  had  been  so  transferred.'* 

But  the  pledgee  has  a  right  to  foreclose  such  mortgage  if  the 
debt  is  not  paid,^  or  if  paid  to  the  payee,  when  the  notes  and 
mortgage  have  not  been  cancelled  and  remain  in  the  hands 
of  the  pledgee.'' 

§  1153.  Equitable  Assignee. — A  mortgagee  who  has  as- 
signed the  mortgage  note,  which  was  negotiable,  to  an  innocent 
purchaser  before  due,  as  security  for  goods  sold  on  the  credit 
of  the  paper,  has  no  right  to  enter  satisfaction,  although  the 
note  was  given  without  consideration.^ 

After  the  note  is  assigned  by  indorsement,  the  assignor  has 
no  right  to  discharge  the  mortgage.^ 

If  the  mortgagor,  after  the  notice  of  such  assignment,  pays 
the  debt  to  the  mortgagee,  he  does  it  at  his  peril.^     But  the 

1  Mason  v.  Beach,  55  AVis.  607  ;  Mallory  v.  Mariner,  15  Wis.  172 ;  Jackson  v. 
Crafts,  18  Johns.  (N.  Y.)  110. 
"^  Lehman  v.  McQueen,  65  Ala.  570 ;  Puttus  v.  McGowan,  37  Hun  (N.  Y.),  409. 
^  De  Laureal  v.  Kemper,  9  Mo.  App.  77. 

*  Seymour  v.  Laycock,  47  Wis.  272. 

*  Reynolds  v.  Rees,  23  S.  Car.  438 ;  Norton  v.  Warner,  3  Edw.  (N.  Y.)  106 ; 
Slee  V.  Manhattan  Co.,  1  Paige  (N.  Y.),  48. 

«Hoflfacker  ;-.  Bank  (Md.),  23  Atl.  Rep.  579. 

■f  Gordon  v.  Mulhare,  13  Wis.  22. 

8  Cutler  V.  Haven,  8  Pick.  (Mass.)  400 ;  Torrey  v.  Deavitt,  53  Vt.  331. 

^Morris  v.  Bacon,  123  Mass.  58;  Welch  v.  Goodwin,  123  Mass.  71. 


PAYMENT  OF  THE  DEBT.  1109 

mortgagee  may  make  a  valid  discharge  of  the  mortgage  when 
empowered  by  the  assignee/ 

§  1154.  Receiver. — A  receiver  is  authorized  to  execute  upon 
payment,  formal  satisfaction  and  discharge  of  mortgages  in 
his  hands,  as  such  officer  has  authority  to  receive  payment  of 
the  amount  secured  by  such  mortgages,  although  the  sum  be 
not  due  at  the  time  of  payment.^ 

Article  3. 
Rights  of  Administrators  and  Executors. 

^  1155.  The     Appointment    of     the  g  1159.  Purchasing    from    His    Own 

Mortgagee  as  Administrator.  Funds. 

§  1156.  Taking  Bond  from  Heir.  |  1160.  Payment  to  Executor. 

^  1157.  Purchase  of  Mortgage  by  Ex-  |  1161.  Foreign  Executor  or  Admin- 

ecutor.  istrator. 
I  1158.  Mortgagor    Paying  Mortgage 

as  Executor. 

§  1155,  The  Appointment  of  the  Mortgagee  as  Adminis- 
trator.— The  appointment  of  a  mortgagee  as  administrator 
of  the  estate  of  the  debtor  will  not  extinguish  the  mortgage  if 
no  funds  come  into  his  hands  which  can  be  applied  to  the  pay- 
ment of  the  mortgage  debt.^  And  although  a  release  of  a  mort- 
gage will  be  voidable  if  made  by  an  executor  with  the  knowl- 
edge of  the  mortgagor  upon  a  consideration  moving  only  to 
him  personally  and  not  to  the  estate,  yet  it  is  not  void,  and 
the  mortgage  cannot  be  enforced  without  first  avoiding  the 
release.* 

§  1156.  Taking  Bond  from  Heir. — An  heir,  in  order  to 
prevent  the  sale  of  mortgaged  land,  gave  a  bond  for  the  pay- 
ment of  the  debt  and  took  an  assignment  of  the  mortgage.    It 

1  Beal  1'.  Stevens,  72  Cal.  451. 

"  Heermans  v.  Clarkson,  64  N.  Y.  171. 

3  Bemis  v.  Call,  10  Allen  (Mass.),  512. 

*Weir  V.  Mosher,  19  Wis.  316.  See,  also,  Jackson  r-.  Shaffer,  11  Johns.  (N. 
Y.)  513 ;  AVheeler  v.  Wheeler,  9  Cow.  (N.  Y.)  34  ;  Bogert  r.  Hortell,  4  Hill 
(N.  Y.),  492;  Douglass  v.  Satterlee,  11  Johns.  (N.  Y.)  16;  Murray  v.  Blatch- 
ford,  1  Wend.  (N.  Y.)  583. 


1110  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

was  held  that  the  bond  operated  as  a  discharge  of  the  mort- 
gage.^ It  seems  in  such  case  the  bond  is  one  to  save  the 
estate  harmless,  and  is  equivalent  in  its  operation  to  a  bond 
given  to  the  intestate  in  his  lifetime  to  save  him  harmless 
from  his  debts.  So  a  bond  or  covenant  by  the  creditor  to 
save  harmless  and  to  indemnify  the  debtor  against  the  debt, 
operates  as  a  release  of  the  debt.^ 

The  debt  is  changed  and  extinguished  by  this  undertaking 
of  the  obligors  to  pay.  It  thereby,  as  between  the  estate  and 
the  obligors,  becomes  their  debt.^  But  some  courts  hold  that 
the  mortgage  remains  a  subsisting  security  after  the  heir  has 
given  a  bond  and  taken  an  assignment  of  the  mortgage.* 

§  1157.  Purchase  of  Mortgage  by  Executor. — A  purchase 
of  the  mortgage  by  another  party  with  the  personal  funds  of 
the  executor  is  not  a  payment  of  the  mortgage  debt.^ 

Even  if  the  doctrine  of  merger  is  applicable  when  a  person 
holding  a  mortgage  as  executor  of  the  mortgagee  purchases  in 
fee,  in  his  individual  capacity,  the  equity  of  redemption  in  the 
mortgaged  premises,  the  mortgage  does  not,  in  equity,  necessa- 
rily become  extinguished. 

In  such  case  the  person  owning  the  mortgage  as  executor 
has  a  right  to  elect  whether  it  shall  remain  outstanding 
or  be  merged  in  the  fee  acquired  by  him  in  his  individual 
right.^ 

§  1158.  Mortgagor  Paying  Mortgage  as  Executor. — The 
mortgagee  by  making  his  debtor  an  executor  does  not  thereby 
extinguish  the  mortgage.''  Because,  when  the  same  person  is 
liable  to  pay  money  in  one  capacity  and  to  recover  it  and  ac- 
count for  it  in  another,  the  law  presumes  that  he  has  done  what 

1  Robinson  v.  Leavitt,  7  N.  H.  73. 

2  Clark  V.  Bush,  3  Cow.  (N.  Y.)  1-52  ;  Clayton  v.  Kynaston,  2  Salk.  573. 

3  Watts  V.  Welman,  2  N.  H.  458 ;  Harvey  v.  Hurlburt,  3  Vt.  561. 
*See  King  v.  King,  100  Mass.  224. 

5  Sanderson  v.  Edwards,  111  Mass.  335. 

"Clift  r.  White,  12  N.  Y.  519  ;  Stillman  v.  Stillman,  21  N.  J.  Eq.  126.    See, 
also,  Griggs  v.  Detroit,  etc.,  Railroad  Co.,  10  Mich.  117. 
'Miller  D.  Donaldson,  17  Ohio,  264. 


PAYMENT  OF  THE  DEBT.  1111 

it  was  his  duty  and  within  his  power  to  do,  and  holds  him  and 
his  sureties  responsible  in  case  of  his  failure  to  do  it/ 

Where  a  mortgagor  of  land  is  the  executor  of  the  mortgagee, 
and  charges  himself  with  the  amount  of  the  mortgage  debt  as 
assets  in  his  hands  as  executor,  this  operates  as  payment  of  the 
debt  and  discharge  of  the  mortgage.^ 

And  when  judgment  is  rendered  against  him  on  suit  upon 
his  bond,  for  the  whole  amount  with  no  deduction  of  the  mort- 
gage debt,  this  is  a  discharge  of  the  mortgage  by  the  operation 
of  law.^ 

Where  the  executor  makes  a  colorable  transfer  for  the  pur- 
pose of  transmitting  the  title  through  purchaser  to  himself,  it 
will  not  affect  the  title.* 

The  administrator  of  a  second  mortgagee  may,  in  his  ca- 
pacity of  administrator,  redeem  as  against  the  assignee  of  a 
prior  mortgage  who  has  purchased  the  equity  of  redemption. 
He  is  in  a  situation  to  do  just  what  any  other  administrator 
would  do,  as  if  he  were  not  himself  the  original  mortgagor. 
On  redemption  he  will  be  put  into  possession  of  the  estate,  and 
will  hold  it  in  autre  droit.  His  seisin  and  possession  will  be 
according  to  his  title,  and  that  Avill  be,  and  will  appear  by  the 
record  to  be,  in  his  representative  capacity.* 

§  1159.  Purchasing  from  His  Own  Funds. — An  admin- 
istrator may  purchase  a  mortgage  in  his  individual  capacity 
and  with  his  own  funds.  Thus,  if  the  administrator  takes  an 
assignment  of  the  mortgage  upon  the  estate  to  himself,  and 
afterward  assigns  it  to  another,  the  assignee  holds  the  mort- 
gage as  a  subsisting  security  which  he  may  foreclose.*' 

1  Ipswich  Manuf.  Co.  r.  Story,  5  Met.  (Mass.)  310,  313 ;  Leland  v.  Felton,  1 
Allen  (Mass.),  531  ;  Choate  r.  Arrington,  116  Mass.  552  ;  Benchley  v.  Chapin, 
lOCush.  (Mass.)  173;  Mattoon  v.  Cowing,  13  Gray  (Mass.),  387;  Tarbell  ?;. 
Parker,  101  Mass.  1&5. 

^Martin  v.  Smith,  124  Mass.  111.  See,  also,  Griffin  v.  Pringle,  56  Ala.  486; 
Wathen  v.  Glass,  54  Miss.  382. 

'Tarbell  v.  Parker,  101  :\Iass.  165;  Commonwealth  v.  Goukl,  118  Mass.  300. 

*  Joyner  v.  Conyers,  6  Jones  Eq.  (N.  Car.)  78. 

*Pettee  v.  Peppard,  120  IMass.  522 ;  Kinney  v.  Ensign,  18  Pick.  (Mass.)  232. 

«  Hough  V.  De  Forest,  13  Conn.  472. 


1112  RIGHTS    OF    PARTIES   BEFORE    DEFAULT. 

So  when  the  executor  conveys  the  property  as  discharged  of 
incumbrances,  it  must  be  considered  as  discharged  of  the  mort- 
gage made  by  him  to  his  testator,  and  therefore  a  subsequent 
assignment  of  such  mortgage  is  without  effect/ 

§  1160.  Payment  to  Executor. — The  executor  or  admin- 
istrator of  a  deceased  mortgagee  is  the  party  to  whom  should 
be  paid  the  mortgage  debt.^ 

The  administrator  may  accept  the  payment  of  the  mortgage, 
and  the  transaction  will  be  binding  upon  him  and  those  whom 
he  represents.^ 

Not  presenting  the  mortgage  claim  within  the  time  pre- 
scribed by  the  statute  does  not  foreclose  the  mortgage,  where  no 
recovery  is  sought  beyond  the  proceeds  of  the  mortgaged 
lands  ;  ^  and  the  approval  of  the  note  by  the  administrator 
does  not  constitute  waiver  of  the  presentation  of  the  mortgage 
by  which  the  note  is  secured.^ 

The  next  of  kin  has  no  authority  to  discharge  a  mortgage 
debt." 

Payment  to  one  of  several  executors  is  sufficient.^ 

A  claim  against  a  decedent  secured  by  mortgage  may  be 
presented  and  allowed  by  the  executor,  so  as  to  prevent  the 
debt  from  being  barred  and  the  mortgage  extinguished  by 
limitation,  and  such  presentation  and  allowance  do  not  pre- 

^  Ritchie  v.  Williams,  11  Mass.  50.  See,  also,  Hadley  v.  Chapin,  11  Paige 
(N.  Y.),  245;  Pettee  i'.  Peppard,  120  Mass.  522;  Remann  v.  Buckmaster,  85 
111.  403. 

^Roath  V.  Smith,  5  Conn.  l?>?j ;  Hitchcock  v.  Harrington,  6  Johns.  (N.  Y.) 
290;  Glass  ?).' Elhson,  9  N.  H.  69;  Snow  v.  Stevens,  15  Mass.  278;  Fay  v. 
Cheney,  14  Pick.  (Mass.)  399 ;  Ely  v.  Scofield,  35  Barb.  (N.  Y.)  330 ;  Swartz 
V.  Leist,  13  Ohio  St.  425 ;  Griffin  v.  Lovell,  42  Miss.  402 ;  Tabor  v.  Tabor,  3 
Swanst.  636. 

^Stribling  v.  Coal  Co.,  31  W.  Va.  82;  Wood's  Appeal,  92  Pa.  St.  379. 

*Reed  v.  Miller,  1  Wash.  St.  426. 

5  Bank  v.  Charles,  86  Cal.  322. 

8  Hatch  V.  Proctor,  102  Mass.  351 ;  Fosters.  Bates,  12  Mees.  &  W.  226  ;  Reece 
V.  Reece,  34  N.  J.  Eq.  33. 

^  Fesmire  v.  Shannon,  143  Pa.  St.  201 ;  Stuyvesant  v.  Hall,  2  Barb. 
Ch.  (N.  Y.)  151 ;  People  v.  Keyser,  28  N.  Y.  226,  228 ;  Begert  v.  Hertell,  4 
Hill  (N.  Y.),  492 ;  Douglass  v.  Satterlee,  11  Johns.  (N.  Y.)  16. 


PAYMENT  OF  THE  DEBT.  1113 

elude  a  subsequent  action  for  the  foreclosure  of  the  mortgage, 
in  which  the  estate  may  be  subjected  to  costs.^ 

§  1161.  Foreign  Executor,  or  Administrator. — The  title 
to  real  estate  is  regulated,  governed,  and  established  by  the  lex 
rei  sitse,  and  whenever  it  is  necessary  to  make  title  to  lands 
through  the  official  acts  of  the  executor  or  administrator,  it 
must  be  the  executor  or  administrator  deriving  his  authority 
from  or  recognized  by  the  lex  rei  sitse? 

If  a  foreign  executor  can  collect  a  debt  due  from  the  debtor 
in  another  State,  he  has  authority  to  do  so,  and  may  give  an 
acquittance.  But  it  is  necessary  to  show  a  clear  record  that  ad- 
ministration be  taken  in  the  State  where  the  land  lies  that  is 
mortgaged.^ 

But  a  foreign  administrator,  as  such,  has  no  power  to  bring 
suit  in  another  State.*  The  courts  of  the  State  where  the  land 
lies  will  not  aid  a  foreign  administrator  or  executor,  as  such, 
to  enforce  the  payment  of  a  mortgage,  until  he  takes  out  ad- 
ministration in  such  State.^  He  has  no  authority  or  power  to 
bring  suit  in  another  State  in  his  representative  capacity,  until 
he  has  taken  out  administration  in  such  State.® 

^  Moran  v.  Gardemeyer,  82  Cal.  96. 

■■^  Kerr  v.  Moon,  9  Wheat.  (U.  S.)  565  ;  Cutter  v.  Davenport,  1  Pick.  (Mass.) 
81;  Hutching  v.  Bank,  12  Met.  (Mass.)  421,  424;  Hayes  v.  Lienlokken,  48 
Wis.  509 ;  Stone  v.  Scripture,  4  Lans.  (N.  Y.)  186. 

'Hutchins  v.  Bank,  12  Met.  (Mass.)  421,  425. 

*  Dial  V.  Gary,  14  S.  Car.  573  ;  Doolittle  v.  Lewis,  7  Johns.  Ch.  (N.  Y.)  45, 46. 

5  Peterson  v.  Bank,  32  N.  Y.  22;  Parsons  v.  Lyman,  20  N.  Y.  103,  112; 
Vroom  V.  Van  Home,  10  Paige  (N.  Y.),  549  ;  Trecothick  v.  Austin,  4  Mason,  C. 
C.  16,  33. 

«  Dial  V.  Gary,  14  S.  Car.  573. 


1114 


EIGHTS    OF    PARTIES   BEFORE   DEFAULT. 


Article  4. 
Foreclosure  is  a  Payment  Pro  Tanto. 

§  1162.  Payment  by  Foreclosure.  §  1166.  Sale  Set  Aside. 

i  1163.  Union    of   the    Titles  of   the  g  1167,  Foreclosure    by  Entry    and 

Mortgagor  and  Mortgagee.  Possession. 

§  1164.  Sale  Under  Power.  §  1168.  Purchasing  Under  Execution 
^  1165.  The    Mortgage    Lien    is    Dis-  Sale. 

charged  if  the  Whole  Estate 

is  Sold. 

§  1162.  Payment  by  Foreclosure. — The  foreclosure  of  a 
mortgage  does  not  satisfy  the  debt,  provided  it  does  not  bring 
enough  to  pay  the  debt.  To  the  extent  of  the  value  of  the 
property  acquired,  at  the  time  when  the  mortgagor's  right 
therein  was  extinguished  the  mortgagee's  debt  is  to  be  re- 
garded as  satisfied,  but  no  further.^ 

Chief  Justice  Doe  says  that  the  foreclosure  of  the  mortgage 
by  which  the  notes  were  secured  is  a  payment  to  the  amount 
of  the  value  of  the  land.^ 

So  where  a  deed  of  trust,  executed  to  secure  the  note  of  the 
grantor,  provided  that  in  default  of  payment  the  trustee 
should  sell  the  property  on  these  terms  :  "  The  amount  of 
indebtedness  secured  by  said  deed  of  trust  unpaid,  with  ex- 
penses of  sale,  in  cash,  and  the  balance  at  twelve  and  eighteen 
months,"  and  the  proceeds  of  the  sale  made  by  the  trustee 
were  less  than  the  amount  due  on  the  note,  the  holder  is  not 
estopped  to  deny  that  his  note  is  satisfied  by  the  payment  to 
him  of  such  proceeds.''' 

The  question  of  the  value  of  the  land  at  the  time  the  fore- 
closure is  complete,  is  one  of  fact  to  be  determined  on  all  the 
evidence.^ 

^  Clark  V.  Jackson,  64  N.  H.  388. 

*Lane  v.  Barron,  64  N.  H.  277  ;  Dearborn  v.  Nelson,  61  N.H.  249  ;  Fletcher 
V.  Chamberlin,  61  N.  H.  438,  493,  494 ;  Shepherd  v.  May,  115  U.  S.  505 ;  De- 
vereaux  v.  Fairbanks,  52  Vt.  587 ;  Vansant  v.  AUmon,  23  111.30  ;  Nunemacher 
V.  Ingle,  20  Ind.  135 ;  Germania  Build.  Asso.  v.  Neill,  93  Pa.  St.  322. 

^  Shepherd  v.  May,  115  U.  S.  505.    See,  also,  Noyes  v.  Rockwood,  56  Vt.  647. 

*  Androscoggin  Bank  v.  McKenney,  78  Me.  442  ;  Lane  v.  Barron,  64  N.  H. 
277. 


PAYMENT  OF  THE  DEBT.  1115- 

If  the  mortgaged  premises  are  of  greater  value  than  the 
debt,  of  course,  the  debt  becomes  extinguished  by  foreclosure.^ 

A  junior  mortgagee  may  make  payment  of  the  prior  mort- 
gage by  buying  in  the  property  at  a  foreclosure  sale  for  an 
amount  equal  to  the  debt  and  costs.^ 

In  case  of  strict  foreclosure,  if  the  mortgagor  does  not  elect 
to  redeem,  and  a  judgment  is  obtained  against  him  for  the 
balance  of  the  debt — that  is,  the  difference  between  the  value 
of  the  land  and  the  debt — there  is  no  ecjuity  thereafter  in 
permitting  him  to  redeem.^ 

At  one  time,  a  foreclosure  and  possession  of  the  mortgaged 
propert}''  by  the  mortgagee  extinguished  the  debt,  in  Connecti- 
cut,^ but  this  law  has  been  changed  to  correspond  to  the  gen- 
eral rule  of  other  States.^ 

§  1163.  Union  of  the  Titles  of  the  Mortgagor  and  the 
Mortgagee. — When  the  mortgagee  purchases  the  equity  of 
redemption  at  a  sale  of  the  mortgagor's  assignee  in  insolvency, 
as  against  those  lands,  the  union  of  the  titles  of  the  mortgagor 
and  the  mortgagee  becomes  perfected  in  the  latter,  and  his 
remedy  exhausted,  but  the  mortgage  debt  is  neither  satisfied 
in  fact  nor  extinguished  in  law.^ 

To  hold  otherwise  would  be  inequitable,  and  in  such  case  it 
is  held  that  the  union  of  titles  will  not  of  itself  be  considered 
a  merger  so  as  to  operate  as  payment  or  satisfaction  of  the 
mortgage  debt ;  and  this  is  the  rule  both  at  law  and  in 
equity.^ 

Judge  Blodgett  says :  "  The  process  of  foreclosure  is  only 
one  of  the  ways  and  remedies  of  a  mortgagee  to  obtain  an  ab- 
solute title  to  the  property.     Among  others  he  may  obtain 

1  Hurd  V.  Coleman,  42  Me.  182 ;  Green  v.  Cross,  45  N.  H.  574 ;  Clark  v.  Jack- 
son, 64  N.  H.  388. 

2  Hill  r.  Helton,  80  Ala.  528. 

3  Lovell  V.  Lcland,  3  Vt.  581 ;  Noyes  v.  Rockwood,  56  Vt.  G47. 

*  Derby  v.  Landon,  3  Conn.  62;  M'Ewen  v.  Welles,  1  Root  (Conn.),  202. 

*  Post  V.  Tradesmen's  Bank,  28  Conn.  420  ;  Bassett  v.  Mason,  18  Conn.  131 ; 
Peck's  Appeal,  31  Conn.  215 ;  Findlay  v.  Hosmer,  2  Conn.  350. 

6  Clark  V.  Jackson,  64  N.  H.  388,  391. 
^  Walker  v.  Baxter,  26  Vt.  710. 


1116  RIGHTS    OP    PARTIES    BEFORE   DEFAULT. 

such  title  by  becoming  the  purchaser  of  the  equity  of  redemp- 
tion at  a  sale  by  the  mortgagor's  assignee  in  insolvency,  or  an 
execution,  both  of  which  may  often  be  a  convenient  and  inex- 
pensive mode  of  procedure ;  and,  as  the  law  gives  the  mortgagor 
the  same  right  to  redeem  from  the  sale  as  from  a  foreclosure, 
and  imposes  the  same  accountal^ility  for  rents  and  profits  upon 
the  mortgagee,  there  would  seem  to  be  no  difference  in  princi- 
ple between  the  one  mode  and  the  other  in  respect  of  the 
mortgage  debt ;  and  we  are  of  opinion  there  is  none."  ^ 
And  this  seems  to  be  the  weight  of  authority.  The  purchase 
of  the  equity  of  redemption  by  the  mortgagee  under  such  cir- 
cumstances is  not  at  law  a  payment  of  the  mortgage  debt,  and 
the  mortgagee  may  claim  and  show  that  the  property  is  of  less 
value  than  the  debt.^ 

The  mortgagee  may  take  the  equity  of  redemption  in  full 
payment  of  the  debt,  by  accepting  a  deed  of  the  mortgagor, 
of  the  premises  mortgaged,  and  such  payment  extinguishes  the 
mortgage ;  ^  and  this  is  the  presumption  when  the  mortgagee 
makes  no  demand  for  the  balance  for  a  long  time  after  taking 
the  premises.'* 

When  the  equity  of  redemption  is  released,  any  mortgage 
held  as  collateral  security  is  thereby  paid  in  full.^ 

When  the  mortgagee  buys  at  a  sale  other  than  a  foreclosure 
sale,  it  has  been  held  that  the  debt  is  extinguished  to  the 
amount  of  the  true  value  of  the  land,^ 

1  Clark  V.  Jackson,  64  N.  H.  388,  391. 

2  Murphy  r.  Elliott,  6  Blackf.  (Ind.)  482 ;  Johnston  v.  Watson,  7  Blackf. 
(Ind.)  174 ;  Post  v.  Tradesmen's  Bank,  28  Conn.  420 ;  Speer  v.  Whitfield,  2 
Stockt.  (N.  J.)  107  ;  Lydecker  v.  Bogert,  38  N.  J.  Eq.  136 ;  Walker  r.  Baxter, 
26  Vt.  710 ;  Findlay  v.  Hosmer,  2  Conn.  350.  See,  also,  Marston  v.  Marston, 
45  Me.  412 ;  Puffer  v.  Clark,  7  Allen  (]Mass.),  80 ;  Spencer  v.  Harford,  4  Wend. 
(N.  Y.)  381 ;  Hartz's  Appeal,  40  Pa.  St.  209. 

^Triplett  r.  Parmlee,  16  Nebr.  649;  Lyman  r.Gedney,  114  111.  388;  Cathn 
V.  Washburn,  3  Vt.  25,  42. 

*  Burnet  ;'.  Denniston,  5  Johns.  Ch.  (N.  Y.)  35.  See,  also,  Corwin  v.  Collett, 
16  Ohio  St.  2S9  ;  Jennings  v.  Wood,  20  Ohio,  261 ;  Loomer  v.  Wheelwright,  3 
Sandf.  Ch.  (N.  Y.)  135. 

5  Wheelwright  v.  Loomer,  4  Edw.  (N.  Y.)  232 ;  McGiven  v.  Wheelock,  7 
Barb.  (N.  Y.)'  22. 

6  Trimmier  v.  Vise,  17  S.  Car.  499. 


PAYilENT    OF    THE    DEBT.  1117 

§  1164,  Sale  Under  Power. — When  the  land,  if  sold  under 
a  power  of  sale  contained  in  tlie  mortgage,  or  by  decree  of 
court,  brings  less  than  the  amount  of  the  note,  an  action  can 
be  maintained  on  the  note  for  the  balance  due.^ 

If  the  mortgagee  buys  the  land  himself  at  such  sale,  in  all 
respects  complying  with  the  power,  for  a  larger  sum  than  the 
amount  of  the  mortgage  debt  and  expenses  of  the  sale,  the 
note  is  thereby  paid  and  the  mortgagee  cannot  by  refusing  to 
execute  a  deed  rescind  the  sale  and  maintain  an  action  on  the 
note.^ 

If  the  amount  fully  pays  the  debt  the  mortgagee  cannot  hold 
the  note  or  bond  for  a  greater  security  of  his  title  without  the 
mortgagor's  consent.^  When  the  mortgagee  buys  the  land 
he  is  bound  to  complete  the  sale  the  same  as  any  other 
purchaser."* 

So  where  land  is  sold  under  a  power  contained  in  a  mort- 
gage which  a  subsequent  grantee  has  assumed  to  pay,  and  the 
grantor  buys  the  land  for  a  sum  less  than  the  mortgage  debt, 
the  debt  is  not  thereby  fully  paid,  and  the  grantee  is  still  liable 
for  the  balance  due  on  the  mortgage.^ 

If  the  mortgagee  purchases  at  a  foreclosure,  sale  but  the 
equity  has  not  been  foreclosed,  his  mortgage  title  is  unaff'ectfd." 
The  sale  must  be  so  conducted  as  to  obtain  the  full  value  of  the 
property.^ 

§  11G5.  The  Mortgage  Lien  is  Discharged  if  the  Whole 
Estate  is  Sold. — When  the  whole  estate  is  sold  the  mortgage 
lien  is  discharged.  Thus,  the  whole  property  was  sold  to  sat- 
isfy the  amount  due,  leaving  some  of  the  notes  not  yet  ma- 
tured.    It  was  held  that  the  mortgage  lien  was  discharged  as 

^Draper  r.  Mann,  117  Mass.  4.'-)9 ;  Winu'  '-.  Hayford,  124  Mass.  249;  Pierce 
V.  Potter,  7  Watts  (Pa.),  475;  Berger  r.  Hieser,  G  Whart.  (Pa.)  210  ;  Mott  v. 
Clark,  9  Pa.  St.  399  ;  Fcnton  v.  Lord,  128  Mass.  4G6. 

''Hood  r.  Adams,  124  Mass.  481. 

3  In  re  Coster,  2  Johns.  Ch.  (N.  Y.)  503. 

*Hood  V.  Adains,  124  Mass.  481. 

^Fenton  v.  Lord,  128  Mass.  466. 

fiHollister  v.  Dillon,  4  Ohio  St.  197. 

^  Howard  v.  Ames,  3  ]Met.  (Mass.)  308. 


1118  KIGIITS    OF    PARTIES    BEFORE   DEFAULT, 

to  the  amount  not  due.^  And  so  when  the  estate  is  purchased 
by  the  holder  of  the  note  not  yet  due,  will  the  lien  be  dis- 
charged.^ 

The  same  principle  applies  when  a  decree  of  sale  has  been 
made  upon  the  last  of  a  series  of  mortgage  notes,  without 
including  the  preceding  notes.    The  lien  is  wholly  discharged. 

Thus,  when  a  mortgagee  foreclosed  his  mortgage  as  to  the 
last  of  three  notes  falling  due,  the  first  having  been  paid  and 
the  second  then  due,  and  a  sale  was  made  of  the  whole  estate, 
it  was  held  on  a  second  bill  by  the  mortgagee  to  foreclose  the 
second  note  that  the  lien  of  the  mortgage  was  released. 

A  party  holding  a  mortgage  may  foreclose  the  moitgage  for 
any  sum  then  due,  and  no  more ;  but  when  he  elects  to  sell 
under  a  power  in  the  mortgage,  or  to  foreclose  in  chancery,  he 
can  only  sell  or  foreclose  for  the  amount  then  due,  according 
to  the  terms  of  the  mortgage,  which  of  necessity  operates  to 
release  the  security  for  the  amount  not  due.^ 

Where  a  decree  of  foreclosure  directs  a  sale  subject  to  the 
mortgage  for  the  unforeclosed  part  of  the  debt,  and  the  sale  is 
so  made  under  an  announcement  to  that  effect,  the  lien  is  not 
released  as  to  the  notes  not  due.* 

And  the  mortgagee's  purchase  at  a  foreclosure  sale,  though  for 
a  less  sum  than  the  mortgage  debt,  extinguishes  the  mortgage 
though  not  the  debt.^ 

§  1166.  Sale  Set  Aside. — When  the  sale  is  void  for  irregu- 
larities or  for  fraud  it  will  be  set  aside,  and  the  mortgage  debt 
is  not  paid  even  in  part,  and  the  mortgagee  may  again  pro- 
ceed to  sell.^  But  a  purchaser  under  a  defective  foreclosure 
sale,  which  does  not  give  him  a  clear  title,  takes  the  mortgage 
title,  and  there  is  no  payment,  but  an  assignment.'^   So  when  a 

1  Smith  V.  Smith,  32  111.  198. 
''Robins  v.  Swain,  68  111.  197. 
3  Rains  v.  Mann,  68  111.  264. 
*  Hughes  V.  Frisby,  81  111.  188. 

^Seligman  v.  Laubheimer,  58  HI.  124;  Finley  v.  Thayer,  42  111.  350. 
«Stackpole  v.  Robbing,  47  Barb.  (N.  Y.)  212. 

^Johnson  v.  Sandhoff,  30  Minn.  197;  Johnson  v.  Robertson,  34  Md.  165; 
Brown  v.  Smith,  116  Mass.  108 ;  Moore  v.  Cord,  14  Wis.  213 ;  Muir  v.  Berk- 


PAYMENT  OF  THE  DEBT.  1119 

mortgage  has  been  foreclosed,  and  the  value  of  the  land  ap- 
plied pro  rata  on  the  note,  no  action  lies  on  the  note  for  the 
balance,  if  it  is  barred  by  the  statute  of  limitations,  and  the  debt 
is  therefore  wholly  discharged.' 

§  1167.  Foreclosure  by  Entry  and  Possession. — When 
the  mortgagee  enters  and  takes  possession  of  the  mortgaged 
land,  which  is  not  sufficient  to  pay  the  debt,  it  inures  by  way 
of  payment  pro  tanto?  And  when  the  foreclosure  is  complete 
and  the  mortgagee's  title  indefeasible,  and  the  value  of  the 
land  equal  to  the  mortgage  debt  and  costs,  the  mortgagor  can 
then  set  up  a  defense  of  payment.^ 

A  foreclosure  by  entry  of  a  mortgage  held  by  the  assignee 
as  collateral  security  must  be  done  for  the  benefit  of  all  the 
parties  interested,  and  the  property  after  foreclosure  as  before 
is  held  in  trust  to  pay  the  debt  for  which  it  is  pledged,  and 
•then  the  surplus  to  the  owner.  The  property  must  be  sold  and 
reduced  to  cash  at  a  fair  valuation,  and  the  payment  dates 
from  the  actual  sale  of  the  property  and  conversion  into  cash.* 

A  second  mortgagee  who  has  never  entered  may  purchase 
the  title  of  a  prior  mortgagee  who  has  foreclosed  by  entry,  and 
he  will  then  obtain  an  absolute  title  wholly  independent  of  his 
own  mortgage  ;  he  can  then  sue  on  his  own  mortgage  note,  and 
the  mortgagor  will  be  debarred  from  showing  tliat  such  debt 
is  paid  by  the  rents  and  j^rofits  received  by  the  mortgagees.' 

§  1168.  Purchasing  Under  Execution  Sale. — If  the  mort- 
gagee purchases  the  mortgaged  premises  upon  an  execution  at 
law  against  the  mortgagor  in  favor  of  a  third  person,  and  pur- 
chases subject  to  the  mortgage,  he  thereby  extinguishes  his 

shire,  52  Ind.  149  ;  Taylor  v.  A.  &  M.  A^go.,  68  Ala.  229.  Compare  Goodenow 
V.  Ewer,  16  Cal.  461. 

I  Gross  ('.  Gannett,  39  N.  H.  140. 

=*  Newall  i).  "Wright,  3  Mass.  138,  150;  Amory  r.  Fairbanks,  3  :Masp.  562; 
Hedge  r.  Holmes,  10  Pick.  (Mass.)  380;  George  v.  Wood,  11  Allen  (Mass.), 
41 ;  Dooley  v.  Potter,  140  Mass.  49,  59;  Hatch  v.  AVhite,  2  Gall.  C.  C.  152. 

3  Wet^t  V.  Chamberlain,  8  Pick.  (Mass.)  336. 

*  Brown  v.  Tyler,  8  Gray  (Mass.),  135. 

6  Hedge  v.  Holmes,  10  Pick.  (Mass.)  380. 


1120  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

debt  ;  if  he  purchases  upon  execution  at  law  upon  a  judgment 
for  his  mortgage  debt,  then  he  extinguishes  his  debt  against 
the  mortgagor  to  the  amount  only  given  for  the  land/ 

Where  the  land  mortgaged  is  sold  subject  to  the  mortgage, 
at  execution  sale,  to  the  mortgagee,  the  debt  secured  by  the 
mortgage  is  paid.^ 

So  where  a  mortgage  is  given  to  secure  the  payment  of  sev- 
eral notes  maturing  at  diiferent  times,  and  a  foreclosure  and 
sale  is  had  for  a  part  of  the  notes,  leaving  one  note  unpaid, 
and  the  holder  of  the  unpaid  note  becomes  the  purchaser  of 
the  premises  and  receives  a  deed,  the  legal  and  equitable  title 
to  the  premises  will  be  merged  and  it  will  operate  as  a  pay- 
ment of  the  mortgage  and  the  remaining  indebtedness  for  the 
reason  that  the  purchaser  in  such  a  case  is  presumed  to  have 
bought  the  land  at  its  value,  less  the  unpaid  note.* 

Article  5. 

'  Change  in  the  Form  of  the  Debt. 

?  1160.  The  General  Rule.  ?  1180.  No  Payment. 

I  1170.  Doctrine  of  Renewal  of  Note  ?  1181.  In  Case  of  Indemnity. 

Modified.  I  1182.  New  Note  for  Accrued  Inter- 
?  1171.  When  New  Note  is  Payment.  est. 

§1172.  Taking  Subsequent  Mortgage.  §118.3.  Extension  of  Tim3. 

§  1173.  Intention  May  Control.  §  1184.  Guarantor  of  Note. 

§  1174.  Substitution  of  Another  Note.  §  1185.  Reduced  to  Judgment. 

§  1175.  (Substitution  of  New  Mortgage.  §  1186.  Imprisonment  of  Debtor  or 
§1176.  Substitution  of  Defeasance.  Mortgagor. 

§  1177.  Entire  Change  in  the  New  Note.  §  1187.  Release  of  Judgment. 
§  1178.  Additional  Security. 
§  1179.  Additional  Loan  Included    in 

New  Note. 

§  1169.  The  General  Rule. — As  a  general  rule,  the  mere 
change  in  the  form  of  the  debt  does  not  satisfy  a  mortgage 
given  to  secure  it,  unless  it  is  intended  so  to  operate.  The  lien 
of  the  debt  attaches  to  the  mortgaged  premises,  and  the  lien  can, 

^  Speer  v.  Whitfield,  2  Stockt.  (N.  J.)  107 ;   Biggins  v.  Brockman,  63  III. 
316 ;  Murphy  v.  Elliott,  6  Blackf.  (Ind.)  482. 
2  Biggins  V.  Brockman,  63  111.  316. 
SEobins  z;.  Swain,  68  111.  197. 


PAYMENT  OF  THE  DEBT.  1121 

as  between  the  parties,  only  be  extinguished  b}-  the  payment 
or  discharge  of  the  debt,  or  by  a  release  of  the  mortgage.  Mere 
change  of  the  form  of  the  evidence  of  the  debt  in  no  wise  affects 
the  lien.  A  renewal  of  the  note,  its  reduction  to  judgment, 
or  other  change  not  intended  to  operate  as  a  discharge  of  the 
lien,  still  leaves  it,  as  between  the  parties,  in  full  vigor.  This 
is  the  rule  in  equity.  In  that  forum  mere  form  is  disregarded, 
and  the  substance  only  is  considered.' 

The  mortgage  remains  a  lien  until  the  debt  is  satisfied,  and 
is  not  affected  by  a  change  in  the  form  of  the  debt,  as  by  change 
of  note,  or  by  giving  a  different  instrument  as  evidence  of  the 
note,  or  by  judgment  at  law  on  the  secured  note.^ 

The  courts  regard  the  interest  of  the  mortgagee  ■with  great 
liberality,  for  the  purpose  of  effectually  securing  to  him  the 
performance  of  the  contract  which  the  mortgage  was  given  to 
secure ;  and  they  allow  no  change  of  the  form  of  indebtedness 
to  discharge  the  mortgage  where  there  has  been  no  actual  pay- 
ment or  release.* 

§  1170.  Doctrine  of  Renewal  of.Note  Modified. — It  is  well 
settled  law  in  some  States  that  a  negotiable  note  given  for  a  sim- 

^  Flower  v.  Elwood,  66  111.  438 ;  Tabor  v.  Hamlin,  97  Mass.  489,  492 ;  Baxter 
V.  Mclntire,  13  Gray  (Mass.),  168,  171 ;  Foster  v.  Paine,  63  Iowa,  85 ;  Swan  v. 
Yaple,  35  Iowa,  248 ;  Geib  v.  Reynolds,  35  Minn.  331 ;  Rogers  r.  Trustees,  46 
111.  428;  Citizens'  Nat.  Bank  v.  Dayton,  116  111.  257  ;  Jenkins  v.  Bank,  111  111. 
462 ;  Ponder  v.  Ritzinger,  102  Ind.  571 ;  Seymour  r.  Darrow,  31  Yt.  122 ;  Slo- 
cum  V.  Catlin,  22  Vt.  137. 

2  Vick  V.  Smith,  83  N.  Car.  80 ;  Kidder  v.  Mcllhenny,  81 N.  Car.  123  ;  Focke 
V.  Weishuhu,  55  Tex.  33;  Kieser  v.  Baldwin,  62  Ala.  52(5;  Smith  r.  Stanley, 
37  Me.  11 ;  Parkhurst  v.  Cummings,  56  ]Me.  155  ;  Bollcs  7'.  Cliauncey,  8  (^3nn. 
389  ;  Thornton  v.  Irwin,  43  Mo.  153  ;  Jagger  Iron  Co.  r.  Walker,  76  N.  Y.  521 ; 
Hill  r.  Beebe,  13  N.  Y.  556;  Franklin  r.  Cannon,  1  Root  (Conn.),  50);  Oli- 
phint  V.  Eckerley,  36  Ark.  69 ;  Coles  v.  Withers,  33  Gratt.  (Va.)  186  ;  Elliot  v. 
Sleeper,  2  N.  H.  525 ;  Williams  v.  Starr,  5  Wis.  534 ;  Farmers'  Bank  r.  ^Mutual 
Assur.  Society,  4  Leigh  (Ya.),  69 ;  Sledge  v.  Obenchain,  58  Miss.  670 ;  Gleason  r. 
Wright,  53  Miss.  247  ;  Morse  v.  Clayton,  13  Sm.  &  :M.  (Miss.)  373  ;  Burton  v. 
Pressly,  1  Cheves  (S.  Car.),  1 ;  Bond  r.  Ins.  Co.,  106  111.  654 ;  Cullnni  r.  Bank, 
23  Ala.  797 ;  Helmetag  v.  Frank,  61  Ala.  67  ;  Bunker  r.  Barron,  79  :\Ie.  (>2 ;  Ponce 
V.  Armstrong,  95  Ind.  191  ;  Walters  r.  Walters,  73  Ind.  425  ;  Port  r.  Robl)ins,  35 
Iowa,  208 ;  Jordan  r.  Smith,  30  Iowa,  500 ;  Hendershott  >'.  Ping,  24  Iowa,  134; 
Lippold  V.  Held,  58  M<~i.  213  ;  Christian  r.  Newberry,  61  IMo.  446. 

^  1  Wash.  Real  Property,  560,  and  cases  cited. 
71 


1122  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

pie  contract  debt  is  prima  facie  to  be  deemed  a  payment  or 
satisfaction  of  such  debt.  But  this  jjresumption  may  be  re- 
butted and  controlled  by  evidence  that  such  was  not  tlie  inten- 
tion of  the  parties.^ 

And  where  the  debt  consists  of  a  note  secured  by  a  mortgage, 
the  renewal  of  the  note  is  not  to  be  presumed  a  jjayment  so  as 
to  discliarge  the  mortgage.^  So  when  it  appears  that  the 
creditor  has  other  and  better  security  than  such  renewal  note, 
for  the  payment  of  his  debt,  it  will  not  be  presumed  that  he 
intended  to  abandon  such  security  and  rely  upon  his  note.^ 

The  general  doctrine  is  that  the  taking  of  a  new  note  is  to 
be  regarded  as  payment  only  when  the  security  of  the  creditor 
is  not  thereby  impaired.*  In  many,  if  not  most,  of  the  cases 
where  the  presumption  of  payment  has  been  held  to  apply,  it 
will  be  found  that  the  original  claim  was  not  secured.^  And 
the  cases  are  numerous  in  which  this  presumption  has  been 
held  to  be  overcome  by  the  facts  and  circumstances  surround- 
ing the  transaction  of  giving  the  note." 

And  as  a  general  rule,  and  in  the  absence  of  any  express 
agreement,  this  presumption  will  be  overcome  when  it  would 
deprive  the  creditor  taking  the  note  of  the  substantial  benefit 
of  some  security  such  as  a  mortgage,  guaranty,  or  the  like. 
Nothing  but  payment  of  the  debt  or  its  release  will  discharge 
the  mortgage.'^ 

§  1171.  When  New  Note  is  Payment. — Where  a  debt, 
evidenced  by  a  note,  secured  by  a  mortgage  is  included  in  a 

^  Fowler  v.  Ludwig,  34  Me.  460 ;  Dodge  v.  Emerson,  131  Mass.  467  ;  Bunker 
V.  Barron,  79  Me.  62 ;  Langley  v.  Bartlett,  33  Me.  477. 
2Taft  V.  Boyd,  13  Allen  (Mass.),  86. 
3  Kidder  I'.  Knox,  48  Me.  551 ;  Lovell  v.  Williams,  125  Mass.  439. 

*  Paine  v:  Dwinell,  53  Me.  52. 

5  Bunker  v.  Barron,  79  Me.  62, 68. 

*  Parkhurst  v.  Cummings,  56  Me.  159  ;  Atkinson  v.  Minot,  75  Me.  193  ;  Thurs- 
ton V.  Blanchard,  22  Pick.  (Mass.)  18 ;  Appleton  v.  Parker,  15  Gray  (Mass.), 
174  ;  Holmes  r.  Banjc ,  126  Mass.  359  ;  Dana  v.  Binney,  7  Vt.  493  ;  Seymour  v. 
Darrow,  31  Vt.  122. 

^  Bunker  r.  Barron,  79  Me.  62 ;  Lovell  v.  Williams,  125  Mass.  442  ;  Maneely 
V.  M'Gee,  6  Mass.  143 ;  Cowan  v.  Wheeler,  31  Me.  443 ;  Machine  Co.  v.  Brock, 
113  Mass.  196. 


PAYMENT  OF  THE  DEBT.  1123 

new  note  given  for  all  past  indebtedness  between  the  parties, 
and  intended  as  a  discharge  and  satisfaction  of  the  debt  in- 
cluded in  it,  the  mortgage  is  thereb}''  discharged/ 

The  mortgagor  cannot  affect  the  security  of  the  mortgagee 
by  any  dealings  with  third  parties.  If  the  mortgage  debt  be 
paid  and  if  there  be  no  intervening  incumbrances  the  mort- 
gagor may  use  the  mortgage  again  and  may  pledge  it  for  another 
debt  to  secure  other  notes.^  A  subsequent  incumbrancer  can- 
not claim  that  a  new  note  for  the  debt  operates  as  a  payment, 
unless  the  facts  are  such  that  the  parties  so  intended  it.^  And 
a  statute  passed  after  the  execution  of  a  mortgage,  and  before 
a  renewal  of  it,  does  not  affect  the  new  security  to  the  mort- 
gagee's detriment/ 

In  the  absence  of  any  express  agreement  and  of  any  con- 
trolling circumstances  the  general  rule  is  that  the  renewal  of 
the  note  does  not  affect  the  security/ 

§  1172.  Taking  Subsequent  Mortgage. — The  deliver}^  to 
the  first  mortgagee  of  a  bond  secured  by  a  second  mortgage  does 
not  amount  to  payment  where  the  bond  was  merely  delivered 
to  him  for  sale,  and  he  being  unable  to  sell  it  returned  it  to 
the  corporation,  which  sold  it  and  appropriated  the  proceeds.® 
And  a  second  mortgage  and  note  taken  for  the  same  debt,  with 
no  discharge  or  surrender  of  the  first,  will  be  presumed  to  be 
a  further  security  for  the  same  debt.^ 

Where  the  mortgagee  took  a  new  note  and  mortgage  from 
the  purchaser  of  the  mortgaged  estate  and  agreed  not  to  enforce 
the  prior  mortgage,  he  may  lose  the  right  to  enforce  the  prior 
mortgage  by  sleeping  on  his  rights  and  allowing  intervening  in- 
cumbrancers to  secure  rights,  he  having  neglected  for  a  long 
time  to  record  the  new  mortgage.* 

1  Joyner  v.  Stancill  (N.  Car.),  12  S.  E.  Rep.  912. 
^  Robinson  r.  Urquhart,  1  Beas.  (N.  J.)  515. 
3  Strachn  v.  Foss,  42  N.  H.  43. 
*  Ponder  v.  Ritzinger,  102  Ind.  571. 

=  Bond  V.  Ins.  Co.,  106  111.  654 ;  Seymour  v.  Mackay,  21  111.  App.  449  ;  Coles 
V.  Withers,  33  Gratt.  (Va.)  186 ;  Cullum  v.  Bank,  23  Ala.  797. 
«  MuUanphy  Bank  v.  Schott,  135  111.  655. 
'  Schumpert  v.  Dillard,  55  Miss.  348,  364. 
«Teaff  V.  Ross,  1  Ohio  St.  469. 


1124  EIGHTS    OP    PARTIES    BEFORE    DEFAULT. 

In  general  a  second  mortgage  for  the  same  debt  on  the  same 
property  does  not  extinguish  the  first/ 

§  1173.  Intention  May  Control. — Any  arrangement  by 
which  the  debt  is  paid  or  discharged  satisfies  the  mortgage.' 
Thus,  the  giving  of  one's  own  note  in  discharge  of  a  debt, 
evidenced  by  an  existing  note,  is  a  good  payment  thereof,  if  it 
has  been  so  accepted  by  the  party  entitled  to  receive  payment, 
and  a  mortgage  executed  to  secure  such  existing  note  will  be 
thereby  satisfied.^  And  in  some  cases  this  intention  may  be 
shown  by  attending  circumstances.* 

The  burden  of  proof  is  upon  the  mortgagor ;  ^  but  the  taking 
of  a  new  note  by  a  mortgagee  afte^  the  institution  of  proceedings 
in  bankruptcy  against  the  mortgagor,  under  a  composition  agree- 
ment of  all  the  creditors,  operates  as  a  release  of  the  mortgage.^ 

The  question  of  intention  in  the  absence  of  an  express  agree- 
ment is  one  of  fact  to  be  determined  by  a  jury.'' 

Payment  by  a  negotiable  note  shall  operate  as  a  discharge 
and  extinguishment  of  a  prior  debt  when  so  intended  by  the 
parties.  The  rule  in  Massachusetts  differs  from  that  of  the 
common  law  only  in  determining  wliat  shall  be  presumed  to 
be  the  intent  of  the  parties  from  the  fact  of  giving  and  accept- 
ing a  negotiable  note  for  a  simple  contract  debt.  Without 
further  evidence  of  intention,  it  is  construed  to  be  payment, 
but  the  common  law  deems  it  collateral  security.** 

'  Gregory  v.  Thomas,  20  Wend.  (N.  Y.)  17  ;  Watkins  v.  Hill,  8  Pick.  (Mass.) 
522 ;  Burdett  v.  Clay,  8  B.  Mon.  (Ky.)  287  ;  Hill  v.  Beebe,  13  N.  Y.  556. 

^  Jackson  v.  Stackhouse,  1  Cow.  (N.  Y.)  122  ;  Runyan  v.  Mersereau,  11  Johns. 
(N.  Y.)  534  ;  Moore  v.  Cord,  14  Wis.  213 ;  Arnot  v.  Post,  6  Hill  (N.  Y.),  65. 

^  Iowa  County  v.  Foster,  49  Iowa,  676 ;  Hardin  v.  Branner,  25  Iowa,  364 ; 
Sloan  y.  Rice,  41  Iowa,  465 ;  Taft  v.  Boyd,  13  Allen  (Mass.),  84;  Hawkes  r. 
Ins.  Co.,  11  Wis.  188  :  Curtis  ';.  Ingham,"  2  Vt.  287  ;  Jaffray  v.  Crane,  50  Wis. 
349 ;  Meyer  v.  Lathrop,  73  N.  Y.  315  ;  AVorcester  Nat.  Bank  v.  Cheeney,  87  111. 
602.  614 ;  Sledge  /-.  Obenchain,  58  Miss.  670. 

'  Baker  v.  Gavitt,  128  Mass.  93  ;  Hoas  v.  Starr,  69  111.  365  ;  Flower  v.  El- 
wood,  66  111.  438  ;  Lippold  v.  Held,  58  Mo.  213 ;  McDonald  v.  Hulse,  16  Mo. 
503 ;  Birrell  v.  Schie,  9  Cal.  104. 

*  Sloan  V.  Rice,  41  Iowa,  465. 

^Jarnagan  v.  Gaines,  81  111.  203. 

'  Hodgman  v.  Hitchcock,  15  Vt.  374 ;  Couch  v.  Stevens,  37  N.  H.  169  ;  Colla- 
mer ;'.  Langdon,  29  Vt.  32. 

8  Fowler  v.  Bush,  21  Pick.  (Mass.)  230. 


i 


PAYMENT  OF  THE  DEBT.  1125 

§  1174.  Substituting  Another  Note. — The  substitution  of 
a  new  note  for  an  antecedent  debt  does  not  discharge  the  debt 
unless  expressly  given  and  received  as  an  absolute  pay- 
ment.^ 

So  where  a  new  note  and  mortgage  are  given  merely  for  the 
purpose  of  securing  the  same  debt,  this  is  not  a  payment  of 
the  former  mortgage  and  note,  for  nothing  short  of  actual  pay- 
ment of  the  debt  or  release  will  operate  to  discharge  a  mort- 
gage.' 

It  is  a  familiar  rule  that  if  the  holder  of  a  mortgage  takes  a 
new  mortgage  as  a  substitute  for  a  former  one,  and  cancels  and 
releases  the  first  in  ignorance  of  the  existence  of  intervening 
liens  upon  the  mortgaged  premises,  equity  will,  in  the  absence 
of  some  special  disqualifying  act,  restore  the  lien  of  the  first 
mortgage  and  give  it  its  original  priority.^ 

The  payment  of  one  note  by  another  is  only  conditional  and 
not  absolute  payment.  It  extends  the  time  for  payment  until 
the  maturity  of  the  new  note,  or  suspends  the  remedy  upon  the 
old  note,  but  does  not  extinguish  it.* 

So,  as  the  remedy  upon  the  debt  is  suspended,  it  is  clear  that 
the  remedy  upon  the  mortgage,  which  is  a  mere  incident  to 
the  debt,  is  suspended.  And  when  the  new  note  has  not  ma- 
tured at  the  time  of  an  intervention  of  a  third  party,  the  in- 
tervener will  not  be  entitled  to  have  the  old  mortgage  fore- 
closed.^ 

§  1175.  Substitution  of  New  Mortgage. — The  moi-tgagee 
may  discharge  his  mortgage  and  take  a  new  one  for  the  same 

'Nightingale  v.  Chafce,  11  R.  I.  609;  Hutchinson  ;•.  Swartsweller,  .^l  X.  J. 
Eq.  205. 

'^Geib  V.  Reynolds,  35  Minn.  331;  Brinkerhoff  v.  Lansing,  4  Johns.  Ch. 
(N.  Y.)65;  8  Am.  Dec.  538;  Heively  r.  Mattoson,  54  Iowa,  505 ;  Frink  i'. 
Branch,  16  Conn.  260,  274 ;  Walters  '■.  Walters,  73  Ind.  425. 

^Bruse  v.  Nelson,  35  Iowa,  157  ;  Cobb  r.  Dyer,  69  Me.  494  ;  Barnes  ?•.  ]\Iott, 
64N.  Y.  397;  Hutchinson  r.  Swartsweller,  31  N.  J.  Eq.  205;  Robinson  v. 
Sampson,  23  Me.  388. 

*  Brewster  r.  Bours,  8  Cal.  501 ;  Smith  v.  Owens,  21  Cal.  23 ;  Brown  v.  Olm- 
sted, 50  Cal.  165  ;  Tobey  r.  Barber,  5  Johns.  (N.  Y.)  68  ;  4  Am.  Dec.  326. 

5  In  re  Mathews,  L.  R.  12  Q.  B.  Div.  596 ;  2  Daniel  on  Neg.  Inst.,  sect.  1272. 


1126  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

amount,  when  the  discharge  and  taking  the  new  one  being  but 
one  transaction.  Release  of  the  old  mortgage  and  taking  a 
new  one  must  be  part  of  the  same  transaction.^ 

So  third  parties  may  pay  off  the  ■  old  mortgage  and  take  a 
new  mortgage  for  a  security  of  the  money  advanced,  provided 
the  transaction  be  one  and  the  same.^  But  as  regards  inter- 
vening liens  of  third  persons,  a  court  of  equity  will  recognize 
their  liens  unless  fraud,  accident,  or  mistake  was  the  cause 
of  releasing  the  prior  mortgage." 

Third  parties  may  advance  money  to  pay  off  the  mortgage 
and  take  a  new  one  from  the  mortgagor  as  security.  In  equity 
the  substance  of  the  transaction  would  be  an  assignment  of  the 
old  mortgage  in  consideration  of  the  money  advanced.^ 

If  the  original  mortgage  is  not  discharged*  it  remains  a  se- 
curity for  the  original  debt  in  the  absence  of  any  express 
agreement.^ 

The  substitution  of  a  new  mortgage  does  not  operate  to  dis- 
charge the  old  one,  but  merely  suspends  the  remedy  upon  it. 
It  is  well  settled  that  in  the  absence  of  an  agreement  to  that 
effect  the  payment  of  one  note  by  another  is  only  conditional 
and  not  absolute  paj^ment.^ 

It  is  well  settled  that  a  subsequent  security  for  a  debt  of 
equal  degree  with  the  former,  for  the  same  debt  will  not  b}'' 
operation  of  law  extinguish  it.'^  So  where  two  notes  and  mort- 
gages are  retired  and  a  new  note  and  mortgage  given  to  cover 

^  Holbrook  v.  Finney,  4  Mass.  566  ;  Clark  v.  Munroe,  14  Mass.  351 ;  Haynes 
V.  Jones,  5  Met.  (Mass.)  292 ;  Burns  v.  Thayer,  101  Mass.  426. 

2  Swift  V.  Kraemer,  13  Cal.  526  ;  Sledge  v.  Obenchain,  58  Miss.  670. 

^  Smith  V.  Bynum,  92  N.  Car.  108 ;  New  Eng.  Mort.  Secur.  Co.  v.  Hirsh 
(Ala.),  11  S.  Rep.  63;  Dingman  v.  Randall,  13  Cal.  513  ;  Washington  County 
V.  Slaughter,  54  Iowa,  265  ;  St.  Alban's  Trust  Co.  v.  Farrar,  53  Vt.  542 ;  Lasselle 
-'.  Barnett,  1  Blackf.  (Ind.)  150 ;  Stearns  v.  Godfrey,  16  Me.  158.  Compare 
Childs  V.  Stoddard,  130  INIass.  110. 

*  Dillon  V.  Byrne,  5  Cal.  455  ;  Birrell  v.  Schie,  9  Cal.  106 ;  Carr  v.  Caldwell, 
10  Cal.  380. 

*  Hill  r.  Beebe,  13  N.  Y.  556.  Compare  Iowa  County  v.  Foster,  49  Iowa, 
676. 

«Tolman  v.  Smith,  85  Cal.  280;  Tobey  v.  Barber,  5  Johns.  68  ;  4  Am.  Dig. 
326. 
^  Gregory  v.  Thomas,  20  Wend.  (N.  Y.)  18. 


PAYMENT  OP  THE  DEBT.  1127 

the  old  one,  and  an  additional  advance  in  cash,  the  retired 
mortgages  will  be  kept  alive  as  against  an  intervening  home- 
stead, because  the  cancellation  of  the  old  mortgages  and  the 
substitution  of  the  new  are  contemporaneous  acts.  It  does  not 
create  a  new  incumbrance,  but  simply  changes  the  form  of  the 
old.^ 

Where  the  amount  due  on  two  mortgages  is  paid  by  a  third 
person  at  the  request  of  the  mortgagor,  and  there  is  no  under- 
standing that  they  shall  be  considered  satisfied,  a  court  of 
equity  will  for  the  purposes  of  justice  keep  the  mortgages 
alive,^  and  much  more  so  if  the  party  paying  takes  an  assign- 
ment of  the  mortgages.^ 

§  1176.  Substitution  of  Defeasance. — A  bond  of  defea- 
sance recorded  together  with  the  deed  of  land,  made  to  secure 
a  debt,  was  delivered  by  the  grantor  to  another  creditor,  and 
the  first  creditor,  on  receiving  from  the  second  payment 
of  his  debt,  conveyed  the  land  to  him,  and  the  second  creditor 
gave  the  debtor  a  new  bond  of  defeasance  conditioned  for  the 
payment  of  the  amount  of  both.  It  was  held  that  the  second 
creditor  could  hold  the  bond  as  security  for  the  amount  paid 
by  him  to  the  first  creditor.' 

§  1177.  Entire  Change  in  the  New  Note. — When  the 
holder  of  one  of  several  notes  secured  by  mortgage  delivers  it 
up  to  the  mortgagor  and  maker,  and  a  new  note  is  exchanged 
for  it,  having  a  different  amount,  payable  at  another  time,  and 
without  any  agreement  that  it  should  be  secured  by  the  mort- 
gage, the  holder  loses  his  right  to  the  security  as  against  the 
holder  of  the  other  notes  secured  by  the  mortgage.^ 

But  a  difi'erent  amount  may  be  agreed  upon,  and  the  mort- 
gage made  to  secure  it.*' 

'  Swift  V.  Kraemer,  ir,  Cal.  530 ;  73  Am.  Dec.  G03. 

^Matzcn  v.  Shaeffer,  65  Cal.  81 ;  Gans  r.  Thieme,  93  N.  Y.  232  ;  Yaple  v. 
Stephens,  36  Kan.  680 ;  Bacon  v.  Goodnow,  59  N.  H.  415. 
'Tolman  v.  Smith,  85  Cal.  280. 
*  Judd  V.  Flint,  4  Gray  (Mass.),  557. 
*Wilhelmi  v.  Leonard,  13  Iowa,  330. 
^  Renshaw  v.  Taylor,  7  Oreg.  315. 


1128  RIGHTS    OF    PxVRTIES    BEFORE    DEFAULT. 

§  1178.  Additional  Security. — Taking  a  second  mortgage 
is  not  to  be  regarded  as  j^ayment  of  the  first,  but  as  additional 
security.'  Taking  a  new  note  with  additional  indorsers  does 
not  discharge  the  mortgage ;  ^  and  taking  a  new  note  with  an 
indorser  does  not  affect  the  security ;  ^  nor  does  the  renewal  of 
the  note  with  different  names  change  the  lien.* 

Of  course  where  the  agreement  is  tliat  taking  additional 
security  for  a  part  of  the  mortgage  debt  with  the  understand- 
ing that  such  part  shall  be  taken  from  the  lien  of  the  first 
mortgage,  such  intention  will  control.^ 

§  1179.  Additional  Loan  Included  in  New  Note. — It  is 
not  necessary  to  constitute  notes,  subsequently  issued,  renewals 
of  the  original  notes,  that  they  be  issued  for  the  same  amount 
to  the  same  periods,  and  that  each  successive  note  shall  have 
been  applied  to  take  up  its  immediate  predecessor." 

And  where  a  note  has  been  renewed  several  times,  the  mort- 
gage remains  as  security  until  it  is  all  paid,^ 

Parol  evidence  is  admissible  to  show  that  the  new  note  was 
taken  with  the  agreement  that  the  mortgage  should  continue 
as  security  for  it.* 

§1180.  No  Payment. — When  there  is,  in  fact,  no  payment 
the  mortgage  will  not  be  discharged.  Thus,  where  it  is  shown 
that  all  payments  have  been  merely  receipts  for  renewals  of 
notes,  on  which  no  money  was  paid,  it  will  not  be  a  j^ayment.^ 

1  Burdett  v.  Clay,  8  B.  Mon.  (Ky.)  287,  296 ;  Byers  v.  Fowler,  14  Ark.  86 ; 
Firemen's  Ins.  Co.  v.  Wilkinson,  35  N.  J.  Eq.  160 ;  Gregory  v.  Thomas,  20 
Wend.  (N.  Y.)  17 ;  Flower  v.  Elwood,  66  111.  438. 

'^Darst  V.  Bates,  51  111.439 ;  New  Hampshire  Bank  ?-.  Willard,  10  N.  H.  210. 

^Darstt'.  Bates,  51  111.439. 

*Pond  r.  Clark,  14  Conn.  334.  See,  also,  Latiolais  v.  Bank,  33  La.  Ann. 
1444  ;  Christian  v.  Newberry,  61  Mo.  446,  451. 

5  Boston  Iron  Co.  v.  King,  2  Cash.  (Mass.)  400.      ' 

«  Gault  V.  McGrath,  32  Pa.  St.  392 ;  De  Cottes  v.  Jeffers,  7  Fla.  284 ;  Port  v. 
Robbins,  35  Iowa,  208. 

'  Brinkerhoff  V.  Lansing,  4  Johns.  Ch.  (N.  Y.)  65. 

8  Pomroy  ?).  Rice,  16  Pick.  (Mass.)  22;  Ellsworth  v.  Mitchell,  31  Me.  247; 
Goenen  V.  Schroeder,  18  Minn.  66  ;  Port  v.  Bobbins,  35  Iowa,  208. 

'Humphreys  v.  Danser,  32  N.  J.  Eq.  220;  Shipman  v.  Cook,  16  N.  J.  Eq. 
251 ;  Tucker  v.  Alger,  30  Mich.  67. 


PAYMENT  OF  THE  DEBT.  1129 

So  where  a  mortgage  is  paid  by  a  check  and  bill  of  exchange 
which  are  dishonored,  and  the  mortgagor  becomes  bankrupt, 
the  mortgage  is  not  thereby  discharged  and  can  be  enforced.' 

So,  if  a  bill  of  exchange  is  not  paid,  although  an  indorsement 
of  payment  has  been  made  upon  the  note  and  mortgage,  this 
does  not  release  the  lien  of  the  mortgage.^ 

§  1181.  In  Case  of  Indemnity. — When  a  mortgage  has 
been  given  to  indemnify  an  accommodation  indorser  on  a  note 
and  the  note  at  maturity  is  not  paid  but  renewed  with  a  re- 
newal of  the  indorsement,  the  security  applies  to  the  renewal 
note  in  the  same  manner  as  to  the  original  one.  So  long  as  the 
renewal  note  is  not  paid,  the  indorser  is  not  indemnified  for  his 
original  indorsement.^  And  this  rule  holds  good,  though  there 
are  several  renewals.^  And  the  renewal  note  may  be  for  a 
larger  amount ;  ®  so  long  as  the  mortgagee  remains  liable  for 
the  debt,  any  successive  renewals  will  not  change  his  rights.^ 

§  1182.  New  Note  for  Accrued  Interest. — When  the 
mortgagee  takes  a  new  note  for  the  accrued  interest,  this  does 
not  necessarily  take  this  part  of  the  debt  from  the  lien  of  the 
mortgage.^ 

So  the  indorsement  of  the  amount  for  which  the  new  note 
is  given  upon  the  original  mortgage  note  is  not  a  payment 
unless  subsequent  purchaser  had  reason  to  believe  that  such 
amount  had  been  actually  paid.® 

iTeed  v.  Carruthers,  2  Y.  &  C.  Ch.  31. 

''Maryland,  etc.,  Co.  v.  Wingert,  8  Gill  (Md.),  170.  See,  also,  Barrows  v. 
Bangs,  34  Mich.  304. 

'  Boswell  V.  Goodwin,  31  Conn.  74  ;  Bolles  v.  Chauncey,  8  Conn.  389  ;  Dun- 
ham V.  Dey,  15  Johns.  (N.  Y.)  555  ;  Smith  v.  Price,  14  Conn.  472 ;  Easton  v. 
Friday,  2  Rich.  (S.  Car.)  427,  n.;  Markell  i'.EichelberL'or,12  Md.  78;  Choteau 
V.  Thompson,  3  Ohio  St.  424 ;  Handy  v.  Bank,  10  B.  Mon.  (Ky.)  98. 

*  Boxheimer  v.  Gunn,  24  Mich.  372. 

^Boxheimer  v.  Gunn,  24  Mich.  372. 

«  Nightingale  v.  Chafee,  11  R.  I.  609 ;  National  Bank  v.  Bigler,  83  N.  Y.  51 ; 
Pond  V.  Clarke,  14  Conn.  334,  overruling  Peters  v.  Goodrich,  3  Conn.  146; 
Robinson  v.  Urquhart,  1  Beas.  (N.  J.)  515. 

^Feldman  v.  Beier,  78  N.  Y.  293  ;  Elliot  v.  Sleeper,  2  N.  H.  525 ;  Parkhurst 
V.  Cummings,  56  Me.  155. 

8Frink  v.  Branch,  16  Conn.  260;  Humphreys  v.Danser,  32  N.  J.  Eq.  220. 


1130  RIGHTS   OF    PARTIES    BEFORE    DEFAULT. 

§  1183.  Extension  of  Time. — The  subsequent  agreement 
to  extend  the  time  to  pay  the  debt  by  a  future  date,  in 
consideration  that  the  mortgagee  will  forbear  suit  on  the  debt 
until  that  day,  is  not  a  release  of  the  mortgage.^  So  giving 
a  new  note  for  the  extension  of  time  does  not  release  the  prior 
note,  default  being  made  in  the  payment  of  the  last  note.^ 

But  if  the  mortgagee,  without  the  consent  of  the  mortgagor, 
wlien  the  mortgage  is  given  to  secure  the  notes  of  a  third 
party,  extends  the  time  for  a  consideration  paid  to  him,  the 
lien  is  thereby  discharged,  as  the  mortgagor  occupies  the  place 
of  a  surety  of  the  debt.^ 

The  mortgagor,  though  not  personally  liable  as  surety,  yet, 
as  owner  of  the  mortgaged  land,  he  occupies  that  position,  and 
consequently  the  extension  granted  to  the  principal  debtor, 
without  the  mortgagor's  consent,  discharges  the  lien  from  the 
mortgaged  land." 

Taking  additional  security  to  a  subsisting  mortgage,  with 
no  extension  of  time,  does  not  affect  the  rights  of  the  surety, 
and  he  is  not  thereby  released.^ 

Where  a  mortgage  given  to  secure  a  debt  by  one  who  does 
not  own  the  land,  provides  that  the  holder  of  the  note  may 
extend  the  time  of  payment  on  the  maker's  executing  coupons 
for  interest  to  accrue  during  such  extension,  the  holder  of  the 
note  may  extend  it  and  fix  the  rate  of  interest  which  such 
coupons  shall  bear  after  maturity,  without  further  consent  of 
the  mortgagor.® 

§  1184.  Guarantor  of  Note. — The  guarantor  of  the  pay- 
ment of  a  note  is  not  discharged  from  liability  by  reason  of  the 

iFord  V.  Burks,  37  Ark.  91;  Cleveland  v.  Martin,  2  Head  (Tenn.),  128; 
AVhittacre  v.  Fuller,  5  Minn.  508 ;  Bank  of  Utica  v.  Finch,  3  Barb.  Ch.  (N.Y.) 
293. 

=*  Naltner  v.  Tappey,  55  Ind.  107. 

»  Metz  V.  Todd,  36  Mich.  473. 

*Christner  v.  Brown,  16  Iowa,  130;  Gahn  v.  Niemcewicz,  11  "Wend.  (N.  Y.) 
312 ;  Walker  v.  Goldsmith,  7  Oreg.  161 ;  Smith  v.  Townsend,  25  N.  Y.  479 ; 
Leary  v.  Shaffer,  79  Ind.  567,  571  ;  Bank  v.  Burnss,  46  N.  Y.  170. 

°  Firemen's  Ins.  Co.  v.  Wilkinson,  35  N.  J.  Eq.  160. 

*Benneson  v.  Savage,  130  111.  352, 


PAYMENT  OF  THE  DEBT.  1131 

failure  to  serve  him  with  notice  of  tlie  non-payment,  unless  he 
can  show  that  he  suffered  detriment  thereby/  Thus,  the  guar- 
antor of  a  mortgage  which  provided  that  the  debt  secured  there- 
by should  become  due  and  payable  in  case  of  default,  was  held 
to  be  liable  on  the  guaranty  upon  such  default  being  made,  al- 
though the  note  given  for  the  mortgage  debt,  which  was  in- 
dorsed by  him,  was  not  by  its  terms  due.  His  liability  was  on 
the  guaranty  and  not  on  the  indorsement  of  the  note,  and 
would  not  be  contingent  upon  notice  of  non-payment.^ 

§  1185.  Reduced  to  Judgment. — Reducing  the  debt  to  a 
judgment  does  not  release  the  mortgage.  So  a  mortgagee  who 
has  taken  judgment  upon  the  mortgaged  debt  may  also  insti- 
tute proceedings  for  foreclosure  of  the  mortgage.^  The  mort- 
gage continues  a  lien  until  the  judgment  is  satisfied,  or  the 
judgment  is  barred  by  the  statute  of  limitations.*  Hence, 
suing  the  notes  secured  by  mortgage  and  procuring  judgment 
upon  them  without  satisfaction  in  any  way,  do  not  affect  the 
validity  of  the  mortgage.^ 

The  rule  is  the  same  when  only  a  part  of  the  debt  is  re- 
duced to  judgment.^  And  a  judgment  on  scire  facias  does  not 
affect  the  mortgage  lien.'^ 

The  same  rule  is  applicable  when  the  security  is  in  the  form 
of  a  trust  deed.^  And  a  decree  in  a  foreclosure  suit  does  not 
release  the  mortgage  lien.® 

^  Rodabaugh  v.  Pitkin,  46  Iowa,  544. 

^  Claflin  V.  Reese,  54  Iowa,  544.  See,  also,  Mitchell  v.  Clark,  35  Vt.  104 ; 
Hilton  V.  Catherwood,  10  Ohio  St.  109. 

3  Thornton  v.  Pigg,  24  Mo.  249 ;  Riley  v.  McCord,  21  Mo.  285 ;  Jordan  v. 
Smith,  30  Iowa,  500 ;  Shearer  v.  Mills,  35  Iowa,  499  ;  Butler  v.  Miller,  1  N.  Y. 
496 ;  Morrison  v.  Morrison,  38  Iowa,  73. 

*  Lewis  V.  Conover,  21  N.  J.  Eq.  230 ;  Torrey  v.  Cook,  116  Mass.  163 ;  AVay- 
man  v.  Cochrane,  35  111.  152 ;  Priest  v.  Wheelock,  58  111.  114  ;  Vansant  v.  AU- 
mon,  23  111.  30  ;  Hamilton  v.  Quimby,  46  111.  90. 

5  Jewett  V.  Hamlin,  68  Me.  172 ;  Cissna  v.  Haines,  18  Ind.  496 ;  Flanagan  v. 
Westcott,  3  Stockt.  (N.  Y.)  264;  Jenkin.son  i'.  Ewing,  17  Ind.  505;  IMarkle  v. 
Rapp,  2  Blackf.  (Ind.)  268;  Ely  v.  Ely,  6  Gray  (Mass.),  439 ;  Hendershott  v. 
Ping,  24  Iowa,  134. 

^Applegate  v.  Mason,  13  Ind.  75. 

^  Rockwell  V.  Servant,  63  111.  424  ;  Hehnbold  v.  Man,  4  Whart.  (Pa.)  410. 

« Hamilton  v.  Quimby,  46  111.  90. 

8  Priest  V.  Wheelock,  58  111.  114 ;  Hendershott  v.  Ping,  24  Iowa,  134 ;  Riley 


1132  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

However,  the  mortgagor  or  one  claiming  under  him  may 
pay  the  judgment,  and  the  Hen  is  discharged;^  and  if  sale 
under  foreclosure  satisfies  the  debt  the  lien  is  then  discharged/ 
unless  the  sale  is  set  aside.^ 

A  judgment  under  trustee  process  is  no  waiver  of  the  mort- 
gage lien/ 

A  release  from  imprisonment  is  no  satisfaction  of  the  mort- 
gage debt.^  If  a  mortgagee  who  has  foreclosed  his  mortgage 
accepts  payment  of  the  mortgage  debt,  it  is  a  waiver  of  the 
foreclosure  suit.® 

§1186.  Imprisonment  of  Debtor  or  Mortgagor. — The 
mortgagee  who  has  taken  the  body  of  his  debtor  in  execution 
for  the  mortgaged  debt  is,  nevertheless,  entitled  to  the  benefit 
of  his  security,  because  the  imprisonment  of  his  debtor  does 
not  discharge  his  mortgage  lien  upon  the  j)roperty.^ 

§  1187.  Release  of  Judgment. — The  release  of  the  judgment 
obtained  upon  the  mortgage  debt,  generally  discharges  the 
lien  of  the  mortgage  ;  *  but  the  mortgagee's  acknowledgment 
of  satisfaction  of  judgment  is  not  conclusive,^  and  whether  the 
judgment  is  released  is  a  question  of  fact  for  the  jury  when  the 
evidence  is  conflicting.  Thus,  where  the  mortgagee  entered 
under  process  of  law  and  subsequently  released  the  judgment, 
whether  this  is  a  waiver  of  such  foreclosure,  when  the  evidence 
is  conflicting,  is  a  question  of  fact  for  the  determination  of  the 
jury.^« 

V.  McCord,  21  Mo.  285 ;  Evansville  Gas  Light  Co.  v.  State,  73  Ind.  219  ;   Stahl 
r.  Roost,  34  Iowa,  475  ;  Peck's  Appeal,  31  Conn.  215  ;  Lapping  v.  Duffy,  47  Ind. 
51 ;  Teal  v.  Hinchman,  G9  Ind.  379.     Compare  Gage  v.  Brewster,  31  N.  Y.  218 ; 
People  V.  Beebe,  1  Barb.  (N.  Y.)  379. 
1  Sibley  v.  Rider,  54  Me.  463  ;  Yeomans  v.  Rexford,  35  Pa.  St.  273. 

*  People  V.  Beebe,  1  Barb.  (N.  Y.)  379. 

'Stackpole  v.  Robbins,  48  N.  Y.  665.    See  Applegate  v.  Mason,  13  Ind.  75. 

*  Watkins  v.  Cason,  46  Ga.  444. 
^  Cary  v.  Prentiss,  7  Mass.  63. 
^McCormick  v.  Irwin,  35  Pa.  St.  111. 

^  Davis  V.  Battine,  2  Russ.  &  M.  76 ;  11  Eng.  Ch.  76.    See,  also,  Cary  v. 
Prentiss,  7  Mass.  63. 

8  Porter  v.  Perkins,  5  Mass.  233,  236. 

9  Perkins  v.  Pitts,  11  Mass.  125. 
w  Couch  V.  Stevens,  37  N.  H.  169. 


payment  of  the  debt.  1133 

Article  6, 
Presumption  of  Payment. 

§  1188.  Note  and  Mortgage  Being  in  ^  1192.  Presumption    of     Payment 

the  Mortgagor's  Possession.  May  be  Rebutted. 

?  1189.  Notice  to  Purchasers.           -  ^  1193.  Kind  of  Evidence  Required 

^  1190.  Payment    is    Presumed    from  to     Overcome     the     Pre- 

Lai)se  of  Time.  sumption. 

^  1191.  Presumption    of  Payment  by  ?  1194.  Questions  for  the  Jury  and 

Lapse  of  a  Less  Tinae  than  the  Court. 

Twenty  Years. 

§  1188.  Note  and  Mortgage  Being  in  the  Mortgagor's 
Possession. — It  is  prima  facie  evidence  that  tlie  mortgage  has 
been  paid  when  tlie  mortgagor  has  possession  of  the  note  and 
mortgage.  Thus,  the  discharge  of  the  mortgage  of  record  and 
the  possession  by  the  mortgagor  of  the  instrument  with  the 
accompanying  note  or  bond,  cancelled  by  one  not  the  mort- 
gagor, i^  prima  facie  evidence  of  the  payment.^ 

It  is  not  reasonable  that  a  party  holding  a  note  and  who  ex- 
acted security  by  mortgage,  would  upon  the  execution  of  the 
mortgage,  deliver  it  into  the  hands  of  his  debtor,  evidence  of 
his  debt,  and  which  in  the  possession  of  the  mortgagor  would 
be  prima  facie  evidence  that  the  mortgage  was  discharged.^ 
And  if  the  mortgagor  has  been  in  possession  of  the  papers  for  a 
long  time  with  no  interference  of  the  mortgagee,  it  is  a  strong 
presumption  of  payment.^  But  the  mortgagor  should  ha\'e 
possession  of  both  instruments,  as  the  possession  of  the  mort- 
gage only  does  not  give  rise  to  the  presumption  of  payment.' . 

If  the  instrument  shows  no  payment  of  interest  after  due,  the 

1  Braman  v.  Bingham,  26  N.  Y.  4S.3 ;  Garlock  v.  Geortner,  7  Wend.  (N.  Y.) 
198;  Pahner  r.  Gurnsey,  7  Wond.  (N.  Y.)  248.  See,  also,  Novelh  v.  Rossi, 
2  Barn.  &  Adol.  757. 

2  Johnson  v.  Nations,  26  Miss.  147  ;  Crocker  r.  Tliompson,  3  Met.  (Mass.)  224  ; 
Bell  V.  Woodward,  34  X.  H.  90 ;  Chapman  / .  Hunt,  IS  N.  J.  Eq.  414 ;  Ormsby 
r;.  Barr,  21  Mich.  474;  Flower  v.  El  wood,  66  111.  438;  Richardson  v.  Cam- 
bridge, 2  Allen  (Mass.),  118;  Pui-ser  r.  Anderson,  4  Edw.  Ch.  (N.  Y.)  17; 
Harrison  v.  New  Jersey,  etc.,  Co.,  19  N.  J.  Eq.  488 ;  Grey  v.  Grey,  47  N.  Y.  552 ; 
Leby  v.  Merrill,  52  How.  Pr.  (N.  Y.)  360. 

•'•Gardner  v.  James,  7  R.  I.  396. 

*  Harrison  v.  New  Jersey,  etc.,  Co.,  19  N.  J.  Eq.  488. 


1134  RIGHTS    OF    PARTIES    BEFORE    DEFAULT, 

presumption  is  that  it  is  in  default/  and,  of  course,  there  is  no 
presumption  that  interest  not  due  is  paid. 

§  1189.  Notice  to  Purchasers. — AVhen  a  mortgage  is  not 
discharged  a  purchaser  must  take  notice  at  his  peril,  even  if 
the  mortgagor  has  possession  of  the  notes,  when  facts  present 
themselves  that  a  prudent  man  would  investigate  before  pur- 
chase.^ 

But  if  the  mortgage  had  been  discharged  of  record  and 
there  is  no  evidence  that  the  notes  are  held  by  some  other 
party,  or  were  negotiable,  a  purchaser  can  buy  without  danger.^ 
If  the  mortgagor  produces  the  mortgage,  though  the  seal  be 
torn  off,  and  makes  the  statement  that  he  can  have  it  released 
at  any  time,  as  it  is  fully  paid,  though  he  does  not  produce 
the  notes,  it  is  sufficient  to  indicate  payment.* 

And  the  mortgagee  can  be  estopped  from  asserting  the  non- 
payment of  the  mortgage  debt  by  his  actions.^  Thus,  if  he 
represents  to  the  purchaser  that  the  mortgage  has  been  satis- 
fied, or  that  it  will  be  paid  from  the  proceeds,  or  by  assisting 
the  mortgagor  in  selling  the  mortgaged  premises  and  leading 
the  purchaser  to  buy.^ 

§  1190.  Payment  is  Presumed  from  Lapse  of  Time. — 
A  mortgage  will  be  presumed  to  be  satisfied  after  a  lapse  of 
twenty  years,  nothing  to  the  contrary  appearing ;  or  whatever 
may  be  the  statutory  limit.'^ 

When  the  mortgagee  fails  to  offer  in  evidence  the  mortgage 

1  OlmPtead  v.  Elder,  2  Sandf.  (N.  Y.)  325. 

^Boxheimer  v.  Gunn,  24  Mich.  372. 

=>  Marburg  v.  Cole,  49  Md.  402. 

*  Harrison  v.  Johnson,  18  N.  J.  Eq.  420. 

5  Ormsby  v.  Barr,  21  Mich.  474. 

^M'Cormick  v.  Digby,  8  Blackf.  (Ind.)  99;  Taylor  v.  Cole,  4  Munf..  (Va.) 
351. 

'  Wilson  V.  Albert,  89  Mo.  537 ;  Chouteau  v.  Burlando,  20  Mo.  482 ;  Cape 
Girardeau  v.  Harbison,  58  Mo.  90 ;  Pattie  v.  Wilson,  25  Kan.  326 ;  Butler  v. 
Washington,  28  S.  Car.  607 ;  Murray  r.  Fishback,  5  B.  Mon.  (Ky.)  403 ;  Ow- 
ings  V.  Norwood,  2  H.  &  J.  (Md.)  96 ;  Chick  v.  Rollins,  44  Me.  104 ;  Brown  v. 
Becknall,  5  Jones  Eq.  (N.  Car.)  423;  Wanmaker  i;.  Van  Buskirk,  Saxt.  (N.  J.) 
685;  Cheever  v.  Perley,  11  Allen  (Mass.),  584;  Lynch  v.  Pfeiflfer,  HON.  Y. 
33. 


PAYMENT  OF  THE  DEBT.  1135 

or  to  explain  its  absence,  and  has  rested  for  thirteen  years 
without  demanding  payment,  and  who  liad  begun  the  suit  after 
a  chance  discovery  in  tlie  record  of  the  mortgage,  he  cannot 
maintain  a  suit  for  payment,  as  it  has  been  barred/ 

Under  the  North  Carolina  law,^  which  provides  that  the  pre- 
sumption of  par'ient  of  a  mortgage  debt  shall  arise  where  the 
mortgagor  remains  in  possession  of  the  mortgaged  premises 
for  ten  years,  after  the  right  of  action  accrues,  a  mortgage  is 
presumed  to  be  paid  where  the  mortgagor  and  his  heirs  re- 
mained in  possession  for  more  than  ten  years  after  default  and 
the  mortgage  was  not  foreclosed.^ 

And,  in  general,  the  possession  of  the  mortgaged  premises  for 
more  than  twenty  years,  without  recognition  of  the  mortgage 
or  of  the  debt  secured  by  it,  is  presumptive  proof  of  payment, 
which,  in  the  absence  of  evidence  to  the  contrary,  is  a  discharge 
of  the  debt  and  lien.* 

No  presumption  of  payment  can  arise  from  lapse  of  time 
when  the  mortgagee  or  his  assignee  is  in  possession  of  the  land.^ 

But  no  length  of  time  of  holding  possession  by  a  mortgagee 
will  bar  the  right  of  redemption,  if  the  mortgage  is  treated 
during  that  time  as  a  subsisting  security  for  the  debt.*^ 

On  the  other  hand,  there  are  presumptions  in  favor  of  the 
mortgagor  arising  from  long-continued  possession  by  him  of 
the  mortgaged  premises,  without  paying  rent  or  interest,  or  ad- 
mitting the  existence  of  an  outstanding  mortgage  debt.  If  this 
is  continued  for  twenty  years  after  the  condition  broken,  it 
raises  a  presumption  that  the  debt  has  been  paid  and  the 
mortgage  redeemed.  But  there  must  be  something  on  the 
part  of  the  mortgagor  showing  affirmatively  that  he  does  not 
hold  in  subordination  to  the  mortgagee's  title  in  order  to  have 

1  Butler  r.  Washington,  28  S.  Car.  607. 

"^  Rev.  Code  of  1885,  ch.  05,  sect.  19. 

^Pemberton  r.  Simmons,  100  N.  Car.  .310. 

*Cheever  v.  Perloy,  11  Allen  ("Mass.),  584;  Andrews  v.  Sparhawk,  13  Pick. 
(Mass.)  393,  400  ;  Rowland  r.  Shurtleff,  2  Met.  (Mass.)  20  ;  Bacon  v.  Mclntire, 
8  Met.  (Mass.)  87 ;  Kellogg  v.  Dickinson,  147  Mass.  432,  437. 

5  Crocker  v.  Jewell,  31  INIe.  300;  Brobst  v.  Brock,  10  Wall.  (U.  S.)  519). 

«2  Wash.  Real  Prop.  (2d  ed.)  p.  601,  sect.  25. 


1136  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

the  time  of  limitation  begin  to  run.  But  the  mortgagor  may 
give  to  his  possession  an  adverse  character  by  some  unequivocal 
act  hostile  to  the  title  of  the  mortgagee  and  brought  distinctly 
home  to  his  knowledge.  Such  act  must  be  a  clear,  open,  ex- 
plicit denial  of  the  mortgagee's  title,  and  a  refusal  to  hold 
under  it,  brought  home  to  the  knowledge  of  the  mortgagee, 
and  until  then  the  statute  of  limitations  does  not  begin  to  run.' 

The  possession  of  the  mortgagor,  in  absence  of  a  distinct  re- 
pudiation of  the  mortgage,  is  not  adverse  to  the  mortgagee.^ 

Under  the  common  law  the  constructive  possession  of  the 
mortgagee,  when  the  mortgagor  is  allowed  to  hold  possession, 
continues  until  the  mortgagor  directly  repudiates  the  right  of 
the  mortgagee.^  This  presumption  of  payment  arises  from 
the  policy  of  the  law  and  is  well  settled.* 

§  1191.  Presumption  of  Payment  by  Lapse  of  a  Less  Time 
THAN  Twenty  Years. — Less  than  twenty  years  may  afford 
presumption  of  payment  if  supported  by  other  facts  which 
may  amount  to  full  proof.^  So,  where  no  possession  had  been 
taken  under  the  mortgage,  and  no  interest  had  been  paid,  and 
no  steps  had  been  taken  to  enforce  it  for  nineteen  years,  it 
was  held  not  to  be  an  outstanding  title.'' 

There  is  a  presumption  of  fact,  or,  more  properly,  in  the 
nature  of  evidence,  which  can  be  drawn  by  a  jury  from  the 
circumstances  of  the  case,  in  less  than  twenty  years.''' 

1 2  Wash.  Real  Prop.  (2d.  ed.)  p.  603,  sect.  27  ;  Harrison  r.  Harrison,  1  Call 
(Va.),  419  ;  Pitzer  ?'.  Burns,  7  W.  Va.  63 ;  Harris  v.  Mills,  28  111.  44. 

^  Benton  County  v.  Czarlinsky,  101  Mo.  275. 

3  Jones  V.  Williams,  5  Ad.  &  E.  291 ;  Hall  v.  Surtees,  5  Barn.  &  Aid.  686, 
687  ;  Atkinson  v.  Patterson,  46  Yt.  750 ;  Martin  v.  Jackson,  27  Pa.  St.  504 ;  Ben- 
son ?\  Stewart,  30  Miss.  49. 

*  Hoffman  v.  Harrington,  33  Mich.  392;  Field  v.  Wilson,  6  B.  Mon.  (Ky.) 
479 ;  Goodwyn  r.  Baldwin,  59  Ala.  127 ;  Downs  v.  Sooy,  28  N.  J.  Eq.  55 ;  Boon 
V.  Pierpont,  28  N.  J;  Eq.  7  ;  Crook  v.  Glenn,  30  Md.  55 ;  Demarest  v.  Wynkoop, 
3  Johns.  Ch.  (N.  Y.)  129, 135. 

5  Saddler  v.  Kennedy,  11  W.  Ya.  187 ;  Walker  v.  Emerson,  20  Tex.  706. 

^Jackson  v.  Pratt,  10  Johns.  (N.  Y.)  381.  See,  also,  Buckmaster  v.  Kelley, 
15  Fla.  180;  Butler  v.  Washington,  28  S.  Car.  706  ;  Oswald  v.  Legh,  1  Term. 
E.  270. 

'Cheever  v.  Perley,  11  Allen  (Mass.),  587 ;  Goldhawk  v.  Duane,  2  Wash.  C. 


payment  of  the  debt.  1137 

§  1192.  Presumption  of  Payment  May  Be  Rebutted. — 
The  inference  of  payment  arising  from  mere  lapse  of  time  is 
not  sufficient  to  overcome  convincing  proof  of  non-payment.' 
Such  evidence  of  payment  can  be  overcome  by  direct  proof,^ 
and  the  presumption  is, 'always  disputable.^  Thus,  where  the 
mortgagor  endeavors  to  prove  payment  by  working  for  the 
mortgagee,  the  latter  may  rebut  his  evidence  by  showing  that  he 
paid  all  his  laborers  at  short  and  stated  intervals,  and  that  the 
mortgagor  was  poor  and  compelled  to  live  upon  his  earnings.^ 

The  presumption  of  payment  arising  from  the  lapse  of  time 
is  liable  to  be  rebutted  and  overcome  by  proof  and  facts  and 
circumstances,  the  legitimate  tendency  of  which  is  to  render  it 
more  probable  than  otherwise  that  payment  in  fact  has  not 
been  made.* 

But  circumstances  merely  rendering  the  collection  of  a  debt 
improbable,  as  the  poverty  of  the  debtor,  are  not  admissible 
to  rebut  the  presumption  of  payment.®  So  an  indorsement  on 
a  note  that  a  release  of  a  trust  deed,  securing  it,  had  been 
made  and  delivered  by  the  order  of  the  holder  is  not  a  pre- 
sumption of  payment  when  the  note  is  produced  by  the  payee 
with  the  indorsement  cancelled  by  drawing  a  pen  through  the 
words/  The  presumption  of  payment  is  not  conclusive  that 
the  debt  has  been  paid,  and  may  be  controlled  by  evidence.^ 

C.  323 ;  Bander  v.  Snyder,  5  Barb.  (N.  Y.)  63  ;  Hender°on  v.  Lewis,  9  Serg.  & 
R.  (Pa.)  384  ;  Milledge  v.  Gardner,  33  Ga.  397 ;  Lyon  v.  Guild,  5  Heif3k.  (Tcnn.) 
175 ;  Fleming  v.  Emory,  5  Harr.  (Del.)  46  ;  Wooten  v.  Harrison,  9  La.  Ann. 
234 ;  Gamier  v.  Eenner,  51  Ind.  372. 

'  Delaney  v.  Brunette,  62  Wis.  615. 

nVanmaker  t-.  Van  Bupkirk,  Saxt.  (X.  J.)  605  ;  23  Am.  Dec.  748. 

'Rowland  v.  Shurtleff,  2  Met.  (Mass.)  26;  35  Am.  Dec.  384 ;  Kane  v.  Blood- 
good,  7  Johns.  Ch.  (N.  Y.)  90 ;  11  Am.  Dec.  417,  439  ;  Schafer  v.  Hartz,  56  Ind. 
389 ;  Popple  v.  Day,  123  Mass.  520 ;  Gallup  v.  Jackson,  47  Mich.  475  ;  Prichard 
V.  Sharp,  51  Mich.  432,  435. 

*Waugh  V.  Riley,  8  Met.  (Mass.)  290. 

*  Grantham  v.  Canaan,  38  N.  H.  268  ;  Wood  v.  Deen,  1  Ired.  L.  (N.  Car.)  230; 
Arden  v.  Arden,  1  Johns.  Ch.  (N.  Y.)  313;  Abbott  v.  Godfroy,  1  Mich.  178; 
Sutphen  v.  Ciis^hman,  35  111.  186  ;  Waugh  v.  Riley,  8  Met.  (Mass.)  290. 

« Rogers  v.  Judd,  5  Vt.  236. 

^Steinmetz  v.  Lang,  81  111.  603. 

8 Locke  V.  Caldwell,  91  lU.  417;  Earned  v.  Earned,  21  N.  J.  Equity;  Cold- 
72 


1138  eights  of  parties  before  default. 

§  1193.  Kind  of  Evidence  Required  to  Overcome  the 
Presumption. — The  evidence  to  rebut  the  presumption  of  pay- 
ment after  twent}''  years  must  be  satisfactor}^  and  convincing, 
and  especially  so  when  the  suit  is  not  brought  until  after  the 
death  of  the  debtor.  Such  evidence  may  consist  of  the  debt- 
or's admissions  to  the  creditor  himself,  or  to  his  agent,  or  even 
to  a  stranger,  but  an  admission  will  not  be  as  readily  implied 
from  language  addressed  casually  to  a  stranger  as  when  ad- 
dressed to  the  creditor  in  reply  to  a  demand  made. 

In  such  case  the  debtor  stands  upon  a  presumption  of  law 
binding  upon  both  court  and  jury  until  invalidated  by  proof. 
The  creditor  in  rebuttal  stands  upon  a  presumption  of  fact, 
which  he  claims  arises  out  of  the  evidence.  Wherefore, 
whether  the  facts  sought  to  be  established  in  rebuttal  of  the 
presumption  are  true  is  a  question  of  fact  for  the  jury,  but 
whether  if  true,  they  legitimately  give  rise  to  the  inference  of 
non-payment,  is  a  question  of  law  for  the  court.^  The  pre- 
sumption of  payment  is  a  presumption  of  law.  The  law  shifts 
the  burden  of  proof  upon  the  shoulders  of  the  creditor  and  re- 
quires him  to  show  that  the  debt  is  not  paid.  He  may  do  this 
by  showing  such  acts  and  declarations  of  the  debtor  as  are  con- 
tradictory or  inconsistent  with  the  theory  that  the  debt  is  paid.^ 
In  case  where  the  trial  is  by  jury,  the  presumption  of  payment  is 
such  a  one  as  the  law  makes  through  the  medium  of  the  jury.^ 

The  evidence  may  consist  of  the  debtor's  admissions  made 

to  the  creditor  himself,*  or  to  his  agent  or  even  to  a  stranger.^ 

But  an  admission  will  not  be  as  readily  implied  from  language 

casually  addressed  to  a  stranger  as  when   addressed  to  the 

creditor  himself  in  reply  to  a  demand  for  the  debt.^ 

cleugh  V.  Johnson,  34  Ark.  312 ;  Cook  v.  Parham,  63  Ala.  456 ;  Philbrook  v. 
Clark,  77  Me.  176 ;  Jarvis  v.  Albro,  67  Me.  310 ;  Ray  v.  Pearce,  84  N.  Car.  485  ; 
Cheever  v.  Perley,  11  Allen  (Mass.),  584 ;  Murphy  v.  Coates,  33  N.  J.  Eq.  424 ; 
Hart  V.  Boyt,  54  Miss.  547 ;  Biddel  v.  Brizzolara,  56  Cal.  374. 

'  Gregory  v.  Commonwealth,  121  Pa.  St.  611. 

"Waugh  V.  Riley,  8  Met.  (Mass.)  290. 

5  Crist  V.  Brindle,  2  P.  &  W.  (Pa.)  262. 

*Eby  w.  Eby,  5Pa.  St.  435. 

5  Morrison  v.  Funk,  23  Pa.  St.  423 ;  Reed  v.  Reed,  46  Pa.  St.  239. 

6  Bentley's  Appeal,  99  Pa.  St.  500. 


PAYMENT  OF  THE  DEBT.  1139 

Justice  Clark  ably  says : 

"  The  facts  and  circumstances  relied  on  to  rebut  the  pre- 
sumption must  necessarily  be  within  twenty  years  before  suit 
is  brought,  and  as  the  recollections  of  the  exact  words  and  im- 
port of  an  oral  admiss^'^n  must  necessarily  become  more  in- 
distinct with  the  lapse  of  years,  the  force  of  such  an  admission 
will  in  general  be  lessened  as  the  time  from  its  occurrence  in- 
creases. On  the  other  baud,  after  twenty  years  the  presump- 
tion will  gather  strength  with  each  succeeding  year,  and  the 
evidence  to  overthrow  it  must,  of  course,  be  correspondingly 
increased.  After  what  lapse  of  time  beyond  twenty  years,  if 
ever,  this  presumption,  which  is  disputable,  will  be  conclusive 
has  never  been  determined,  and  as  the  law  now  stands  each 
case  must  stand  on  its  particular  facts  and  circumstances.  It 
is  not  required  that  the  same  precision  and  particularity  of 
proof  shall  in  all  respects  be  observed  as  has  been  required  to 
remove  the  bar  of  the  statute  of  limitations,  but  as  the  pre- 
sumption of  payment  after  twenty  years  is  a  strong  one,^  the 
evidence  to  rebut  it  must  be  satisfactory  and  convincing.^ 
Especially  is  this  so  when  the  suit  is  not  brought  until  after 
the  defendant's  death.  It  must,  according  to  the  cases,  carry 
conviction  to  the  mind  of  the  court  that  if  the  facts  alleged  are 
true,  the  matters  in  issue  are  definitely  and  distinctly  estab- 
lished." ^ 

Parol  evidence  is  admissible  to  explain  payments  made  upon 
the  mortgage  notes,  or  to  show  that  they  were  erroneously 
made.* 

§  1194.  Questions  for  the  Jury  and  the  Court. — In  cases 
of  presumption  of  payment,  the  debtor  stands  upon  a  presump- 
tion of  law  which  is  binding  alike  upon  the  court  and  jury, 
until  invalidated  by  proof ;  and  the  creditor  in  rebuttal,  upon 

1  Kline  v.  Kline,  20  Pa.  St.  50.S. 

"Peter's  Appeal,  106  Pa.  St.  340;  Eby  v.  Eby,  5  Pa.  St.  435;  Sellers  v.  Hol- 
man,  20  Pa.  St.  321. 

3  Gregory  v.  Commonwealth,  121  Pa.  St.  611,  622. 

*  Humphreys  v.  Danger,  32  N.  J.  Eq.  220  ;  Austin  v.  Austin,  9  Vt.  420.  See, 
also,  McDaniels  v.  Lapham,  21  Vt.  222. 


1140  RIGHTS   OP    PARTIES    BEFORE    DEFAULT. 

presumption  of  fact  only,  which  he  claims  to  arise  out  of  the 
evidence ;  whether  or  not  the  matters  sought  to  be  estabhshed 
are  true  is  a  question  for  tlie  jury,  but  whether  tlie  facts  and 
circumstances  relied  on,  if  true,  would  legitimately  give  rise  to 
the  presumption  of  fact  referred  to,  is  necessarily  a  question  of 
law  for  the  court.  ^ 

And  where  there  is  no  evidence  to  authorize  the  verdict,  Jus- 
tice Simmons  says  every  court  which  has  the  power  should  set 
aside  the  verdict,  regardless  of  the  number  of  verdicts  which 
the  jury  may  erroneously  return.^  Thus,  the  reception  without 
objection  by  the  mortgagors  of  accounts  of  sales  showing  the 
disposition  made  of  the  proceeds,  and  allowing  the  mortgage 
to  remain  in  the  hands  of  the  mortgagees,  with  all  other  facts 
and  circumstances  of  the  case,  are  opposed  to  a  verdict  support- 
ing a  plea  that  the  mortgage  was  paid  off.^ 

Article  7. 

Evidence  of  Payment. 

?  1195.  Sufficient  Proof.  §  1197.  Parol  Evidence. 

I  1196.  Insufficient  Proof.  I  1198.  Burden  of  Proof. 

§  1195.  Sufficient  Proof. — The  extinguishment  of  a  debt 
by  payment  must  be  shown  by  reasonable  certainty.*  When 
defense  is  interposed  to  a  note  or  other  security,  and  the  testi- 
mony is  conflicting  and  evenly  balanced,  the  possession  by  the 
creditor  of  the  uncancelled  security  is  a  material  circumstance 
and  should  turn  the  scale  in  his  favor,  unless  satisfactorily  ex- 
plained by  the  debtor.'^  Express  proof  as  well  as  acts  of  the 
parties  may  show  that  a  mortgage  debt  has  been  paid.^ 

When  the  preponderance  of  evidence  is  against  the  mort- 
gagee, he  has  the  weight  of  proving  his  claim.'^ 

^  Gregory  v.  Commonwealth,  121  Pa.  St.  611 ;  Peter's  Appeal,  106  Pa.  St.  340. 

2  Kennedy  v.  Davis,  82  Ga.  210,  213  ;  Mitchell  ().  Malone,  77  Ga.  301. 

3  Kennedy  v.  Davis,  82  Ga.  210. 

*  Succession  of  Moreira,  16  La.  Ann.  368. 

*  Doty  V.  Janes,  28  Wis.  319. 

« Ackla  V.  Ackla.  6  Pa.  St.  228. 

'  Ketchum  v.  Gulick  (N.  J.),  20  At.  Rep.  487.     See,  also,  Whitman  v.  Foley, 
125  N.  Y.  651. 


PAYMENT  OF  THE  DEBT.  1141 

Where  evidence  is  conflicting  as  to  whether  the  mortgage 
has  been  paid,  and  whether  the  mortgage  is  simply  lield  by 
the  assignee  as  security  for  advances  made  to  a  subsequent 
purchaser  of  the  land,  the  mortgagor  may  testify  to  admissions 
by  the  mortgagee  to  the  effect  that  the  mortgage  debt  has  been 
paid  by  such  subsequent  purchaser  of  the  land/ 

The  docket  entries  of  a  case  required  by  law  to  be  kept  by 
the  clerk,  showing  there  is  a  judgment,  are  admissible  in  evi- 
dence in  connection  with  a  copy  of  the  judgment ;  but  the 
declarations  of  the  mortgagor  and  others  that  the  mortgage 
has  been  paid  are  inadmissible  to  affect  the  assignee.^ 

So  where  a  deposit  of  cash  has  been  made  by  the  mortgagor 
with  a  third  person  to  pay  a  mortgage  and  the  mortgagee  takes 
a  note  of  the  third  party  for  part  of  the  cash  and  purposely 
conceals  this  fact  from  the  mortgagor  for  a  period  of  ten  years, 
such  conduct  on  the  part  of  the  mortgagee  was  a  continuing 
admission  to  his  mortgagor  that  he  had  received  cash  on  his 
mortgage,  which  estopped  him  from  asserting  rights  incon- 
sistent with  such  admissions.^ 

In  an  action  on  a  mortgage  where  the  plaintiff  is  proceed- 
ing as  assignee  for  the  benefit  of  the  creditors  of  one  of  the 
owners  of  the  mortgage,  it  is  not  error  to  admit  in  evidence 
under  the  plea  of  payment  the  office  inventory  and  appraise- 
ment of  the  assigned  estate  to  show  that  the  interest  sought  to 
be  recovered  had  not  been  appraised  as  a  portion  thereof. 
Justice  Mitchell,  speaking  for  the  court,  says  that  it  is  no  error 
to  admit  in  evidence  the  record  entry  of  satisfaction  of  the  in- 
terest, made  by  the  assignor  himself  after  the  date  of  the  as- 
signment, as  a  self-deserving  declaration,  admissible  not  only 
against  the  assignor,  but  against  the  assignee,  when  accom- 
panied with  instruction  that  the  assignor  had  no  right  to  make 
the  entry,  if  he  had  not  received  payment  before  the  date  of 
his  assignment.* 

1  Blake  v.  Broughton,  107  ISi .  Car.  220. 
^Shipley  v.  Fox,  69  Md.  572. 
'^  Rhinesmith  r.  Slote,  44  N.  J.  Eq.  578. 
*  Cox  V.  Ledward,  124  Pa.  St.  435, 449. 


1142  RIGHTS   OF    PARTIES    BEFORE   DEFAULT. 

§  1196.  Insufficient  Proof. — In  order  to  sustain  the  proof 
of  payment,  the  evidence  must  show  it.  When  the  mortgagor 
claims  a  payment  has  been  made,  his  evidence  must  not  be 
conflicting.  Tlius,  when  he  claims  in  his  testimony  that  an 
assignment  of  the  mortgage  was  made  after  the  mortgagee's 
death,  when  it  appears  of  record  that  the  mortgagee  himself 
assigned  the  mortgage,  the  evidence  of  payment  is  insufficient, 
the  mortgagor  not  having  the  note  or  mortgage  in  his  posses- 
sion.' And  the  mere  introduction  of  the  mortgage  bond,  with 
evidence  that  proves  that  it  had  been  in  the  mortgagor's  pos- 
session for  a  long  time,  is  not  sufficient  proof  of  payment, 
when  the  bond  appears  to  consist  of  two  pieces  of  paper  of  dif- 
ferent quality,  and  the  mortgage  is  not  produced  or  its  absence 
accounted  for,  and  there  is  no  indorsements  on  the  bond  of 
payments,  as  these  circumstances  rebut  the  presumption  of 
payment  arising  from  the  possession  by  the  mortgagor.^ 

Where  a  mortgagor  asserts  that  certain  receipts  in  his  pos- 
session indicate  that  he  had  j^aid  usurious  interest  on  the 
mortgage,  but  when  produced  no  such  evidence  was  shown ;  * 
and  where  a  subsequent  mortgage  is  executed  by  the  owner  of 
the  mortgaged  property,  showing  that  the  mortgagor  considered 
the  property  free  from  incumbrance  at  the  time  of  making  it ; 
it  is  evidence  not  admissible  to  show  payment  of  a  note  secured 
by  a  prior  mortgage,  as  the  mortgagor  cannot  admit  away  rights 
of  the  holder  of  the  note.* 

In  case  the  vendee  agrees  to  pay  the  mortgagee  if  he  would 
release  his  mortgage,  but  fails  to  pay  the  amount  after  cancel- 
lation, evidence  going  to  show  that  the  mortgagor  had  in  fact 
paid  the  debt  prior  to  the  agreement  is  irrelevant  and  inad- 
missible.^ 

A  contention  that  a  debt  secured  by  a  trust  deed  under 
which  the  defendant  in  ejectment  claims  has  been  paid,  and 

iNau  V.  Brunette,  79  Wis.   664;  Hann  v.  Dekater  (N.  J.),  20  At.  Rep. 
657.' 
^  Anderson  v.  Culver,  127  N.  Y.  377. 
3 Hann  v.  Dekater  (N.  J.),  23  At.  Rep.  657. 

*  Thompson  v.  Longan,  42  Mo.  App.  146. 

*  Jones  V.  Hughes,  66  Miss.  413. 


PAYMENT  OF  THE  DEBT.  1143 

the  debtor  who  is  a  witness  for  the  plaintiff  testifies  tliat  he 
nor  the  beneficiary  claims  that  payment  made  by  him  to  the 
beneficiary  was  to  be  applied  on  the  debt  secured  by  the  trust 
deed,  does  not  establish  payment/ 

§  1197.  Parol  Evidence. — In  a  contest  between  original 
parties  to  notes  secured  by  deed  of  trust,  executed  subsequent 
to  the  date  of  the  notes,  parol  evidence  is  admissible  to  show 
that  other  payments  have  been  made  on  the  notes  than  those 
recited  in  the  trust  deed. 

Judge  Black  says  that  a  deed  of  trust  being  under  seal  im- 
ports a  consideration,  and  want  of  consideration  could  not  be 
shown  for  the  purpose  of  defeating  it  as  a  deed.  This  is  true 
in  resj^ect  to  other  deeds,  and  the  principle  is  applicable  to 
mortgages  and  deeds  of  trust  in  the  nature  of  mortgages.  But 
for  the  purpose  of  ascertaining  what  is  due  the  consideration 
may  be  inquired  into.  Parties  are  concluded  by  recitals  in 
deeds  to  prevent  denial  of  affirmation  upon  the  faith  of  which 
affirmation  third  persons  have  acted  or  exjDended  their  money .^ 

§  1198.  Burden  of  Proof. — The  burden  of  proof  is  upon 
the  mortgagor  where  he  alleges  payment  of  the  mortgage  debt 
and  a  set-off  and  breach  of  another  contract,  and  the  assignee 
of  the  mortgagee  is  not  obliged  to  produce  the  books  of  the 
mortgagee  to  prove  his  case,  which  the  mortgagor  alleges  were 
kept  by  the  mortgagee  and  showed  the  amount  due.^ 

Where  the  evidence  is  wholly  circumstantial  some  of  the 
parties  to  the  transaction  being  dead  and  the  others  therefore 
incompetent  to  testify,  and  the  collateral  facts  are  nearly  all 
evidenced  by  writings,  and  form  as  a  whole  a  ftiir  basis  for  a 
conclusive  inference  of  payment,  the  question  sliould  be  sub- 
mitted to  the  jury  accompanied  with  the  instruction  that  the 
burden  of  proof  is  upon  those  claiming  payment. 

The  court  says  that  when  the  evidence  is  limited  to  a  series 

of  collateral  facts,  none  of  them  conclusive,  or  perhaps  very 

weighty,  taken  singly,  but  forming  as  a  whole  the  fair  basis  of 

>  Collins  V.  Stocking,  98  Mo.  290. 

^Estes  V.  Fry,  94  Mo.  266 ;   Farniim  v.  Burnett,  21  N.  J.  Eq.  87. 

'Coon  V.  Bouchard,  74  Mich.  488 ;  Brown  v.  Scott,  87  Ala.  453. 


1144  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

a  conclusive  inference  by  the  jury  in  favor  of  payment,  the 
jury  was  properly  told  that  the  burden  of  proof  was  on  the 
defendants,  and  there  was  more  than  a  scintilla  in  support  of 
the  latter's  contention.^ 

Article  8. 
Application  of  Payment. 

I  1199.  General  Rule.  §  1206.  Eights  of  Third  Parties. 

§  1200.  Application  by  the  Mortgagor  I  1207.  What  is  a  Sufficient  Appro- 
or  Debtor.  priation. 

§  1201.  Ai)plication    by    Creditor    or  ?  1208.  Payment  of  Interest. 

Mortgagee.  I  1209.  Partial  Payments  of  Usurious 

§  1202.  Application  by  the  Law.  Interest. 

I  1203.  Debts  With  Different  Securi-  I  1210.  Payment  of  Collateral  Secu- 
ties.  rity. 

§1204.  Money   Derived  from  a  Par-  §  1211.  Payment  of  Insurance  Money 
ticular  Source.  for  Losses. 

I  1205.  When  the  Eight  of  Appropri- 
ation Must  Be  Made. 

§  1199.  General  Rule. — The  general  rule  of  law  in  refer- 
ence to  the  appropriation  of  payment  is  that  a  debtor  owing 
several  debts  to  the  same  creditor  has  a  right  to  apply  his  pay- 
ment, at  the  time  of  making  it,  to  which  debt  he  pleases.  If 
he  makes  a  general  payment  without  appropriating  it,  the 
creditor  may  apply  it  as  he  pleases.  And  when  neither  party 
appropriates  it,  the  law  will  apply  it  according  to  its  own  view 
of  the  intrinsic  justice  and  equity  of  the  case.^ 

§  1200.  Application  by  the  Mortgagor  or  Debtor. — 
Where  a  debtor  who  owes  to  his  creditor  several  distinct  debts 
makes  a  payment  to  his  creditor,  the  debtor  or  mortgagor  may 
apply  such  payment  to  any  one  of  such  debts  which  he  chooses,* 
and  the  creditor  cannot,  without  the  consent  of  the  debtor, 
change  such  appropriation.^     The  mortgagor  may  appl}''  the 

^Cox  V.  Ledward,  124  Pa.  St.  435,  450. 

'^Terhune  v.  Colton,  1  Beas.  (N.  J.)  232. 

^Shellabarger  t).  Binns,  18  Kan.  345.  See,  also,  Bean  v.  Brown,  54  N.  H. 
395 ;  Champenois  v.  Fort,  45  Miss.  355. 

*  Jackson  p.  Bailey,  12  111.  159 ;  Semmes  v.  Boykin,  27  Ga.  47 ;  Sherwood  v. 
Haight,  26  Conn.  432;  Calvert  v.  Carter,  18  Md.  73. 


PAYMENT  OF  THE  DEBT.  1145 

payment  to  the  principal  or  to  the  interest,  or  to  another  debt 
due  the  mortgagee/ 

And  the  debtor  unquestionably  has  the  right  to  have  the 
proceeds  of  sale  of  the  mortgaged  property  appropriated  to  the 
satisfaction  of  the  mortgage  debt,  without  any  special  direc- 
tion to  this  effect.  This  duty  of  the  mortgagee  is  one  implied 
by  law,  in  the  absence  of  the  mortgagor's  consent  to  have  the 
money  credited  upon  some  other  debt.^ 

In  an  action  to  compel  the  discharge  of  a  mortgage  on  the 
ground  that  the  mortgagor  applied  certain  payments  to  the 
satisfaction  of  the  mortgage,  when  he  owed  the  mortgagee 
other  debts,  the  burden  is  upon  the  mortgagor  to  show  such 
application.^  In  some  cases  a  payment  b}'-  the  mortgagor  has 
been  presumed  to  be  upon  the  mortgage  debt.* 

§  1201.  Application  by  Creditor  or  Mortgagee. — ^AVhere 
a  debtor,  who  owes  another  several  distinct  debts,  makes  a 
payment  to  him  without  directing  the  mode  of  its  appropria- 
tion, the  creditor  may  apply  the  money  as  he  pleases.  This 
he  may  do  without  giving  the  debtor  any  notice  of  the  act  by 
which  the  appropriation  has  been  made.^ 

This  rule  applies  when  the  mortgagee  receives  money  from 
the  husband  of  the  mortgagor,  who  is  indebted  to  him,  with- 
out any  direction  that  it  shall  be  applied  to  the  mortgage  debt 
of  the  wife.^ 

And  if  a  creditor  makes  an  application  of  a  payment  not 
applied  by  his  debtor,  generally  on  an  open  account,  the  law 

1  Leeds  v.  Gifford,  41  N.  J.  Eq.  4G4 ;  Vick  v.  Smith,  83  N.  Car.  80 ;  Hughes 
V.  Johnson,  38  Ark.  285  ;  Harris  v.  Hooper,  50  Md.  537 ;  Mills  v.  Fowkes,  5 
Bing.  N.  C.  455  ;  Hammersley  v.  Knowlys,  2  Esp.  666 ;  Bradley  v.  Heath,  3 
Sim.  543. 

^Lenystein  r.  Whitman,  59  Ala.  345 ;  Sanders  v.  Knox,  57  Ala.  80;  Johnson 
V.  Thomas,  77  Ala.  367,  370 ;  2  Whart.  Contr.,  sects.  924,  929. 

^  Knox  V.  Johnston,  26  Wis.  41. 

^  The  Antarctic,  1  Sprague  (Dist.  Ct.),  206;  Pattison  v.  Hull,  9  Cow.  (X.  Y.)  747. 

5  Johnson  v.  Thomas,  77  Ala.  367;  Terhune  v.  Colton,  1  Beas.  (N.  J.)  312; 
Feldman  v.  Beier,  78  N.  Y.  293 ;  Shellabarger  v.  Binns,  18  Kan.  345 ;  Ege  v. 
Watts,  55  Pa.  St.  321 ;  Prouty  v.  Price,  50  Barb.  (N.  Y.)  344 ;  Mackenzie  v. 
Gordon,  6  CI.  &  F.  875,  892  ;  United  States  v.  January,  7  Cranch  (U.  S.),  572; 
Bell  V.  Radcliff,  32  Ark.  645. 

6  Greig  v.  Smith,  29  S.  Car.  426. 


1146  EIGHTS    OF    PAETIES    BEFORE    DEFAULT. 

will  not  afterward  apply  it  to  the  payment  of  a  judgment, 
even  if  older  than  the  account,  especially  if  the  creditor  has 
security  for  the  judgment  and  not  for  the  account.^ 

And  if  the  mortgagor  fails  to  make  an  application  to  one  of 
two  mortgages  on  the  same  property,  held  by  the  same  mort- 
gagee, the  latter  may  make  the  application/ 

In  the  absence  of  instructions  as  to  how  the  creditor  should 
apply  the  payment,  the  creditor  can,  under  the  common-law 
rule,  apply  the  payment  to  any  of  the  debts  at  his  pleasure ;  ^ 
but  the  rule  under  the  civil  law  is  that  payment  is,  in  the  ab- 
sence of  instructions,  to  be  made  on  the  debt  most  onerous  to 
the  debtor.*  No  presumption  can  control  approi:)riations  by 
the  parties.^ 

A  creditor,  having  received  a  mortgage  from  the  debtor's 
wife  on  all  the  notes  held  against  him,  but  who  is  not  under 
any  contract  with  parties  who  had  indorsed  a  part  of  the  notes, 
has  a  right  to  apply  the  proceeds  of  the  mortgage  to  the  ex- 
tinguishment of  the  notes  other  than  the  ones  indorsed  by  the 
sureties,  the  sureties  not  being  damnified  by  the  creditor's  ap- 
propriation of  the  property."  This  the  creditor  had  a  clear 
right  to  do,  unless  the  surety  acquired  such  a  right  in  the  se- 
curity the  moment  it  was  given  as  precluded  the  creditor  from 
dealing  with  the  same  in  the  manner  in  which  he  clid.^ 

But  it  is  equally  clear  that  the  creditor,  receiving  the  mort- 
gage in  the  manner  in  which  he  did  without  any  designation 
from  the  debtor  of  a  particular  note  upon  which  the  proceeds 
of  the  security  should  be  applied,  had  the  right  to  apply  the 
entire  proceeds  upon  notes  other  than  those  upon  which  the 
surety  had  indorsed.^ 

The  surety  was  no  party  to  this  arrangement  and  had  no  right 

iWatt  V.  Hoch,  25  Pa.  St.  411. 
"  Parker  v.  Green,  8  Met.  (Mass.)  137. 

'  Law  V.  Southerland,  5  Gratt.  (Va.)  357 ;  Johnson  v.  Anderson,  30  Ark.  745. 
*  Forstall  v.  Blanchard,  12  La.  1. 
"Tharp  v.  Feltz,  6  B.  Mon.  (Ky.)  6. 
« Noble  V.  Murphy  (Mich.),  52  N.  W.  Rep.  148. 

^  Blair  v.  Carpenter,  75  Mich.  167  ;  Wood  v.  Callaghan,  61  Mich.  402. 
8  Mathews  v.  Switzler,  46  Mo.  301 ;  Bank  v.  Lewis,  78  "Wis.  475 ;  Hanson  v. 
Manley,  72  Iowa,  48. 


I 


PAYMENT    OF    THE    DEBT.  1147 

to  control  its  terms.  His  principal  was  dealing,  not  with  the 
surety's  property,  but  his  own.  The  claims  received  by  the 
creditor  became  in  his  hands  a  collateral  security  for  the  pay- 
ment of  the  notes  generally  ;  and  the  surety  had  no  right  to 
ask  that  the  creditor  shall  not  be  allowed  the  full  benefit  of 
his  own  vigilance.^ 

§  1202.  Application  by  the  Law. — When  neither  party 
appropriates  the  payment,  the  law  will  apply  it  according  to 
its  own  notice  of  the  intrinsic  justice  of  the  case  ;  ^  and  in 
doing  so  the  law  will  generally  apply  the  payment  to  the 
oldest  debt,  or  to  the  earliest  item  of  the  same  debt,  or  to  the 
debt  that  is  due,  in  preference  to  the  one  that  is  not  due. 
Generally,  when  one  is  secured  and  the  other  is  not,  the  law 
will  apply  the  payment  to  the  debt  which  is  not  secured.^ 

And  thus,  when  neither  party  avails  himself  of  his  power, 
it  would  seem  reasonable  that  an  equitable  application  should 
be  made.  It  being  equitable  that  the  older  debt  should  be 
paid,  it  cannot  be  inequitable  to  extinguish  first  those  debts  for 
which  the  security  is  most  precarious.^ 

The  power  to  make  the  application  to  earlier  or  later  items 
of  the  account  rests  wholly  with  the  debtor.  The  payment 
goes,  by  the  force  of  law,  to  the  oldest  items,  when  this  appli- 
cation is  not  made.  And  if  this  part  be  secured  by  mortgage, 
and  the  aggregate  payments  exceed  its  amount,  it  will  be  dis- 
charged, unless  a  contrary  agreement  has  been  made.^ 

The  law  will  make  no  application  of  payments  when  the 
parties  have  done  so.^ 

And  if  the  debtor  has  made  application  of  payment  to 
usurious  interest,  the  law  will  not  retract  it  for  him.^ 

1  Gaston  v.  Barney,  11  Ohio  St.  506;  Wood  r.  Callaghan,  CA  "SUch.  403. 

i^Terhune  v.  Colton,  1  Beas.  (N.  J.)  232;  Magarity  v.  Shipnian,  82  Va.  784. 

^  Shallabarger  v.  Binns,  18  Kan.  345. 

*  Field  ?;.  Holland,  6  Cranch  (U.S.),  8.  See,  also,  Fairchild  v.  Holly,  10 
Conn.  175;  Sprague  v.  Hazenwinkle,  53  111.419;  Wendt  v.  Ross,  33Cal.  650; 
Shedd  V.  Wilson,  27  Vt.  478  ;  Harrison  v.  Johnston,  27  Ala.  445. 

^  Hughes  V.  Johnson,  38  Ark.  285,  295  ;  Johnson  v.  Anderson,  30  Ark.  745. 

^Dickey  v.  Permanent  Land  Co.,  63  ]\Id.  170  ;  Feldman  v.  Gamble,  26  N.  J. 
Eq.  494  ;  Trcadwell  v.  Moore,  34  Me.  112. 

'  Dickey  v.  Permanent  Land  Co.,  63  Md.  170. 


1148  EIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

§  1203.  Debts  with  Different  Securities. — Where  the 
debts  are  of  different  character  and  due  when  the  payment  is 
made  without  direction,  and  neither  party  makes  appUcation, 
the  law  will  apply  it,  upon  the  presumed  intention  of  the 
debtor,  to  that  debt  a  relief  from  which  will  be  most  beneficial 
to  him.  Therefore,  if  the  debt  be  a  mortgage  and  an  account, 
or  a  judgment  and  an  account,  the  law  will  apply  the  payment 
to  the  mortgage  or  judgment  in  preference  to  the  account, 
because  the  former  would  bear  more  heavily  on  the  debtor.^ 

But  it  has  been  held  that  the  law  in  such  case  will  apply 
the  payment  as  will  be  most  beneficial  to  the  creditor ; "  that 
is,  if  there  are  separate  demands,  part  of  which  is  secured 
and  part  not  secured,  the  application  will  be  made  on  those 
not  secured  ;  ^  and  that  the  court  will  exercise  a  sound  discre- 
tion in  making  the  application.*  And  if  a  creditor  makes  an 
application  of  a  payment,  generally  on  an  open  account,  the 
law  will  not  afterward  apply  it  to  the  payment  of  a  judgment 
even  if  older  than  the  account,  especially  if  the  creditor  has 
security  for  the  judgment  and  not  for  the  account.^ 

And  in  New  York  it  was  held  that  where  payment  is  made, 
even  by  judgment  of  the  court,  without  directing  its  application 
as  among  several  securities,  in  subsequently  determining  the 
application,  the  court  should  do  so  upon  equitable  principles, 
and  is  not  bound  to  apply  the  payment  to  the  older  security.^ 

And  in  Georgia  it  was  held  that  the  assignee  of  two  judg- 
ments from  different  creditors  against  the  same  debtor,  on  the 
older  of  which  judgments  there  is  a  security,  and  on  the 
younger  there  is  none,  must  apply  money  raised  from  the 

1  Windsor  v.  Kennedy,  52  Miss.  164 ;  Pattison  v.  Hull,  9  Cow.  (N.  Y.)  747  ; 
The  Antarctic,  1  Sprague  (Dist.  C),  206;  Dorsey  v.  Gassaway,  2  Harr.  &  J. 
(Md.)  402 ;  Neal  r.  Allison,  50  Miss.  175. 

''  Gwinn  v.  Whitaker,  1  Harr.  &  J.  (Md.)  754. 

3  Sanborn  v.  Stark,  31  Fed.  Rep.  18  ;  Langdon  r.  Bowen,  46  Vt.  512. 

*  Coles  V.  Withers,  33  Gratt.  (Va.)  186. 

5  Watt  V.  Hoch,  25  Pa.  St.  411. 

^  Campbell  v.  Vedder,  3  Keyes  (N.  Y.),  174.  See,  also,  Bosley  v.  Porter,  4  J. 
J.  Marsh.  (Ky.)  621  ;  Chester  r.  Wheelwright,  15  Conn.  562  ;  Smith  v.  Wood, 
Saxt.  (N.  J.)  74 ;  Field  v.  Holland,  6  Cranch  (U.  S.),  8 ;  State  v.  Thomas,  11 
Ired.  L.  (N.  Car.)  251. 


PAYMENT  OF  THE  DEBT.  1149 

debtor's  property  to  the  senior  judgment ;  if  he  applies  it  to 
the  junior  the  surety  is  discharged  pro  tanto} 

If  a  vendee  of  a  part  of  the  mortgage  debt  pays  the  amount 
to  the  mortgagee  who  releases  that  portion  of  the  property',  tlie 
application  must  be  made  to  the  mortgage  debt.^ 

The  law  will  appropriate  a  payment,  other  considerations 
being  equal  in  the  first  instance,  to  the  payment  of  a  note 
absolutely  due  to  the  creditor,  rather  than  to  the  payment  of 
one  transferred  to  him  as  collateral  security  only.^ 

So  where  a  purchaser  of  an  estate  incumbered  by  a  mort- 
gage has  assumed  a  portion  of  the  mortgage  debt  and  has  thus 
made  himself  personally  liable  to  the  mortgagee  foi*  this  part 
of  the  debt,  he  is  entitled  to  have  a  general  payment  made  by 
him  applied  to  the  portion  of  the  debt  for  which  he  is  person- 
ally liable.* 

§  1204.  Money  Derived  from  a  Particular  Source. — 
When  money  is  derived  from  any  particular  source  or  fund, 
payment  must  be  applied  to  the  relief  of  such  source  or  fund, 
unless  there  is  an  implied  agreement  to  apply  it  otherwise.^ 
Therefore  money  derived  from  rents  of  mortgaged  premises, 
in  the  absence  of  any  contrary  agreement,  must  be  applied  by 
the  mortgagee  toward  payment  of  such  mortgage,  and  not  to 
the  satisfaction  of  other  indebtedness  of  the  mortgagor.*'  But 
a  mortgage  containing  a  covenant  that,  in  case  of  default,  the 
mortgagee  may  enter  and  collect  and  apply  the  rents  and  profits 
to  the  indebtedness,  does  not  bind  the  mortgagee  to  collect  and 
apply  the  rents.^ 

When  the  mortgagor's  tenants,  with  Ms  consent,  pa}'  their 
rent  to  the  mortgagee,  who  holds  several  mortgages  on  the 
same  property,  the  mortgagee  has  no  right,  after  suit  for  fore- 

^  Simmons  v.  Gates,  50  Ga.  609. 
''Hicks  V.  Bingham,  11  Mass.  300. 
3  Bank  v.  Brown,  22  Me.  295. 
*  Snyder  v.  Eobinson,  35  Ind.  311. 

5  Levystein  v.  Whitman,  59  Ala.  345 ;  Taybr  t'.  CbekrelJ,  80- Ala.  238 ;  Burns  v. 
Campbell,  71  Ala.  286. 
« Darden  v.  Gerson,  91  Ala.  323". 
'Borel  V.  Kappeler,  79  Cal.  342. 


1150  RIGHTS   OF    PARTIES    BEFORE    DEFAULT. 

closure  has  been  begun,  to  apply  these  payments  to  the  junior 
mortgage/ 

Where  an  agent  to  loan  money  takes  from  the  borrower  a 
separate  note  and  mortgage  for  his  commissions,  the  commis- 
sions paid  to  a  sub-agent  wrongfully  appointed  by  the  agent, 
will  be  credited  on  the  mortgage  debt.^ 

Where  the  assignee  of  some  of  a  series  of  mortgage  notes, 
has  also  another  fund  to  which  he  can  resort  for  payment,  and 
the  mortgage  security  is  inadequate  to  pay  the  whole  debt,  he 
should  first  resort  to  such  fund.^ 

So  where  the  maker  of  the  notes  was  the  legatee  of  one  of 
the  mortgagees'  estate,  and  the  executor  held  a  part  of  these 
notes  as  assignee,  and  foreclosure  being  brought  for  the  benefit 
of  the  -estate,  the  executor  and  assignee  of  part  of  the  notes, 
should  apply  the  legacy  of  the  maker  first  in  discharging  other 
unsecured  debts  to  the  estate  from  the  maker  of  the  notes,  and 
then  the  balance  in  paying  the  notes  he  held  as  assignee,  thus 
giving  to  the  other  mortgagee  the  benefit  of  the  mortgage  se- 
curity in  paying  the  notes  he  held,  the  mortgage  security  being 
inadequate  to  pay  all  the  notes. 

Judge  Howell  ably  says  that  inasmuch  as  the  mortgage  se- 
curity was  inadequate,  and  the  executor  has  in  his  hands  an- 
other fund  to  which  he  can  legally  resort  for  payment  or  part 
payment  of  his  notes  as  assignee,  equity  required  that  he 
should  resort  to  that  fund  before  resorting  to  the  mortgage  se- 
curity to  the  damage  of  the  other  mortgagee  or  assignor ;  for 
this  course  works  no  injury  to  either  creditor,  but  does  justice 
to  both.  But  the  executor  is  not  bound  to  resort  to  that  legacy 
to  the  detriment  of  the  estate  in  respect  of  the  unsecured  debts 
that  the  legatee  owes  it.  But  aside  from  those  debts,  the  legacy 
should  in  some  way  be  made  to  profit  the  assignor  in  respect 
to  his  security.* 

^Sanford  v.  Van  Arsdall,  53  Hun  (N.  Y.),  70. 
"^  Scruggs  V.  Scottish  American  Mort.  Co.,  54  Ark.  566. 
» Jt'ff  ('.  Woods,  2  P.  Wm.  128;  CampbeU  v.  Graham,  5  Eng.  Ch.  454  ;  Tink- 
ham  V.  Smith,  56  Vt.  187. 
*Blairw.White,  61  Vt.  110. 


payment  of  the  debt.  1151 

§  1205.  "When  the  Right  of  Appropriation  Must  Be 
Made. — It  ma}'-  be  considered  as  settled  that  when  a  payment 
has  been  rightfully  ascribed  or  a]3propriatcd  to  one  of  several 
debts,  it  requires  the  consent  of  both  parties  to  change  it. 
And  the  act  may  be  considered  complete,  and  irrevocable  by 
the  creditor  alone,  when,  having  the  right  of  election,  he  has 
exercised  it  and  communicated  the  fact  to  the  debtor.' 

'  When  the  creditor  has  the  right  of  appropriation,  he  must 
exercise  this  right  ante  litem  motam,  or  before  any  controversy 
has  arisen  between  the  parties  as  to  the  act.  It  is  too  late  to 
attempt  it  after  such  disputation  and  a  fortiori  at  the  time  of 
the  trial.^  Though  the  creditor  need  not  do  this  at  the  time 
of  the  payment,  yet  it  must  be  done  before  settlement.^  And 
this  rule  should  apply  though  the  mortgagor  becomes  bank- 
rupt.* 

Of  course  an  agreement  of  the  parties  as  to  the  appropriation 
controls.^  If  the  mortgagor  give  a  mortgage  which  covers  pre- 
existing as  well  as  present  debts,  and  the  mortgagee  applies 
the  payments  generally,  this  is  an  application  pro  rata  upon 
the  old  and  the  new  debts." 

•Of  course  the  application  must  be  made  to  a  debt  which 
existed  at  the  time  of  payment  and  before  the  rights  of  the 
parties  are  in  any  way  changed.^ 

§  1206,  Rights  of  Third  Parties. — If  neither  party  makes 
an  appropriation  of  the  payments,  and  equities  attach  in 
favor  of  a  third  party,  it  is  not  in  the  power  of  either  debtor  or 
creditor,  at  a  subsequent  period,  to  make  an  appropriation 
affecting  the  equities  of  such  third  party.*     So  proceeds  of  a 

1  Johnson  v.  Thomas,  77  Ala-  367 ;  1  Greenl.  Ev.,  sect.  532  a ;  2  AVhart.  Cent., 
sect.  932 ;  1  Addison  on  Cent.,  sect.  350 ;  2  Parsons  on  Cunt.  {(>th  ed.)  (i30. 

^  Callahan  v.  Boazman,  21  Ala.  24:(> ;  1  Addison  on  Cont.,  sect.  350  ;  Sanford 
V.  Van  Arsdall,  53  Hun  (X.  Y.),  70. 

^  Hughes  V.  Johnson,  38  Ark.  287 ;  Clayton's  Case,  1  Merv.  572 ;  Feldnian 
V.  Beier,  78  N.  Y.  293 ;  Wilkinson  r.  Sterne,  9  Mod.  427, 

*Ex  parte  Johnson,  3  De  Gex,  M.  &  G.  218,  236. 

5  Mercer  v.  Tift,  79  Ga.  174. 

«Shelden  v.  Bennett,  44  Mich.  634. 

•^Terhune  v.  Colton,  1  Beas.  (N.  J.)  232,  312. 

8Terhune  v.  Colton,  1  Beas.  (N.  J.)  232. 


1152  RIGHTS    OP    PARTIES    BEFORE    DEFAULT. 

part  of  the  mortgaged  property  made  by  consent  of  parties 
cannot  be  applied,  as  against  subsequent  incumbrances,  to  the 
payment  of  an  unsecured  debt  of  the  mortgagor.^  The  debtor 
may  authorize  the  application  of  the  fruit  of  parts  of  the 
mortgaged  property  to  unsecured  items  in  the  account,  if  no 
rights  of  third  parties  have  intervened.'^ 

But  subsequent  incumbrancers  have  no  claim  for  relief  against 
payments  which  are  made  by  common  consent  of  the  parties  to 
the  interest  if  it  be  legal.^ 

And  equity  will  not  permit  payment  to  operate  as  an  extin- 
guishment against  parties  equitably  entitled  to  substitution  in 
the  place  of  the  party  receiving  payment.* 

§  1207.  What  is  a  Sufficient  Appropriation. — An  appli- 
cation of  funds  to  the  payment  of  a  debt  once  made  in  good 
faith  by  the  debtor  or  the  creditor  cannot  be  recalled.^ 

The  appropriation  by  the  debtor  may  be  shown  not  only  by 
his  express  declarations  but  by  any  circumstances  from  which 
his  intention  can  be  inferred ;  but  such  intention  must  be  sig- 
nified to  the  creditor  in  some  way.  A  private  entry  made  by 
the  debtor  in  his  own  books  of  account  is  insufficient  to  de- 
termine the  application  of  the  payment." 

Where  some  of  a  series  of  mortgage  notes  are  afterward  sep- 
arately secured  by  anotlicr  mortgage,  the  first  mortgage  is  paid 
as  to  these  notes  which  are  tlius  secured  by  another  mortgage.^ 

So  where  a  mortgagee  begins  to  make  additional  advances 

to  the  mortgagor  and  opens  a  new  account  with  him  in  which 

the  mortgagee  charges  the  advances  and   credits  the  proceeds 

of  personal  property  theretofore  and  thereafter  received,  and 

MVebster  v.  Singley,  5S  Ala.  208. 
"  Hughes  V.  Johnson,  38  Ark.  285. 
3  Mills  V.  Kellogg,  7  Minn.  469. 

*  Richardson  v.  Bank,  3  Met.  (IMass.)  536  ;  Morris  v.  Oakford,  9  Pa.  St.  498  ; 
Eddy  ('.  Traver,  6  Paige  (N.  Y.),  521 ;  Matter  of  Foot^  8  Benedict  (Dist.  Ct.) 
228.' 

*  Mayor  v.  Patten,  4  Cranch  (U.  S.),  317 ;  Simson  v.  Ingham,  2  Barn.  &  C. 
65 ;  Johnson  v.  Thomas,  77  Ala.  367. 

^Terhune  v.  Colton,  1  Beas.  (N.  J.)  232 ;  Manning  v.  Westeme,  2  Vem.  606 ; 
Wrout  V.  Dawes,  25  Beav.  369. 
'  Bridenbecker  v.  Lowell,  32  Barb,  (N.  Y.)  9. 


I 


PAYMENT  OF  THE  DEBT.  1153 

sends  a  copy  of  this  account  to  the  mortgagor,  who  receives  it 
without  objection,  and  corresponding  entries  made  on  the 
mortgagor's  books  is  an  actual  appHcation  by  the  mortgagee  of 
the  proceeds  of  the  personalty  to  his  advances  with  the  knowl- 
edge and  consent  of  the  mortgagor/ 

§  1208.  Payment  of  Interest. — Payment  made  on  a  prom- 
issory note  in  the  absence  of  agreement  or  direction  as  to 
how  it  shall  be  applied,  in  so  far  as  it  exceeds  the  interest  which 
has  accrued  at  the  time  of  the  payment,  will  be  applied  to  the 
payment  of  the  principal  of  the  secured  note  and  not  to  future 
or  unearned  interest.  The  payment  is  to  be  applied  first  to 
interest  up  to  the  date  of  the  payment,  and  if  there  be  a  bal- 
ance, this  will  be  applied  to  the  principal."  But  if  no  interest 
be  due,  it  will  then  be  applied  to  the  principal.^ 

§  1209.  Partial  Payments  of  Usurious  Interest. — The 
holder  of  a  usurious  mortgage  cannot,  even  with  tlie  assistance 
of  the  mortgagor,  apply  partial  payments  to  the  unsound  part 
of  the  mortgage  for  the  purpose  of  keeping  alive  that  part 
which  is  valid  to  the  prejudice  of  an  existing  subsequent  mort- 
gage. Because  the  application  of  payments  applies  only  where 
the  mortgagor  has  paid  on  moral,  honest,  bona  fide,  legal 
claims,  and  it  does  not  apply  where  one  of  tlie  debts  is  spuri- 
ous, immoral,  and  usurious.* 

When  the  whole  mortgage  is  due,  it  is  immaterial  whether 
the  payment  is  applied  generally  upon  the  principal  and  in- 
terest or  first  to  the  extinction  of  the  accrued  interest,  ^\'hen 
a  usurious  agreement  is  made  for  the  extension  of  time,  it  is 
not  a  valid  extension,'' and  such  usurious  interest  cannot' be  re- 
garded as  a  payment  of  the  interest  so  as  to  prevent  a  default 
in  payment  of  interest ;  but  the  judgment  will  be  entered  for 
the  amount  of  the  mortgage  after  deducting  the  amount  of 

'  Lewis  V.  Hartford,  etc.,  Co.,  56  Conn.  25. 

2  Monroe  r.  Fohl,  72  Cal.  568 ;  Chase  v.  Box,  Freem.  Ch.  261. 

3  Davis  V.  Fargo,  Clarke  (N.Y.),  470. 

*  Greene  v.  Tyler,  30  Pa.  St.  361. 

*  Church  V.  Maloy,  70  N.  Y.  63. 

73 


1154  RIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

usurious  interest  paid,  under  the  New  York  statute  against 
usury.^ 

The  mortgagor  cannot,  after  suit  is  brought,  have  a  partial 
payment  on  account  of  the  interest  first.  It  should  be  allowed 
on  the  principal  and  interest.^ 

§  1210.  Payment  of  Collateral  Security. — Payment  and 
discharge  of  a  mortgage  given  as  collateral  security  for  the 
payment  of  a  prior  mortgage,  operate  as  a  payment  upon  the 
principal  debt.  Prima  facie  there  is  nothing  else  upon  which 
the  money  can  be  applied.^  But  where  stock  of  a  building 
association  is  assigned  as  collateral  security  for  a  mortgage 
given  to  the  association,  paiyment  on  the  stock  is  not  ipso  facto 
payment  on  the  mortgage-.* 

§  1211.  Payment  of  Insurance  Money  for  Losses. — 
Money  paid  to  a  mortgagee  by  an  insurance  company  in  absence 
of  its  agreement  with  the  mortgagor,  cannot  be  applied  by  the 
mortgagee  to  the  payment  of  the  debt  secured  by  the  mort- 
gage, if  it  be  not  due,,  without  the  consent  of  the  mortgagor,^ 
and  especially  so  where  the  mortgagee  has  other  interest  in  the 
property  ."^ 

But  if  the  insurance  money  is  payable  to  the  mortgagee,  he 
is  bound  to  apply  it  to  the  payment  of  the  mortgage  debt,  and 
any  other  use  of  it  will  be  illegal  and  at  his  peril.^  But  when 
the  mortgagee  insures  the  property  for  his  own  interest,  the 
mortgagor  cannot  claim  the  money  as  payment.^ 

1  Church  V.  Maloy,  9  Hun  (N.  Y.),  148. 

2  Hartley  v.  Tatham,  1  Keyes  (N.  Y.),  222. 
sprouty  V.  Eaton,  41  Barb.  (N.  Y.)  409. 

*  North  American  Building  Asso.  v.  Sutton,  35  Pa.  St.  463  ;  Spring  Garden 
Asso.  V.  Tradesmen's  Loan  Asso.,  46  Pa.  St.  493 ;  Early's  Appeal,  85  Pa.  St. 
411 ;  Economy  Building  Asso.  v.  Hungerbuehler,  93  Pa.  St.  258. 

*  Gordon  v.  Bank,  115  Mass.  588;  .^na  Nat.  Bank  v.  Ins.  Co.,  24  Fed.  Rep. 
770. 

8  Louden  v.  Waddle,  98  Pa.  St.  242. 

^Connecticut  Mut.  L.  Ins.  Co.  v.  Scammon,  117  U.  S.  634. 

8  Foster  v.  Van  Reed,  70  N.  Y.  19  ;  Stinchfield  v.  Milliken,  71  Me.  567 ;  Ely 
V.  Ely,  80  111.  532 ;  Clark  v.  Wilson,  103  Mass.  219,  221  ;  Dobson  v.  Land,  8 
Hare,  216;  Russell  v.  Southard,  12  How.  (U.  S.)  139,157. 


payment  op  the  debt.  1155 

Article  9. 

Reissue  and  Revivor  of  Mortgage. 

1 1212.  Keeping    Alive    a    Mortgage  1 1216.  Assignment   of  Mortgage    to 

After  Payment  of  the  Debt.  Mortgagor. 

^  1213.  Reissue  of  Mortgage.  ^  1217.  Reissue  of  Note  to  Cover  a 

1 1214.  Rights  of  Third  Parties.  New  Indebtedness. 

1 1215.  Intervening  Creditors'  Eights  1 1218.  The  Question  of  Payment. 

Must  Be  Preserved. 

§  1212.  Keeping  Alive  a  Mortgage  After  Payment  of 
THE  Debt. — Courts  of  equity  will,  to  accomplish  the  ends  of 
justice,  keep  alive  a  security  which  in  form  has  been  extin- 
guished. 

Thus  where  a  mortgagor  conveys  the  mortgaged  premises  to 
a  first  mortgagee  to  satisfy  the  debt  without  expenses  of  fore- 
closure, equity  will  consider  the  first  mortgage  as  still  subsist- 
ing as  against  a  subsequent  incumbrancer.^ 

Under  the  same  principle,  if  the  owner  of  the  equity  of  re- 
demption acquires  the  mortgage,  a  court  of  equity  will,  when 
the  purpose  of  justice  requires  it,  treat  the  mortgage  as  still 
subsisting.^  So  where  a  first  mortgagee  purchases  under  a 
foreclosure  sale  equity  will  ke«p  his  mortgage  alive  for  the 
purposes  of  j)rotection  against  a  second  mortgage.^  And  so 
where  one  mortgage  is  substituted  for  another,  equity  will  kfeep 
the  first  alive  when  the  interest  of  justice  requires  it.* 

§  1213.  Reissue  of  Mortgage. — A  mortgage  cannot  law- 
fully operate  as  security  for  any  oiher  debt  than  that  which  it 
was  given  to  secure.^  It  cannot  be  extended  after  payment  to 
any  other  debt.^     Because  the  rei.ssue  of  a  mortgage  which  has 

1  Low-man  r.Lowman,  lis  111.  586;  Richardson  r.  Hoekenhull,  85  111.  124; 
Edgerton  ?•.  Young,  43  111.  408 ;  Tolman  r.  Smith,  85  Cal.  280 ;  Brooks  v.  Rice, 
56  Cal.  428  ;  Smith  v.  Swan,  69  Iowa,  412 ;  Stantons  v.  Tliompson,  49  N.  H. 
272 ;  Collins  v.  Stocking,  98  Mo.  296  ;  Silliman  v.  Gammage,  55  Tex.  366. 

*  Thompson  v.  Chandler,  7  Me.  381 ;  Duflfy  v.  McGuinees,  13  R.  1.597. 

^  Carpentier  v.  Brenham,  40  Cal.  234- 

*Tolman  v.  Smith,  85  Cal.  280. 

^  Morris  v.  Alston,  92  Ala.  502 ;  Harris  v.  Hooper,  50  Md.  537 ;  Laeber  v. 
Langhor,  45  Md.  477,  482 ;  Dolan  r.  Kehr,  9  Mo.  App.  351. 

^Pelton  V.  Knapp,  21  Wis.  63 ;  Perkins  v.  Sterne,  23  Tex.  561 ;  McGiven  v, 
Wheelock,  7  Barb.  (N.  Y.)  22 ;  Luce  v,  Mortg.  Co.,  6  Dak.  122. 


1156  RIGHTS   OF    PARTIES    BEFORE    DEFAULT. 

been  paid  upon  the  agreement  that  it  shall  secure  another  debt 
than  the  one  originally  secured  by  it,  does  not  create  a  lien/ 
The  mortgage  to  be  discharged  must  be  paid  to  the  mort- 
gagee.^ 

An  absolute  deed  given  as  a  mortgage  cannot  be  extended 
to  another  debt  without  the  consent  of  all  persons  interested.^ 

§  1214.  Rights  op  Third  Parties. — A  paid  mortgage  as- 
signed to  one  of  the  mortgagors,  the  notes  secured  by  which 
are  long  past  due,  cannot  be  reissued  by  the  mortgagor's 
assignment  of  the  same  to  a  creditor  so  as  to  compete  with  the 
title  of  another  creditor  of  the  mortgagor,  to  the  mortgage 
estate  or  a  surplus  of  the  same  in  the  hands  of  the  court  of 
equity  fixed  by  the  decree  of  the  court  prior  to  the  reissue  of 
the  mortgage,  although  the  creditor  who  received  the  assign- 
ment of  the  mortgage  was  no  party  to  the  decree.^ 

The  mortgage  cannot  be  revived  to  the  prejudice  of  a  bona 
fide  incumbrancer  whose  claim  is  subsequent  to  the  mortgage 
but  prior  to  the  payment.^ 

Money  once  paid  and  appropriated  by  the  parties  to  the 
mortgage  note  and  indorsed  upon  it,  cannot,  by  subsequent 
agreement,  be  transferred  to  secure  any  other  demand,  and  such 
p»id  indebtedness  thereby  becomes  revived  and  good  against  a 
second  mortgagee.^ 

And  the  debtor  and  creditor  becoming  the  same  person,  equity 
will  preserve  the  equitable  distinct  from  the  legal  right  according 
to  the  intention  of  the  parties  and  just  requirements  of  the  case.'' 

1  Thompson  v.  George,  86  Ky.  311 ;  Mead  v.  York,  6  N.  Y.  449;  Johnson  v. 
Anderson,  30  Ark.  745 ;  Spencer  v.  Fredendall,  15  Wis.  666 ;  Walker  v.  Snedi- 
ker,  Hoff.  Ch.  (N.  Y.)  145;  Murrell  v.  Chase,  3  Allen  (Mass.),  339;  Ledyard  v. 
Chapin,  6  Ind.  320 ;  Fewell  r.  Kessler,  30  Ind.  195  ;  McClure  v.  Andrews,  68 
Ind.  97 ;  Thomas's  Appeal,  30  Pa.  378 ;  Bowen  v.  Manter,  33  N.  H.  530 ;  War- 
ner V.  Blakeman,  36  Barb.  (N.  Y.)  501;  Gardner  v.  James,  7  R.  I.  396  ;  Large  v. 
Van  Doren,  14  N.  J.  Eq.  208. 

2  Fields  /;.  Sherrill,  18  Kan.  365. 

^  Spencer  v.  Fredendall,  15  Wis.  666. 
*  Gardner  v.  James,  7  R.  I.  396. 

5  Mitchell  V.  Coombs,  96  Pa.  St.  430 ;  Kellogg  v.  Ames,  41  Barb.  (N.  Y.)  218. 

6  York  County  Sav.  Bank  v.  Roberts,  70  Me.  384. 
'  Champney  v.  Coope,  32  N.  Y.  543. 


PAYMENT  OF  THE  DEBT.  1157 

However  equity  will  sometimes  give  to  the  actions  of  parties 
a  force  and  effect  different  from  what  they  actually  intended. 
Thus,  where  tlie  actual  intention  was  not  to  pay  and  satisfy  a 
mortgage,  but  to  substitute  another  holder  in  the  place  of  the 
original  mortgagee,  and  to  keep  it  alive,  if  such  action  will 
operate  as  a  fraud  on  any  person,  equity  might,  in  favor  of  such 
person,  in  order  to  defeat  the  fraud,  give  an  effect  to  the  trans- 
action different  from  that  so  intended.^ 

The  condition  of  a  mortgage  having  been  performed,  a  sub- 
sequent incumbrancer  cannot  be  postponed  to  equities  newly 
created  which  are,  in  fact,  subsequent  to  his  claim.^ 

When  the  old  mortgage  is  paid  it  loses  its  lien  as  to  third 
parties.^  But  where  the  assignee  of  two  mortgages  makes  fur- 
ther advances  to  the  mortgagor,  who  gives  a  new  mortgage 
covering  the  amounts  of  the  old  mortgages  and  the  further 
advances,  but  there  is  no  agreement  or  understanding  that  the 
old  mortgage  shall  be  considered  satisfied,  and  possession  of 
them  is  retained,  there  is  only  conditional  and  not  absolute 
payment.* 

In  some  cases  the  subsequent  mortgagee  and  the  mortgagor 
may  be  equitably  estopped  to  claim  that  the  old  mortgage  was 
paid.  Thus,  when  the  mortgage  debt  was  paid  and  the  notes 
surrendered  before  maturity,  but  the  mortgage  not  released  of 
record,  and  then  the  notes  were  reissued  the  indorsers  of  those 
notes  and  the  holders  of  them  may  have  priority.^ 

A  mortgage  given  to  indemnify  the  mortgagee  for  his  liabil- 
ity as  an  indorser  of  the  mortgagor's  notes  cannot,  after  the 
payment  of  the  debt,  be  assigned  for  the  mortgagor's  benefit  as 
security  for  another  debt  as  against  the  holder  of  a  second 
mortgage,  upon  the  estate  then  of  record." 

In  those  States  where  a  wife  is  not  emancipated  but  is  allowed 

iHall  V.  Southwick,  27  Minn.  234. 

"Jones  V.  Brogan,  29  N.  J.  Eq.  139 ;  Swope  v.  Leffingwell,  4  Mo.  App.  525. 
'McGiven  v.  Wheelock,  7  Barb.  (N.  Y.)  22;  Hodgman  v.  Hitchcock,  15  Vt. 
374. 
*Tolman  v.  Smith,  85  Cal.  280. 
6  Jordan  v.  Forlong,  19  Ohio  St.  89. 
^Purser  v.  Anderson,  4  Edw.  Ch.  (N.  Y.)  17. 


1158  EIGHTS    OP    PARTIES    BEFORE    DEFAULT. 

to  mortgage  her  estate  for  her  husband's  debts  she  is  considered 
a  surety,  and  is,  therefore,  entitled  to  the  benefits  of  all  securi- 
ties which  the  creditor  receives  from  her  husband  for  the  debt.^ 

A  husband  and  wife  executed  a  mortgage  upon  their  home- 
stead to  secure  an  indebtedness  of  the  husband.  A  portion  of 
the  debt  was  subsequently  paid,  and  the  amount  indorsed  on 
the  note.  Afterward  the  husband,  by  an  arrangement  with  the 
mortgagee,  agreed  that  the  payment  made  on  the  mortgage 
debt  should  be  applied  on  another  indebtedness,  and  the  note 
with  the  credit  on  it  was  given  up,  and  another  note  of  the 
same  date  and  amount  executed  and  delivered,  with  the  agree- 
ment that  the  mortgage  should  stand  security  for  it.  This 
agreement  was  held  to  be  valid  against  the  husband  but  void 
as  to  the  wife,  who  could  claim  satisfaction  pro  tanto  for  the 
amount  paid.^ 

An  extension  or  renewal  of  the  debt,  payment  not  having 
been  made,  does  not  invalidate  the  security  as  against  the 
homestead.^ 

Thus,  where  an  unmarried  man  executed  a  deed  of  trust  on 
his  land  to  secure  a  debt  due  by  him,  and  afterward  marries 
and  occupies  such  land  as  a  homestead,  and  before  the  bar  of 
the  statute  of  limitations  attaches  makes  a  new  promise  in 
writing  to  pay  the  debt,  and  a  new  period  is  thereby  given  for 
both  the  debt  and  security  to  run,  such  security  is  paramount 
to  his  homestead  claim.* 

§  1215.  Intervening  Creditors'  Rights  Must  be  Pre- 
served.— If  the  mortgagee  assigns  the  mortgage  to  the  mort- 
gagor after  payment  it  cannot  be  revived  to  a  third  person  so 
as  to  defeat  the  rights  of  prior  or  intervening  creditors.^  The 
repaying  the  money  to  the  mortgagee  and  agreeing  with  him 
that  it  shall  still  stand  as  security,  are  prejudicial  to  interested 

^  Purvis  V.  Carstaphan,  73  N.  Car.  575. 
^  Brockschmidt  v.  Hagebvisch,  72  111.  562. 
'  Hambrick  v.  Jones,  64  Miss.  240. 
*  Smith  V.  Scherck,  60  Miss.  491. 

s  Carlton  v.  Jackson,  121  Mass.  592 ;  Marvin  v.  Vedder,  5  Cow.  (N.  Y.)  671 ; 
Champney  v.  Coope,  32  N.  Y.  543 ;  Dorst  v.  Gale,  83  111.  136. 


PAYMENT  OF  THE  DEBT.  1159 

third  parties  and  is  not  a  valid  agreement  or  revivor  of  the 
mortgage.^ 

§  1216.  Assignment  of  Mortgage  to  Mortgagor. — The 
performance  of  an  agreement  by  the  mortgagor  to  pay  the 
mortgagee  a  sum  to  the  amount  of  his  debt  if  lie  would  assign 
the  mortgage  to  the  mortgagor's  attaching  creditor  as  security 
instead  of  the  attachment  does  not  extinguish  the  mortgage, 
and  it  can  be  enforced  bv  the  creditor.^ 

So  if  the  mortgagor  makes  a  payment  out  of  his  ovrn.  funds, 
yet  if  it  is  agreed  at  the  time  the  payment  is  made  and  re- 
ceived on  the  condition  that  the  mortgage  should  be  kept  alive 
and  transferred  to  another  creditor  of  the  mortgagor,  such  an 
agreement  will  be  valid,  and  the  payment  will  not  extinguish 
the  mortgage.^  So  where  the  assignment  is  made  at  the  re- 
quest of  the  mortgagor  to  another  creditor  of  his,  even  though 
the  consideration  moves  from  the  mortgagor  and  not  from  the 
assignee,  it  is  not  a  payment,  but  a  valid  assignment.*  Thus, 
a  mortgagor  delivered  to  the  mortgagee  a  check  which  he  had 
procured  from  the  bank  on  his  own  note,  and  the  mortgagee 
gave  him  a  receipt  in  full  of  his  account  and  paid  him  in 
money  the  difference  between  the  amount  of  the  check  and  the 
amount  of  the  mortgage  debt.  The  mortgage  was  not  can- 
celled, but  turned  over  to  the  bank  by  the  mortgagee  as  a  sub- 
sisting obligation,  and  none  of  the  parties  understood  that  the 
mortgage  had  been  discharged  by  the  transfer  of  the  clieck. 
Judge  Walker  said  that  though  the  transaction  amounted  on 
its  fiice  to  a  payment  of  the  mortgage,  equity  would  consider 
it  as  an  assignment  to  the  bank,  and  not  an  extmguisliment ; 
that  in  furtherance  of  the  purposes  sought  to  ho.  accomplislied, 
the  transaction  was  to  preserve  the  life  of  the  mortgage  and  of 
the  debt  secured  thereby,^  and  the  only  change  made  was  the 

1  Gardner  v.  James,  7  R.  I.  396. 

2  Sheddy  v.  Geran,  113  Mass.  378. 
^Hubbell  V.  Blakeslee,  71  N.  Y.  63. 

*Hall  V.  Southwick,  27  Minn.  234  ;  Goulding  v.  BunBter,  9  Wis.  513;  Hoy 
V.  Bramhall,  19  N.  J.  Eq.  74 ;  BoUes  v.  Wade,  3  Green  (N.  J.),  458. 
5  Morris  v.  Alston,  92  Ala.  502. 


1160  EIGHTS    OF    PARTIES    BEFORE    DEFAULT. 

substitution  of  a  different  holder  of  the  mortgage  and  the  debt, 
which  was  a  vahd  transaction/  Equity  will  not  suffer  mere 
appearances  and  external  forms  to  conceal  the  true  purposes, 
objects,  and  consequences  of  a  transaction.^ 

So  where  the  amount  on  two  mortgages  is  paid  by  a  third 
person  at  the  request  of  the  mortgagor,  and  there  is  no  under- 
standing that  they  shall  be  considered  satisfied,  a  court  of 
equity  will,  for  the  purpose  of  justice,  keep  the  mortgages 
alive,  and  much  more  so  if  the  party  payijig  takes  an  assign- 
ment of  the  mortgages  ;  ^  even  if  he  had  not  taken  an  assign- 
ment of  them,  a  court  of  equity  would,  for  the  purposes  of  jus- 
tice, apply  the  principle  of  subrogation.* 

§  1217.  Reissue  of  Note  to  Cover  a  New  Indebtedness. 
— When  the  parties  to  the  mortgage  agree  that  it  shall  con- 
tinue as  security  for  a  new  indebtedness,  it  has  no  binding 
force  as  a  mortgage,  still  equity  will  not  aid  the  mortgagor  in 
obtaining  a  release  of  such  mortgage,  when  the  mortgagee  has 
parted  with  his  money  under  such  agreement ;  nor  will  the 
court  aid  one  who  has  taken  a  conveyance  from  the  mortgagor 
with  knowledge  of  the  facts.^ 

A  conveyance  of  land  in  mortgage,  at  common  law,  is  a  con- 
veyance by  a  deed  defeasible  on  a  condition  subsequent.  By 
the  performance  of  the  condition  the  title  of  the  mortgagee  is 
defeated,  and  the  mortgagor  is  in  of  his  former  estate. 

The  condition  is  saved,  and  no  release  or  discharge  of  the 
mortgage  is  necessary,  and  the  mortgagor  can  gain  possession 
by  suit  at  law.^  So  a  reissue  of  the  note  for  a  valuable 
consideration  could  not  afterward  convey  a  title  to  the  land 
without  a  new  conveyance  in  mortgage,  by  deed ;  ^  and  the 

1  Kieser  v.  Baldwin,  62  Ala.  526  ;  Hall^;.  South  wick,  27  Minn.  234 ;  McGuire 
V.  Van  Pelt,  65  Ala.  344 ;  Boyd  v.  Beck,  29  Ala.  712  ;  3  Pom.  Eq.  Jur.,  sect. 
1211. 

^  1  Pom.  Eq.  Jur.,  sect.  378,  et  seq. 

^Tolman  v.  Smith,  85  Cal.  280. 

*Matzen  v.  Shaeffer,  65  Cal.  81 ;  Bacon  v.  Goodnow,  59  N.  H.  415;  Yaple  v. 
Stephen?,  36  Kan.  680 ;  Gans  v.  Thieme,  93  N.  Y.  232. 

*  Joslyn  V.  Wyman,  5  Allen  (Mass.),  62. 

"Holman  ?'.  Bailey,  3  Met.  (Mass.)  55;  Richardson  «.  Cambridge,  2  Allen 
(Mass.),  118;  Merrill  v.  Chase,  3  Allen  (Mass.),  339. 

'Merrill  v.  Chase,  3  Allen  (Mass.),  339. 


PAYMENT  OF  THE  DEBT.  1161 

fact  that  the  parties,  acting  under  a  mutual  mistake  as  to  the 
validity  of  such  contract,  have  undertaken  to  stipulate  that  the 
mortgage  should  continue  in  force,  cannot  change  the  legal  title.^ 

So  making  a  second  mortgage,  subject  to  the  first,  will  not 
give  the  first  any  effect  against  an  assignee  of  the  second,  if  at 
its  date  there  was  nothing  due  upon  the  first.^ 

While  an  agreement  to  revive  a  mortgage  may  not  operate 
in  the  way  intended,  as  a  revival  of  the  mortgage,  effect  may 
be  given  to  the  intention  of  the  parties  by  another  mode,  in  de- 
claring it  an  equitable  mortgage.^ 

When  the  note  is  found  among  the  papers  of  a  deceased 
mortgagor,  the  presumption  is,  in  the  absence  of  evidence,  that 
it  was  paid  according  to  the  condition,  and  a  return  of  the  note 
by  the  heirs  of  the  mortgagors  to  the  heirs  of  the  mortgagee 
will  not  revive  the  mortgage.*  When  a  note  is  paid  a  reissue 
of  it  does  not  revive  the  debt.^ 

§  121S.  The  Question  of  Payment. — The  question  of  the 
fact  of  payment  is  always  open,  and  it  is  also  a  good  answer 
to  show  that  the  giving  up  of  the  notes  secured  thereby  or  a 
formal  discharge  of  the  mortgage  was  obtained  by  fraudulent 
means.^  But  it  is  equally  clear  that  after  an  actual  payment 
of  the  debt  the  mortgage  cannot  be  revived  by  any  oral  agree- 
ment to  keep  it  in  force  to  secure  a  distinct  and  independent 
debt.^  AVlien  the  note  has  been  paid,  the  mortgagee  has  no 
right  to  hold  the  same  as  security  for  any  damages  which  the 
mortgagee  may  sustain  by  reason  of  a  failure  of  the  mort- 
gagor to  perform  another  agreement.* 

1  Whitney  v.  Claflin,  cited  21  Pick.  10 ;  Fnrbuph  v.  Goodwin,  25  N.  H. 
425 ;  Claflin  v.  Godfrey,  21  Pick.  (Mass.)  1.  Compare  Purser  r.  Anderson,  -4 
Edw.  Ch.  (N.  Y.)  17.  ' 

2  iSIerrill  v.  Chase,  3  Allen  (Mass.),  339,  340. 
^Peckhani  v.  Haddock,  36  111.  39. 

*  Richardson  v.  Cambridge,  2  Allen  (Mass.),  118. 

*  Murphy  v.  Simpson,  42  Mo.  App.  654. 

«  Barnes  f.  Camack,  1  Barb.  (N.  Y.)  392 ;  Grimes  v.  Kimball,  3  Allen  (Mass.), 
518. 

'Merrill  v.  Chase,  3  Allen  (Mass.),  339. 
^Beardsley  i'.  Tattle,  11  "Wis.  74. 


1162  RIGHTS    OF   PARTIES  BEFORE    DEFAULT. 

And  a  mortgage  upon  a  homestead  once  paid  cannot  be  re- 
vived by  an  agreement  of  the  husband  alone.' 

And  where  the  consideration  named  in  a  deed  is  the  pay- 
ment of  a  prior  mortgage,  the  payment  of  such  mortgage  by 
the  grantee  of  the  deed  extinguishes  it,  even  though  he  at- 
tempts to  keep  the  mortgage  alive  by  taking  an  assignment 
of  it.' 

Where  a  party  purchases  land  upon  which  there  is  an  in- 
cumbrance which  he  pays  and  obtains  a  release  and  afterward 
procures  a  loan,  giving  the  notes  as  collateral  security,  which 
he  paid,  the  party  loaning  having  no  notice  of  their  payment 
or  of  the  release,  and  such  loan  was  procured  by  his  and 
others'  acts  and  representations  leading  to  the  belief  that  the 
notes  were  unpaid  and  the  incumbrance  still  a  valid  and  sub- 
sisting lien,  he  and  those  co-operating  with  him  to  create  such 
belief  and  cause  the  loan,  are,  in  equity,  estopped  from  show- 
ing and  insisting  upon  the  fact  of  the  payment  of  the  notes 
and  the  release.^ 

A  mortgage  cannot  by  a  parol  agreement  be  altered  in  its 
operations  so  as  to  stand  as  security  for  a  new  debt  different  in 
character  and  amount  from  that  mentioned  in  the  instrument.* 

1  Spencer  v.  Fridendall,  15  Wis.  666. 

2  Fouche  V.  Delk  (Iowa),  48  N.  W.  Rep.  1078. 
^  International  Bank  v.  Bowen,  80  111.  541. 

*  Morris  v.  Alston,  92  Ala.  502 ;  Johnson  v.  Anderson,  30  Ark.  745 ;  Whiting 
V.  Beebe,  12  Ark.  421,  428. 


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